Public Sector

According to the Office of National Statistics just over 6 million people work in the public sector. This is 53% of the economy. 523,000 of them work in the civil service.

What does this mean? Well it means that for every pound in the economy 53p of it comes from the state. Hang on though, the state doesn’t earn any money does it? It doesn’t make anything or sell anything. In fact the only way that the state gets money is from our taxes. So that 53p comes from money generated in the private sector. Our money.

If I earn £100,000 in a year (I wish) I will pay about 50% of that in direct and indirect taxes. I say “about” because I’m just using the figure to illustrate a point. Some of the money comes from direct income tax and some from tax on my savings (I wish), investments (I wish), VAT on good and services that I buy, etc. In fact for the UK we pay 42.6% on average in direct and indirect taxation. Soon to increase. The rich pay less as a percentage but more as a sum.

Anyway that £50k in taxes ends up in the pot of the state: the treasury. There they decide how to spend our money. Presumably this is loosely based on the policies that they made while running for office but I wouldn’t bet on it. Of this hypothetical £50k the wages of a civil servant or two are paid along with health and social systems, welfare, pensions, defence, rubbish collection, firemen, the BBC, science research, foreign aid, everything really that the state spends our money on.

If the wages of the public and private sector are equivalent then you can see how this might cause a problem. For every £100k earnt, £106k has to be generated to pay for public sector pay. Some of it is redistributed from taxes paid by public sector workers but there isn’t a perpetual motion machine that gets more out than goes in. Our money from the private sector doesn’t cover the money needed in the public sector.

The public sector is too big.

Not just a little bit too big. It is hugely inflated. It is paid for by borrowing against money that we might make in the future and in our children’s futures. Does that sound fair to you?

Now I do think that some things are really worth paying for. I want an NHS in case I get ill and need treatment. I want a benefits system as a safety net in case I find myself out of work. I want my rubbish collected. I want firemen to be around in case my house catches fire. I want an education system to teach our children so that the next generation becomes an educated and productive work force. There is a lot that I’m willing to contribute towards. If you tot it up though it only comes to about 2 million people of the 6 million employed in the public sector.

What do the other 4 million do? What are they spending our money on? Why isn’t something actually being done about this?


Filed under Our money

2 responses to “Public Sector

  1. Doesn’t the public sector make money from selling things? 3G licences for billions, leases on certain bits of land to the US, etc? But I agree with your overall thrust, it is too big. Moreso when people like Crapita are taken in to account.

  2. That’s a good point Brennig. I’ll add a post about it in a day or so.

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