In recent months, I’ve been boring my colleagues with the idea of a public sector recession. The private sector has gone through it, adjusting to big changes in budgets, business models and mindsets in anticipation of a long, austere sit-in. But the public sector has carried on defending the status quo.
George Osborne’s first Budget speech drove a stake through the heart of that approach and now the public sector recession I’ve been talking about is here.
I don’t believe the coalition government can deliver all its lofty aims – cutting government department budgets by 25 percent while concurrently delivering GDP growth built on a reinvigorated exports sector – as this will hurt many businesses relying on government contracts or even subsidies that may now be living on borrowed time.
Many think such severe resizing raises the risk of a double-dip recession. But it will force the clearance of a lot of out-of-date practices, of waste in government departments – and it is already forcing a proper review of public sector pensions. All of which will be painful, and some choices will be unpalatable, but give us the only chance we have of the country getting back on its feet. And it will be the directors of finance at government departments who will be called on to examine the options and deliver the bad news.
The private sector has probably done much of what is possible to survive the kind of environment we’ll be living in: the public sector can no longer avoid the same trajectory. There will be blood.
Melanie Stern, editor
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