Public sector employment & public spending in the UK

In the context of nothing in particular, here's an overview of how things have changed between 1997 and 2007.

Total public spending, is up from 41.2% of GDP to 44.6% of GDP, per the OECD's Economic Outlook, Table 25 (having dipped as low as 37.1% in 2000). GDP seems to be about £1,400 billion, so if spending had remained a constant % of GDP, it would now be £48 bn less. Had it remained at 2000 levels, it would be £105 bn less.

According to this, employment in the public sector (in the narrowest sense) is up from 6.1 million to 7.0 million (column D); but if you chuck in all the para-statals - quangoes, state-funded charities and so on - employment in 'Public administration, health and education' (Column M) it has increased from 6.5 million to 8.3 million.

So what are all these people doing?

The number of nurses and doctors in the NHS has increased by 120,000 (from 400,000 to 520,000). Spending on the NHS in nominal terms has trebled.

The number of teachers in English schools has increased by 36,000, from just under 500,000 to about 530,000, call it 600,000 for the whole of the UK. Nominal spending on education has doubled.

The number of police officers has increased from 126,000 to 140,000.

That means that out of those 8.3 million, there are 1.26 million nurses, teachers, doctors and police officers. To be fair, they need back up staff (cleaners, receptionists, classroom assistants etc) let's be generous and double that to 2.5 million, stick on another 500,000 for DVLA, court system, armed forces, a few people to run dramatically reduced and simplified tax/welfare system, issuing passports and so on, so 3 million seems a reasonable upper figure for public sector (about 10% of all employees). Not that the State should employ teachers and medical staff of course, but AFAIAC the taxpayer should still bear the cost of basic level health and education vouchers to be used in private sector, so the cost would be much the same.

So what on earth do the other 5.3 million other people in 'Public administration, health and education' do all day long? Presumably bugger all. So let's sack the lot

Total government spending is currently about £625 billion. If you knock off £165 bn for child benefit, welfare and pensions, that's £460 bn on salaries and overheads. As a check - 8.3 million employees x average salary £25,000= £210 bn, plus 50% for public sector pension accruals plus 50% for overheads (buildings rent and maintenance and other jollies) = £420 bn, plus £40 bn wasted on PFI, EU membership and so on, seems about right.

So if you sack 5.3 million of them, that would cut public spending by 5.3/8.3 x £460 bn = £290 bn. Giving them all a flat rate Citizen's income of £60 per week would reduce the saving to £275 bn. About £50 bn of current spending is being funded by borrowing, so to balance the books we could still cut taxes by £225 bn.

So in theory you scrap VAT (£77 bn), National Insurance (£87 bn) and reduce income tax and corporation tax (£144 bn + £45 bn) to a flat 20% or so (see Table C4) without even having to worry about Laffer effects.

That's what I call a libertarian budget!