Cuts, Responsibility and the Public Sector

Last week saw large scale strike action from public sector workers here in the UK, campaigning against changes to pension arrangements and more generally ‘cuts’ to government spending. The most common refrain from these workers, as on similar days of action in the UK and elsewhere, was that because the public sector was not responsible for causing the financial crisis it is ‘unfair’ to expect its workers to pay towards undoing the morass. It seems to me that there is more than a grain of truth to this charge because whatever one thinks of high public spending it did not cause bankers to become over-exposed to sub-prime mortgage investments. It is equally true that banking institutions both on grounds of justice and the need to avoid future moral hazard should have faced more of the costs of their own failure.

All this said, the claims of ‘unfairness’ might warrant a more serious hearing if public sector workers in the UK and elsewhere had marched against the enormous increase in government spending (between 4 and 6 % of GDP in the UK) that took place on the back of the financial bubble that prevailed between 2001 and 2008. Few, if any of those spending increases were ‘deserved’ by public sector workers. They certainly didn’t come as result of productivity increases. Yet those who work for the public sector (and I include myself in that category) were perfectly willing to cash in on the spending increases that were funded in part by taxing the gains made in the banking boom. Now that boom has disappeared someone has to pay the full bill- including the public sector. If union leaders had marched through the streets demanding public spending restraint and campaigned for higher interest rates during the last ten years – as any genuine guardian of the ‘public interest’ should have been expected to do – then and only then might they have a valid reason to gripe about the present ‘injustice’.

Read the article on the Pileus website.

Mark Pennington is the author of Robust Political Economy: Classical Liberalism and the Future of Public Policy

IEA Fellow of Political Economy

Professor Mark Pennington is a fellow in Political Economy at the Institute of Economic Affairs and is also a lecturer in Political Economy at King's College, London. Mark holds a PhD from the London School of Economics, has been published in a number of publications and is co-editor of The Review of Austrian Economics.