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Axe the bureaucrats

Regular readers of this column will know that I sometimes stray from my main brief of highlighting funds and explore the wider economic landscape. Sadly, it is difficult to talk forthrightly about economics today without upsetting some people. This is because now, more than ever, it is impossible to entirely separate economics from politics. I believe this country’s finances have been utterly mismanaged over the last 10 years.

If we are to get our economy back on track in the coming years, we will have to make tough decisions. In my opinion, this includes substantial cutbacks, such as cutting two million people from the public payroll. This is not as controversial a view as it sounds – when I made similar comments recently, one lady wrote to say her fireman husband would not rescue me if my house was on fire. I think perhaps I have been misunderstood.

Politicians, eager to quash any suggestion of spending cuts, have encouraged the viewpoint that public sector job losses must mean hordes of unemployed nurses, teachers and emergency service workers. That argument is disingenuous. The real drain on the public purse is the layer upon layer of middle management, bureaucrats – many of whom administer one another – and quangos.

The public sector recorded a net budget surplus of £4.5bn in 1998/99 and this rose in the next two years to £18.3bn. This was the period when Gordon Brown gained a reputation for economic prudence. Sadly for the country, his halo slipped in a massive way in subsequent years. The public sector deficit in the last financial year was a staggering £90bn and will rise to a truly outrageous £175bn this year. This represents a deficit of around 12 per cent of national GDP – normally a 3 per cent level is considered the sensible limit and we are miles beyond that stage now. (My thanks to Richard Jeffries at Cazenove for these figures.)

No Government has cut the public sector budget since the Second World War, but I do not think politicians from either side of the House are being honest with the British public about the need for drastic cutbacks. Perhaps that is not surprising a year before a general election.

The point I am really trying to make is that we are living through a kind of phony war. The UK is in a huge mess and it cannot afford its bloated public sector (the pension bill alone is more than £1 trillion and no money has been set aside to pay for it). Yet there is no serious debate about spending cuts – just the usual political finger-pointing and buck-passing.

The private sector faces the unpleasant prospect of at least another one million people becoming unemployed. I do not think it will be long before the nation begins to turn against public sector bureaucracy in a big way.

If you look at the debates on Question Time from 30 or 40 years ago, they are the same ones we are having today. Everyone wants politics to stay out of essential services such as the NHS and power needs to be returned to the people who run them best – those involved at the grassroots and who are the lifeblood of these services.

Our money would be spent far more effectively by dispensing with the paper-pushers and focusing the funding on what really matters – on the people best placed to affect change.

My comments shouldn’t be interpreted as an anti-Labour rant – I am not a fan of current Tory policy either. This is an issue that should go beyond party politics. It may sound alarmist but if our Government does not rise to the challenge, the UK could find itself adrift in political and economic terms. The powerhouses of Asia will not wait for us to catch up, their economies are forging ahead as we flounder.

From an investment point of view, we are in the fortunate position of having a vast range of funds to choose from these days. Plenty of UK-listed companies will continue to do well in years to come and the world is full of promising investment opportunities. In future, I will return to your regularly scheduled programme and look at a fund that I think can prosper over the long term.

Mark Dampier is head of research at Hargreaves Lansdown

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Comments

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  1. You’d get my vote Mark!
    Mark is, of course, spot on with his comments. We’re all mired in bureaucracy that serves no useful purpose. All we get is continual change and no actual progress. Vast numbers of public sector jobs could be dispensed with today with no detrimental effect on public services. DB pension accrual should stop now in the public sector – Gordon and his predecessors (both Labour and Tory) have “prudently” put nothing aside for the future – the pot’s empty, if we have a pot at all, so pensions apartheid must end. It’s time the Government ran the country in a business-like manner and showed some real prudence. Frankly I’m sick of hearing politicians in this country pretending that we have a democracy and that they really care. Our adversarial system of politics means that self-interest rules, the difficult issues never get tackled and the value of a vote depends on the voters location. If we had referenda on some of the major issues affecting this country and everyone was legally obliged to vote I am convinced the majority would oppose Government policy on Iran, Afghanistan, Europe, immigration, regulation etc etc. The really depressing aspect of all of this is that it’s impossible to see anything changing for the better. So what does this country need? A bloody revolution? I fear the answer to that question is yes, and sooner rather than later. Rant over!

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