Is the public sector really ‘too big’?

How public spending is spread around the UK is generating great interest, after David Cameron identified areas like Northern Ireland and the North East as having a public sector that is ‘too big’. Is he right? Well, sort of.

Much of the coverage has been based on figures that show the public sector constitutes up to 70 per cent of the economy in some parts of the country. These are quite shocking figures, but they deserve closer inspection.

Treasury figures published last week reveal that spending per head is spread unevenly around the country. Areas like Northern Ireland, Wales, Scotland, the North East and the North West of England receive above average levels of public spending per head, while regions like the South East and East of England receive less than the UK average. Surprisingly for some, these figures also reveal that is it actually London that receives the most public spending per head – 15% above the UK average.

Mostly what this shows us is which parts of the UK have the highest levels of social and economic need, as a large proportion of this spend is made up of ‘social protection’– i.e. benefits and the state pension. This spending is entitlements-based, and responsive to need, so if the number of claimants of Jobseeker’s Allowance in an area increases, so too does social protection spending.

So why didn’t David Cameron flag London’s public sector as too large? The figures he used looked at the sector as a proportion of GDP, rather than public spending per head. The City of London’s economic success (much of it the result of people commuting in from surrounding regions) disguises the size of public sector spending when the figures are viewed in this way.

Cameron did also make the argument that the private sector needs to be larger in the Northern regions, Wales and Northern Ireland, which is the right way to think about the issue. It is not so much that the public sector is 'too big' but that the private sector is 'too small'. You could argue that without public sector employment the situation could be even worse in some parts of the UK.

We all know cuts are coming and they have to be made, but it is vital that economic geography is factored into the thinking as the size of the public sector is reduced. Otherwise, there is a risk that swinging cuts could have a particularly negative effect where social and economic need is already high.

Katie Schmuecker

The parties and voluntary sector engagement

Last week Gordon Brown suggested that life after politics will not see him slide into a high-profile job at the World Bank or the IMF, but a turn to 'charity or voluntary work'. My fear is that the current policy outlook jeopardises the existence of this charitable future, or at best transforms it beyond recognition.

On the face of it, the political consensus forming around the need to ‘strengthen the voluntary sector’ bodes well for charities and community groups. All of the main parties have put forward measures which affirm their commitment to the sector, from Labour’s Social Impact Bonds, through the Lib Dems’ increase on gift-aid payouts to the Conservatives’ Big Society Bank. The charity sector already receives one third of its income from the state, and this looks set to rise under any future government.

So why the concern? The cynic within me sees this newfound enthusiasm for voluntary sector engagement as a neat way of divorcing a future government from the looming problem of public service spending cuts, while reaping the anticipated rewards of a ‘change’ agenda which 'returns power' to the hands of communities.

The idea is that money can be saved through outsourcing to charities and communities, under the guise of ‘inclusive’ government. This is already underway: public service contracts currently make up around 65% of the voluntary sector’s statutory income.

Yet by asking charities to compete for public sector contracts which they lack the infrastructure to deliver, policy falls short of the substantive support that the voluntary sector will need if it is to play the starring role that the three major parties have assigned to it. In the context of a battle for the future of affordable public services, the current measures seem analogous to handing David a slingshot and sending him forth to meet Goliath.

As highlighted by recent ippr work on 'Capable Communities', charities add value where other service delivery mechanisms cannot, owing to their niche, local expertise and their independence from top-down targets and constraints. To couple simple, finance-based policy to an expectation that charities will transform into slick, area-wide providers of target-hitting public services is to inhabit the grey area between naїvety and negligence.

The new government will need to sit up and do some serious thinking about the scale, process and viability of this proposed transformation or risk selling an expectant and dependent public woefully short.

Leo Ringer

Don't meddle with the BBC!

Once again MPs are united against the BBC. A cross-party committee of MPs has demanded the BBC be accountable to Parliament. Surely public eyebrows will rise in unison at MPs criticising 'spending public money without fully analysing costs and benefits'. But behind the pot-kettle-black, do they have a point?

The BBC has undeniably made a few foolhardy decisions of late. In trying to maintain public interest the corporation has felt pressured to bid for popular names (infamously Jonathan Ross). But there have also been some fantastic decisions. The corporation persevered with their decision to base BBC Scotland in Glasgow despite severe recruitment difficulties early on. They have invested heavily in new talent, there as elsewhere (the majority of people that work in UK private media were trained at the BBC), and in the process fulfilled their mandate of being a truly UK-wide broadcaster.

The BBC is not beyond criticism, and it is right to question excessive spending, especially on pay at the top. But we are in murky water when MPs start demanding that the BBC is accountable to them, and must justify every pound spent, every decision made. The BBC plays a vital role democratic politics (a point we have made here before), and must maintain independence from Parliament.

So is there a way to balance accountability with independence? There is. And – who knew?! – it already exists. Every 10 years the Charter review scrutinises the BBC’s role, activities and budget. When next up for review – in 2016 – this process should be rigorous and ensure value for money from the Beeb. But once the financial settlement is complete, like it or not, the BBC must be left to do its job. That is what independence means.

If criticisms that the BBC has too many, overpaid managers ring true, it may well be that the unrelenting attacks are a driving force. Organisations that lack the freedom to take risks and make mistakes see middle management multiply in a bid to disperse accountability for ill-fated decisions. Meddling MPs may well end up with a cowed corporation of risk-averse managers, with fewer funds to support the talent and creativity it thrives on. That, surely, would be a waste of tax-payers money.

Tess Lanning and Laura Chappell