To cut public spending, a Great Jobs Audit is needed

With a fracture waiting to happen in the Conservative party over its fiscal policies, it is astonishing that there is little or no discussion about the most obvious means of funding the tax cuts so many Tories want: reducing public spending. In an economy from which growth is largely absent, cutting spending is the only feasible way to fund the lower taxes that might encourage an expansion of economic activity. The most effective way to provide the necessary cut in spending is to reduce the size of the state’s payroll. But rather than take a lead on that, the Government is allowing the public payroll to grow relentlessly.

Jeremy Hunt inherited an economic mess that had brought down a prime minister after 45 days. The markets, inevitably, rejected tax cuts funded by borrowing that would have had equally inevitable inflationary consequences. No one could blame Mr Hunt for acting cautiously, given he had to shore up the value of sterling and stop pension funds going under: but he appears now to have gone beyond caution and into a form of paralysis. He will break out of it only by finding ways to cut the public sector. He should start by ordering all heads of government departments and services to do an audit of every public sector job, and prove that each one is really necessary.

There is plenty of scope for cuts. Over 5.75 million people are employed in the British public sector. The wages bill for them is £233billion a year, more than a fifth of the country’s total public spending. Compared with the private sector, state employees enjoy superior occupational pensions: the Institute for Fiscal Studies estimates that when pensions are taken into account, remuneration for state employees is 6 per cent higher, on average, than in the private sector.

And the public sector is growing incontinently: in September 2022 it had 28,000 more employees than the previous June, and 73,000 more than September 2021. Even without growth in numbers, a pay rise linked to an inflation rate of 10.1 per cent would cost an extra £23.5billion a year. The NHS, with around 1.375 million full-time equivalent employees, spends around two-thirds of its £192billion annual budget on payroll.

The NHS seems unable to stop expanding. It would certainly be insane to reduce the numbers of doctors, nurses, midwives and paramedical staff; but that would leave around 650,000 support staff to be evaluated, many of whom are well-paid bureaucrats with skills easily transferable to a private sector that is having trouble recruiting.

There are also 636,000 jobs in “public administration” and over half a million in a sector called ‘other’ – which does not include the police, the Armed Forces, social work or the central civil service (which itself has 513,000 employees).

The Armed Forces may have to expand if we are to conduct diplomacy properly in an increasingly dangerous world. With demands that the public sector can’t avoid, cutting payroll in order to cut tax is even more essential.

It is hard to see why Mr Hunt is not aggressively attempting to identify the jobs that the state should not provide. Private-sector concerns review their own payroll routinely. The purpose of public service is to serve the public, not to create jobs for large client-groups. A Great Jobs Audit would be a timely reminder that government should strive not to spend taxpayers’ money, but hand it back instead.

The number of state employees is growing inexorably. To reduce spending, it is time to see if all these roles are needed