FIGURES released this week have exposed something of a myth in certain circles that only by throwing more money at the public sector will we see growth.
The Office for National Statistics confirmed that Gross Domestic Product (GDP) increased 1.1 per cent in the second quarter of 2010, compared with an increase of 0.3 per cent in the previous quarter.
All very good news, and many from the Left have seized on this as a vindication of their stance that the only way to secure the recovery is to carry on pumping money into the public sector.
On the surface, that sounds very convincing, until you scratch beneath that gloss and find out the truth. And the reality is that the public sector contributed 0.1% to the growth figures. So if there had been no public sector growth, the net figure would have still been a very strong showing.
So the Left’s position is not borne out by the facts because if it were, we would have seen a greater contribution to the overall GDP figure from the public sector, especially given the fiscal stimulus.
The reality is that reducing the size of the public sector can, and will, in turn provide some opportunities for the private sector. There is evidence all around us.
For instance, many councils have transferred their housing stock to outside bodies and everyone has reaped the benefits – more investment in housing stock, protected employment rights for housing staff under TUPE agreements, better services for tenants, more opportunity for external funding… the list is endless.
There is a certain myth that reducing public sector investment or making efficiencies will mean a worse service or no service at all. That is of course nonsense.
In many areas of the country, businesses have flourished by taking over the running of council services. Provided the quality of service is maintained, it’s a win-win for everyone – the company created jobs and employment while the strain is taken off the council who don’t have to pay NI contributions, sickness pay etc.
If this is wholly outsourced service, the council by default gets more bang for its buck simply by only having to pay for the actual service and not having to be burdened with the overheads. It makes practical economic sense, and I am glad the Coalition recognises this in its policies.
It is true though that one swallow doesn’t make a summer and the road to full recovery will be tough – afterall, it took 18 years from the miserable Winter of Discontent to the blossoming economy bequeathed to Tony Blair in 1997.
But by making a start now, we are sowing the seeds of prosperity for our children and grandchildren… let’s just hope the seedlings are trampled on by those whose misguided policies would see Britain left behind in a rapidly changing and globalised economy.
