The impression that the Coalition is being run by a gang of particularly cold-hearted and vicious middle management sadists deepened this evening with the Guardian publishing details of a leaked memo from the Treasury. Leaked, you say? As in 'what do you think happens if you tell the entire public sector workforce that you're going to sack one in four and give the rest a pay cut and a slashed pension?' Fancy. Anyway, the headline figure should be that the effect of the cuts on employment is slightly worse on the private than the public sector, with about a 55/45 splt. This should not come as a surprise for a couple of reasons.
First, the private sector is inextricably linked with the public sector - my missus works in a regulatory department that has to deal with Government agencies over drug and medicine licencing - obviously a cut in red tape or similar means companies can make cuts in staff assigned to regulatory compliance (although I'd like to be sure we aren't going to deregulate medicinal safety control, you really never know with this lot). Likewise I work for an firm that works partly on behalf of Government agences, providing networking services and internet access - cuts in these agencies will have direct consequences for our teams involved in those areas.
Second, there's the blatantly obvious point that sacking a policeman has an effect on everyone who supplies things to that policeman - internet services, phone, food, petrol - it's all affected. Again, this is not a startling insight to make at this point.
It's thus profoundly ignorant to assume, as many Tory/libertarian commentators regularly do, that public spending is not wealth creating - it's fairly obvious that cuts in it can be wealth destroying for private sector jobs that depend on public sector contracts and public sector wage money circulating through the economy.
Now, at this point your orthodox Thatcherite says 'Ha! Your mates working on government contracts could have been making just as much money working harder for private sector customers, with the added benefit of not being paid out of my taxes, thank you very much' and they're right, sort of - the likes of EDS used to boast of the high margins on Government work as a plus point and thus you quite possibly had the public sector driving up costs for the private sector who might want the same services. However, can you see a burgeoning private sector recovery anywhere in this courtroom that would take advantage of Government contractors seeking new work? I sure as dammit can't, and George Osborne's estimates of 2.5m jobs created over five years purely in the private sector looks rather optimistic. In particular it'll be very hard not to find himself behind the curve as public and private sector jobs are lost without corresponding job creation* to take up the slack, leading to a large bubble in unemployment that persists for years. He therefore *has* to keep the confidence trick going, which is a recipe for more spin and assiduous media manipulation. He may even, at some point blink, but the damage will have been done by then and it'll take more than Vince Cable and Danny Alexander to pull the ship away from the iceberg in time.
* The latest GLA forecasting suggests London could well be ahead of Gideon's employment growth predictions, with strong growth in 2011 and 2012 by my reckoning leaving us up on where we should be. Unfortunately, while this takes account of projected falls in public sector employment, it was based on the March budget, although they knew last week's Budget was coming. This means their public sector employment predictions might be rather rosy, since they're only forecasting a loss of 1-1.5% per annum, and that's not going to satisfy the Taxpayers' Alliance. This is a worry considering London probably needs to be creating jobs faster than the rest of the country owing to being a net tax revenue exporter, and if we stop motoring, that just makes it a whole lot harder for the rest of the UK to generate jobs at a sufficient rate.