Politics Summary: Thursday, January 21st

Tory cuts, Haiti earthquake survivors, the Government's anti-terrorism strategy, climate change and public and private sector pay.

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A key adviser to David Cameron has called for a £75 billion cut in public spending, reports today’s Independent. Former Scottish Secretary Lord Forsyth, chair of Cameron’s policy commission on tax, told the Conservative Intelligence Conference: “It seems to me that we need to be able to reduce the overall level of public expenditure over a parliament by about £75bn [a year]. This is not going to be easy stuff.” Harriet Harman, meanwhile, will today pledge to make inequality a key dividing line with the Tories, reports the Guardian. Ahead of a report into inequality next week, the Labour Deputy Leader, in a speech to Compass, is to say the report will “clearly document for the first time how inequality is cumulative over an individual’s lifetime and is carried from one generation to the next”, adding that “persistent inequality of socio-economic status – of class – overarches the discrimination or disadvantage that can come from your gender, race or disability”.

The Times, Telegraph and Independent report the amazing story of three survivors pulled from the rubble eight days after the Haiti earthquake. The Indy reports that they were “covered in dust and bits of masonry, desperately thirsty but defiantly alive”. The Guardian reports another aftershock hitting the area – of magnitude 5.9 – and the dispatch of another 4,000 US troops to the region. According to the EU, “the quake killed an estimated 200,000 people, injured 250,000 and left 1.5 million homeless” adds the paper. And the Standard reports that British aid teams “won’t give up” in the hunt for survivors, adding that the Disasters Emergency Committee appeal had passed £31.5 million. To donate call 0370 6060 900 or visit tinyurl.com/haiti-appeal

Muslim police have attacked the Government’s anti-terrorism strategy, report the Telegraph and Standard. The National Association for Muslim Police claim Ministers are wrong to blame Islam for driving recent terror attacks, saying far-Right extremists were a more dangerous threat to national security. They say:

“Never before has a community been mapped in [such] a manner … it is frustrating to see this in a country that is a real pillar and example of freedom of expression and choice … our British system is a model for the world to follow, yet we have embarked on a journey that has put this very core of British values under real threat.”

The Guardian and Times report the admission by a leading UN scientist that claims the Himalayan glaciers could melt by 2035 were false. Rajendra Pachauri said he “regrets the poor application of well-established IPCC procedures in this instance”, reports the Guardian, with the Times saying his admission is being exploited by climate deniers:

“The error is also now being exploited by climate sceptics, many of whom are convinced that stolen e-mail exchanges last year revealed a conspiracy to exaggerate the evidence supporting global warming.”

And the Telegraph reports a “record gap” between public and private sector pay. Data from the Office for National Statistics shows that in the three months to November the average public sector worker was paid £23,660 a year – £2,132 more than the average pay of a private sector worker. This was a result of “nurses, teachers, civil servants and other public workers enjoying an average annual pay rise of 3.8 per cent in the three months to the end of November” said the Telegraph, adding that “private sector employees saw their salaries rise by just 0.2 per cent, as thousands of firms froze their workers’ pay as part of a desperate bid to cut costs in the recession”.

14 Responses to “Politics Summary: Thursday, January 21st”

  1. David

    THe last story is very interesting indeed. It is clearly a problem when the private sector (which generates wealh) is paid less than the public sector. This cannot ever lead to a stable economy and must be redressed.

  2. Joe

    Isn’t a little simplistic to assume only the private sector, in isolation, generates wealth? I mean, surely good schools and hospitals are essential to any wealth generating economy? If we were to privatise them would they suddenly become ‘wealth generators’?

    The telegraph article hardly seems balanced, quoting only a shadow minister, the director general of the British Chambers of Commerce and an economist moaning about the ‘gravy train’. The last point is revealing; if many of the lower paid public sector jobs have been outsourced then surely its hardly surprising that group made up of highly educated professionals are well paid, compared to a more mixed group? I’m sure the standard deviation of private sector pay would be very revealing.

  3. David

    Not simplistic at all. Hospitals and schools while important do not generate wealth. The private sector has been allowed to be on the receiving end of the economic downturn. Losses of jobs and many companies instigating pay cuts or freezes. At the same time the public sector, which does not contribute materially to the economy, actually increased pay. We need to really look at public spending in great detail and adjust it to reflect the current state of the economy.

    Yes standard deviation of private sector pay might be interesting but an entirely moot point. Private sector is very simple, you have to be physically paid less than the money (or utility) you provide. Or to put it simply you earn less than you make or the business dies.

  4. emilia

    So David, are you advocating that the private sector should pay its staff better, or a race to the bottom where everyone ends up low-paid?

  5. Left Outside

    I’m not sure how you can say “Not simplistic at all.” and follow it with something as simplistic, not to mention wrong, as “Hospitals and schools while important do not generate wealth.”

    Does BUPA generate wealth? The NHS’s income is from Govt run compulsory insurance programme, BUPA’s is from a privately run voluntary insurance programme. What does the NHS do that stops them generating wealth?

    Remember, it generates no wealth, not just less, in your view. You must also pretend that no coordination problems exist in the production of public goods.

    Does Eton generate wealth? It certainly increases the human capital of those that go there, so yes. State run schools do the same, if to a lesser extent, but surely you can’t say they generate no wealth.

    Now, you can argue that the Government does a worse job at these things than the private sector does, but it shows a degree of economic illiteracy which is worryingly prevelent in some rightwing circles to say the government is incapable of producing wealth. There are a great number of things the government does better than the private sector (its called market failure) and it seems odd to say it produces no wealth.

    There is a nuanced and powerful argument out there that the state interfers too much. You are not making it, you are preaching voodoo economics.

  6. David

    Voodoo economics? I like that. Might use it myself some time.
    My normal measure for generating wealth is that money goes in and profit comes out. For example I spend ten pounds on materials but get back twenty pounds for a product I make. As such I have made a profit (I know dangerous grounds here but bear with me). A private hospital provides a service and by its very nature as a private entity must charge more money than it spends providing that service. That is a simple fact of life. The same goes for private schools like Eton. Public sector does not post a profit, does not answer to shareholders and has absolutely no incentive to produce their product smarter, better or cheaper. All they ever need to do is meet a budget and that is why they do not generate wealth.
    They may aid others to go on and generate wealth but in and of themselves they do not.

  7. Joe

    Wow, thanks Left Outside! Put more eloquently than I could manage. The later post, explaining that the figures for public sector pay include the nationalised banks, is absolutely hilarious!

    David, there’s obviously more to private sector balance sheets than simply what it pays its employees and your strange notion of utility! Are you just making this stuff up as you go along? The standard deviation of private sector pay might demonstrate that lumping the pay of low paid, unskilled labour, with skilled professionals, might be at best misleading, as further analysis of the figures is already demonstrating.

    It’s really worrying that such deceitful stuff is being published unchecked in the right wing press, to back a conservative agenda of immediate and savage cuts that would seriously endanger any economic recovery.

  8. David

    Emilia And here lies the catch. Private sector cannot pay more because we are tied down with tedious things like making a profit. What I am suggesting is that there should be a reasonable wage for a reasonable job. Surely if the public sector has the luxury of paying above the odds then it is only because they are not ‘competitive’.

  9. David

    Joe, you are right there is more to the balance sheet than just wages. The point I was making is that to survive a private company must make a profit. To do that all parts of the business must produce more than they consume. My use of the word ‘utility’ was more to cover the bases.
    For instance a cleaner does not directly earn a factory money but the cleaning he does allows continued production. The benefit of which must be more than the cost of him.
    Simples.

  10. Liz McShane

    David – what about ‘social capital’ and ‘wellbeing’. I think going forward these intangible assets will become important factors when looking at the health of the economy & society, rather than just a traditional balance sheet of ‘monies paid in’ & ‘monies paid out’. This obviously requires a big, bold vision…..

    Re Bupa _ is wish they would pay the NHS for all the years of medical training that they benefit from whenever they employ ex-NHS doctors & nurses.

  11. David

    Liz McShane, you are quite right intangibles are important but given the current financial climate surely the ‘tangibles’ must be right first even if we must sacrifice the intangibles for a time. For instance when I was starting out in life and did not earn much I did not have a holiday. I was missing an intangible in order to secure my future in a very boring monies in and out basis. Now that is sorted I can refocus on the intangibles and have a holiday. My suggestion is that the country is at that place where intangibles must be put on hold and the basics of money in and out must take precedence.

  12. Joe

    David; the term ‘voodoo’ economics has existed since the late 1970s as a description for what neo-Keynesian economists and thinkers regard as dangerously simplistic New Right economic theories. Amusingly I think it was George Bush Senior who coined it in his primary battles with Ronald Regan!

    David; your take on wealth generation seems to come from the same origin; some version of supply side economics that for many of us lefties is so simple as to be useless or even dangerous in its limited view.

    You seem to be confusing the traditional right critique of the public sector as inefficient (you can’t really link this to the figures without more evidence) without a profit motive, with an idea that it doesn’t create any wealth whatsoever; completely ignoring the cost and development of human capital and the state of the wider economy in terms of money supply and the problems of long term investment etc. etc.

    Wealth generation is really not ‘simples’ and cannot be explained adequately with such simple examples.

  13. Joe

    Apology! Of course the Republican primary was in 1980…

  14. Left Outside

    Thanks Joe, I’m reall not sure David knows what he’s talking about.

    The public sector can be less efficient than the private (the private sector destroys the least efficient 20% every year after all) but when it comes to public goods it can be more efficient. It can also most definitely produce wealth. Talking of “simples” and “tangibles” is obscurantism not analysis.

    Indeed where there are information asymmetries, where one party to a transaction knows more than the other (i.e always), there theoretically always exists interventions which will improve outcomes (I think you have to assume no transaction costs etc.) but it seems David cannot even begin to argue about the differences between profits, wealth creation and efficiency.

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