Comment: Cuts lead way to private sector recovery

John O'Connell is deputy research director of the TaxPayers' Alliance
John O'Connell is deputy research director of the TaxPayers' Alliance

Redundancies in the public sector are unfortunate, but the government must now focus on a strong, private-sector led recovery by lessening the tax burden.

By John O'Connell

It's great news that the government has announced a good range of tangible cuts which will save a lot of money and mean lower taxes and less money wasted on debt interest over time. Programmes including Train to Gain are going and there are healthy cuts in departments like the Treasury, BIS and DEFRA.

Unfortunately a number of measures that would save significant amounts of money without hitting the priorities of ordinary families haven't been taken: a freeze in the International Development budget; pay cuts for the best paid public sector staff; scrapping bodies like the Carbon Trust and the Equality and Human Rights Commission.


And in some areas they've introduced new spending. Carbon Capture and Storage and the Green Investment Bank get £1 billion each, for example. That is a lot of money that will have to be found from other programmes or the pockets of ordinary families. Also, a new green tax will place pressure on businesses as they try to lead the economy out of the downturn. With calls to rebalance the economy towards manufacturing, hitting producers with bigger bills is counter-productive.

And we've also seen that there will be 490,000 fewer public sector employees by the end of the spending period. Nobody enjoys seeing redundancies so hopefully as many of these as possible are lost through natural wastage.

However, the scale of the fiscal crisis means that redundancies will be a necessary pain. Ideally as many of these workers as possible move straight into employment in the private sector - if the OBR's forecasts of private sector job growth hold firm it can continue to drive the recovery and total employment will rise.

Those numbers, announced in June, are also likely to be revised down, if they change at all, as more of the cuts are coming through cutting back benefits rather than the services where most public sector staff work.

Now we've seen the detail, the government has to ensure they do all they can to support a healthy and thriving private sector to pick up the slack. Growth and jobs will follow. The cuts announced will mean less of a burden on taxpayers and less wasted on debt interest but the government shouldn't hinder supply-side growth with new burdensome taxes and regulations.

John O'Connell is deputy research director of the TaxPayers' Alliance

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