Public sector

And what about the other sort of debt? We spend so much time harrumphing about the national debt that an important point is obscured: personal debt, the amount owed by individuals, is even higher. I wrote an article on the subject for a recent issue of The Spectator, as well as the Thunderer column (£) for last Saturday's Times. But, really, a piece in the latest Spectator (subscribers here) by Helen Wood — the former prostitute who transacted with Wayne Rooney, as well as with a "married actor" who has slapped her with a superinjunction — puts voice to the problem in blunter fashion. "My mistake," she writes, "was to get into debt": "I borrowed £800 to go on holiday, followed by £500 to pay the rent — both from loan sharks.

'NHS good, private health bad'. 'State good, market bad'. 'Four legs good, two legs bad'. Whenever political leaders get into a tight corner they have to find allies fast. There is no time for reasoning to work its gentle magic. Basic sentiments need to be stirred and the popular favourite is usually hate. Yesterday Mr Clegg used this classic strategy to rebuild his support base. The cold-hearted Tories were at it again, dismantling that icon of compassion the NHS. In public they were declaring their undying love for it but out of sight they were promising fat profits for ‘health care corporations’ once the new law was passed. Mr Clegg even resorted to another child-like contrast.

It may look diminutive in between Easter and the Royal Wedding, but tomorrow is still a big day in the political calendar. It is, after all, the day when we hear the official growth estimate for the first quarter of this year. A negative number, and we shall have experienced two consecutive quarters of shrinkage — which is to say, the country will be back in recession. A positive number, and we shall have avoided that unhappy fate. So what are the forecasters saying? The consensus among bodies such as the NIESR and the CBI is around 0.5 percent, which – as Duncan Weldon explains in a very useful post – is barely enough to compensate for last quarter's snow-induced hit, but is still some sort of growth.

If I was a betting man, I’d fancy wagering that if the economy is growing at a decent clip again by next year’s Budget, Osborne will abolish the 50p rate then. His announcement of a review of how much revenue it actually brings in, strikes me as a move to pave the way for its abolition. This review is, if it is using dynamic models, likely to conclude that the rate is bringing in no, or minimal, revenue and that a lower rate would produce more. This would give Osborne the political cover to reduce the rate. But, as with so much else, this is dependent on growth returning to the economy.  Osborne won’t want to get rid of the 50p rate until he can do some other things such as unfreezing public sector pay.

The Big Society’s health is recovering. Despite the fevered clamour about library closures, some councils and communities are being positive about re-organising their services. After wide consultation with schools and local people, Wandsworth council has saved the York Gardens library in Battersea. Volunteers have agreed to form a ‘staffing mutual’ to run the library, this move is being supported by the £10m fund that the DCLG has allocated to cover the start up costs for nascent staff mutuals. In addition to that, two local schools have hired spare rooms on the premises to use as additional classrooms and both intend to maintain the library’s internet facilities with full public access. The private sector is playing its part too.

It is almost a cliche to describe jobs figures as a "mixed picture" — and yet that's exactly what today's are. Beneath the headline finding that the number of unemployed people has risen above 2.5 million, are numbers that will fuel not only David Cameron's happiest dreams, but also his most paranoid nightmares. Let's start with the nicer stuff first. The graph above shows the cumulative change in employment levels since the recession started to take hold in 2008. What it shows is something that often goes ignored: that is was the private sector, not the public sector, that took the greatest hit from the crunch.

The future of the public sector has become a tale of two Huttons. Last week, John Hutton disclosed his pension plans and today Will Hutton’s submitted his final recommendations on pay. He makes six substantial points. 1). He has resisted calls to link senior public sector pay with the Prime Minister's. He told broadcasters this morning: “I think the Prime Minister's is a completely arbitrary salary. He took a pay cut in the first place and there's no shortage of people coming forward to be Prime Minister. There's no problem of recruiting and retaining a Prime Minister. If you're trying to hire someone to do child protection services in Haringey...

Councils from Liverpool to Bromley have cut voluntary sector funding; but Reading Borough Council is defying the trend. It will increase its voluntary sector funding by more than £200,000 in 2011-12. This will be achieved by transferring £956,000 in loose grants to strict revenue contracts, which deliver greater value for money. This is part of a wider administrative rationalisation that raised an extra £181,000 for local groups, which will now apply for cash on a clearly specified basis to ensure that frugality survives the current efficiency drive. An efficiency drive was certainly needed.

The cuts in spending are going to feel very unpleasant indeed. Rising interest costs, resulting from past expansions in public debt, are going to crowd out other parts of the budget. It is proving difficult to curb the cost of transfers, such as benefits and pensions, and this combines with the ring-fencing of health and development spending to leverage the cuts in unprotected departments. But, as I show in my report published today by the Centre for Policy Studies, the stark reality is that the spending clock is only being turned back to 2008-09, not to the dark ages.   In fiscal year 2014-15 the government plans to spend £758bn, equivalent to £647bn at 2009-10 values.

Public sector workers will be waiting nervously for John Hutton’s pension review, due out tomorrow.  It is likely to mandate extra pension contributions of around 2.5-3.5 percent of pay and new ways to make entitlements grow more slowly.  Policy Exchange advocated a similar solution in a report published last year.  Predictably, the TUC is up in arms. It says that public sector pay is not significantly out of line with the private sector – despite all the evidence that it is. The main reason why those in the public sector get a better deal is their pensions. These add up to the equivalent of 44 per cent of public employees’ wages and 71 per cent for uniformed services – but are just 9.

Matthew Sinclair’s piece on high-speed rail makes two main criticisms, both of which have already been addressed in the material published earlier this week for the consultation – but I would like to explain our approach again here.   First, Matthew criticises our forecasts. He would prefer us not to forecast demand beyond 2026, but HS2 would be a long term investment and would bring benefits for successive generations over many decades. It would be absurd to forecast only 10 years ahead. Therefore, we have taken a longer term but still realistic view. Demand for long distance rail travel more than doubled between 1994 and 2009 – an annual growth rate of around 5 percent. We have predicted a far slower growth rate than this: approximately 1.4 percent.

David Cameron’s piece on opening up public services today is, as Ben Brogan notes, one of the most important moments of Cameron’s premiership so far. First, it is, as I discussed last week (subscribers here), part of a concerted attempt to get the Big Society back to its original meaning, that public services do not need to be provided by the state. As Cameron writes, “our plans to devolve power from Whitehall, and to modernise public services, are more significant aspects of our Big Society agenda than the work we're doing to boost social action.” Next, the ideas in this piece are the central thread that runs through the public service reforms the coalition is pushing through.

Public sector pensions are grossly unfair. At a time when private sector pensions have collapsed, not least because of Gordon Brown’s infamous pensions raid on private pensions, public sector pensions have continued to be unreformed. The coalition was quick to recognise that this must change. And by appointing former Labour Cabinet Minister John Hutton to come up with suggestions for reform, there is a chance of some cross-party agreement in this difficult and sensitive area. In his recent Centre for Policy Studies report, leading pensions expert Michael Johnson gets a grip on the problem. And, to continue a favourite Coffee House theme, how is it best measured?

The government’s plans for state forestry are so weak and feeble that it is hard to understand why there is so much fuss about them. Maybe people do not realise that three-quarters of the English woodland that they love so much is already privately owned. And those private owners face strict standards on public access and recreation, environmental quality, and conservation. So why is there so much fuss about selling the rest? People forget that broadleaf woodlands comprise just 8 percent of the Forestry Commission’s estate. The other 92 percent is farmland and conifer plantations, and it is hard to get worked up about who owns either of those.