Scotland's Public-Sector Reliant Economy.

[The McGlashan]

You might want to put on your crash helmet before reading this. (Either that or your tinfoil hat.)

Figures from the UK's Pre-budget report, the Centre for Public Policy for Regions show that the Scottish Government's budget will fall by nearly 12% in real terms over the next two budget periods.

http://www.cppr.ac.uk/media/media_138777_en.pdf

The public sector accounts for more than 50% of GDP in Scotland and provides about 1/4 of all employment. According to The Economist the public sector in 'Northern Britain' is larger today than is was in some of the Iron Curtain countries during the Soviet era.

Earlier this month, the budget went through at Holyrood just about on the nod. This is clearly the calm before the budgetary storm. A painful period of belt-tightening is in the post.

Given that we have seen significant malinvestment and misallocation of capital in the boom and continuing through the unsustainable stimulus period of the last year, the effect of the sharply declining government budget on aggregate demand thoroughout the entire Scottish economy is likely to be horrifying,

Not a good time to be taking on debt.

[The McGlashan]

Shall I be the first to call ******** on this? More than 50% of GDP? 1/4 of all employment? What kind of crazy productivity do you think you get from public sector workers?

Seriously, I checked your links. Where exactly did you get the figures from? I couldn't find the figures you were quoting in either of the links.

Hi Mr Gruff,

Thanks for the Quality Control.

Language is a slippery thing, I should have taken more care...

When I said:

The public sector accounts for more than 50% of GDP in Scotland

I might more accurately have said:

Public sector spending is equivalent to more than 50% of GDP in Scotland, as it is in the UK.

The 1/4 figure for employment is accurate enough, the actual figure is 23.1%:

from

http://www.scotland.gov.uk/Publications/2009/09/15140059/2

Edited February 16, 2010 by The McGlashan

[aberdeen07]

Hi Mr Gruff,

Thanks for the Quality Control.

Language is a slippery thing, I should have taken more care...

When I said:

I might more accurately have said:

The 1/4 figure for employment is accurate enough, the actual figure is 23.1%:

from

http://www.scotland.gov.uk/Publications/2009/09/15140059/2

If it wasn't for certain banks, the overall figure would be falling:

Impact of Public Sector Financial Institutions

Royal Bank of Scotland Group plc, Lloyds Banking Group plc and Northern Rock plc

The large increase in public sector employment over the year is caused by the reclassification of RBS and Lloyds Banking Group as public corporations. If we exclude public sector financial institutions 1 from the series, there would be 572,200 people employed in the public sector, representing 23.1% of total employment in Scotland. Excluding these banking groups, public sector employment would have decreased by 4,200 (0.7%) over the year.

The public sector financial institutions are classified as UK-wide public corporations as they are the responsibility of the UK Government. Hence the inclusion of these banking groups has no impact on the estimates for devolved public sector employment which is the responsibility of the Scottish Government or the Scottish Parliament. Commentary on the trends of devolved public sector employment can be found in section 2.

Edited February 19, 2010 by aberdeen07

[Democorruptcy]

From that graph - Britain has gone from being one of the least reliant upon public sector into one of the most reliant, all under the tenure of Brown, but the state sector employment has remained fairly constant, which would suggest to me an increase in outsourcing to the private sector. Does anyone else see the same or have I got it wrong?

Couldn't excessive salaries in the Public sector be part of the problem?

[Democorruptcy]

According to figures obtained by the Liberal Democrats, 2,439 people earn more than £100,000 in the public sector, totalling £330 million a year

http://scotlandonsunday.scotsman.com/news/-Anger-at-pay-increase.5988895.jp

[The McGlashan]

Thanks for the update. The >50% of GDP as public sector spending implies that much of the private sector relies on government contracts etc. I'm glad you picked up on the subtle language distinction as well rather than assuming I was disputing your figures - I too have a massive dislike for big government.

From that graph - Britain has gone from being one of the least reliant upon public sector into one of the most reliant, all under the tenure of Brown, but the state sector employment has remained fairly constant, which would suggest to me an increase in outsourcing to the private sector. Does anyone else see the same or have I got it wrong?

Yes, I think that's a sound analysis. I think that PFI and PPP coming home to roost is also having a big impact on these figures as formerly off-balance sheet spending now comes into the public accounts. There is additionally the impact of fighting two major wars in faraway places and much fantastically expensive fortress-Britain security stuff. The impact of the Blairite uplift in NHS spending and the emergency re-nationalisation of and re-investment in Railtrack, along with other, recent emergency and punitive infrastructure renationalisations is all there for us to read and weep.

However, I don't have a particular dislike for big government in and of itself, any more than I dislike big business. As far as I'm concerned and as far as they impact me, these things are just like the weather. Or hills. They exist, and there's not much I can do about it; sometimes we coast easily downhill in fair weather and it's great. At other times, we struggle uphill into the wind and rain and it's horrible.

The point I'm making on this thread is that the private-sector banking disaster has, as we all know, now become a public-finance issue. Scotland's public finances will therefore be coming under increasing budgetary pressure in the next few years. As Scotland's public sector is proportionally larger than the UK's as a whole, this budgetary pressure will inevitably lead to pressure on employment and impact on final demand to the detriment of the Scottish economy.

So, the contour-lines of the hill will become closer together as we climb to the hoped-for summit of recovery. We will also be climbing into a headwind, with a severe risk of squalls turning wintery. I read that the helicopter mountain rescue service is to be privatised. Let us hope that they still have the resources to pluck us from the cliff-face should we need it, and that the service remains free-of-charge for those in genuine need.