Newcastle council: at the vanguard of neo-liberal thinking?

Seeing as looking for a job is mind-numbingly boring and in any case doesn't fill the day, I thought I might as well spend a bit of time adding to the blog, post-round the world travel. So the blog will evolve from an occasionally amusing record of my little adventures, to a dull-but-worthy discussion of politics and/or public policy.

I was prompted to do this by the front page of today's Journal newspaper, which splashes a story about a leak of a document written by a friend of mine who works on secondment for Newcastle City Council. The full story can be read here and here but in short Neil Murphy has argued that "the public sector is too big. Like for like it pays more than the private sector" and that "at certain skills levels... there is clear evidence that the public sector is crowding out the private".

Having been the butt of stories such as these in the past, I know that the newspapers can seriously distort your meaning in the search for a more interesting story (I don't blame journalists, that's their job. But the rest of us need to take a more cautious approach). But there are a couple of direct quotes here which I can't agree with, much as I like and respect Neil.

"The public sector is too big". Too big for what? My assumption is that this gist of the argument is that it is somehow impeding economic growth, and that if it were smaller economic growth in Tyneside would be larger. I disagree. More public spending does not inevitably lead to less economic growth. There is no evidence which suggests that it does - mostly its driven by assertions from the business community who are pursuing their vested interests of trying to keep salaries as low as possible (they always like competition until they're affected by it).

In UK terms a fairly high proportion of the North East's output (GDP) comes from the public sector, but actual spending isn't really that high. It's because the private sector is so weak that the proportion is relatively high. Our actual level of public spending per head in the North-East is lower than in some of the economically successful nations and regions. For years London and Scotland have had both higher levels of public spending and higher economic growth rates than the North-East. On the other hand, Wales has had higher levels of public expenditure than the North-East but a roughly comparable rate of economic growth (ie a pretty crap growth rate).

Data from the OECD would seem to confirm this analysis. Countries such as Japan and Switzerland are low-spending nations but have had slow growth in GDP per head in recent years. However, in countries such as Finland and Sweden, where levels of public expenditure are substantially higher than in the UK, growth has been significantly higher than in the UK.

Quite simply there is no simple relationship between Government spending and economic success, and the size of our public sector has little or nothing to do with the size of our economy. It reflects our political values and the degree to which a country believes that we can do more together than individually.

Final thought: if the council are sensible, they'll now put it up on the website so that people can read for themselves the full account and not what is necessarily an abridged version in the Journal and what is highly likely to be sensationalised. Unsurprisingly it isn't even mentioned.