The UK public sector grows in real terms and adds to UK overall growth

Let me have one more go at explaining to all those commentators and opposition politicians who claim there have been massive cuts in the public sector. Overall the public sector continues to grow, led by the growth in real spending on important areas like health and education. Whilst some individual departments and programmes have been reduced, overall there has been real growth. So can we now have some accuracy in reporting, and an end to the lies based on no figures or garbled and selective numbers?

Yesterday the ONS produced the official figures for the year to September 2014. They said:

“Government final consumption increased by 0.3%,(Q3) following a 1.4% increase in the second quarter. Between Q3 2013 and Q3 2014 government final consumption increased by 1.9%”. These figures are in real terms.

The same official figures showed that growth in government consumption added 0.2% to the total economy in Q1 2014, another 0.3% in Q2 and an additional 0.3% in Q3. This follows the performance in 2013 when public consumption showed a small real increase.

The ONS revised down total growth of the economy for the most recent year to September to 2.6% from 3.0%, but it still leaves the UK as the fastest growing major economy apart from the USA. There are also signs now of rising private sector consumption, with more imports adversely affecting the balance of payments, along with a reduced balance on income from investments. People are saving less and spending more.

As a result of the better growth rate, the UK economy is now 2.9% above the previous peak, and has recouped all of the 6% crash in output recorded in the Great Recession at the end of the last decade.

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70 Comments

  1. Brian Taylor
    Posted December 24, 2014 at 6:11 am | Permalink

    The only thing the BBC reported (with some glee) was the revised growth figure down from 3% to 2.6%.
    I have Emailed this article to the BBC daily politics, I put it on my Facebook page and on Twitter.
    I think everyone should get the facts out there.

    • oldtimer
      Posted December 24, 2014 at 11:05 am | Permalink

      Apart from Andrew Neill, the one BBC commentator who deserves respect, I doubt your intervention will gain much traction. The BBC is first and foremost a propaganda machine. Its three principal mantras are the gloom and doom resulting from “cuts”, the “NHS in crisis” and “global warming”.

      Real doom and gloom is caused by out of control immigration, continued debasement of the currency and the effective surrender of sovereignty to the EU and QMV.

    • petermartin2001
      Posted December 24, 2014 at 8:16 pm | Permalink

      Even 2.6 % growth is pretty good at the present time given that the Eurozone, our largest trading partner, is in such a mess and is paralysed by indecision (or ideology?) on how to get out of an economic rut of its own creation.

      The next government, on the EU question, should not solely be about withdrawal negotiations. The EU would be a fine idea if it actually worked. The problem is that it doesn’t. Largely that is down to the rules imposed on those countries who use the Euro. There is, for example, a 3% limit on government deficits. The UK runs a deficit which is double that and that is necessary to replenish money into the economy which is lost largely in the payments for our net imports. It is essentially a recycling of the proceeds of the sale of government gilts. If we tried to cut it back to 3%, without balancing our current trade account, our economy would be like Greece and Spain’s too.

      So, as a priority, we need to teach our continental friends some basic economics. Both for their sake and ours!

  2. Margaret Brandreth-J
    Posted December 24, 2014 at 6:26 am | Permalink

    Yes John , you are talking, as you say, about overall growth ,but all those who have had to face hardships ( as my daughter) with cuts and redundancies will not agree.Every individual life matters and that is what people are tying to get through to politicians. The accusation against socialism used to be, many years ago, that people are treated as numbers and this is exactly what you, as a Tory, have laid out.

    Reply Yes, there have been some individual cuts as I always accept. Most of the redundancies have been voluntary, and there has been substantial private sector job generation so many more people are in work despite some job shedding by the public sector.

    • Lifelogic
      Posted December 24, 2014 at 12:05 pm | Permalink

      The state sector is still paid (with pensions included) nearly 50% more the the private sector, they have more sick leave, better working conditions, better pay offs, earlier retirement and about half of them do little of any real value for anyone.

      It is about time the government actually addressed this imbalance. In fact Osborne has just continued Gordon Brown’s mugging of private pensions with lower contributions and caps. Though MPs and EU bureaucrats pensions remain about the best going.

      Why should so many of these people be allowed to continue to parasite off the backs of people earning far less and often without any pensions at all?

      Government in the UK is so often organised just for the 20% who work for the state sector it seems. Do Ministers ever come into contact with the other 80%? Other perhaps than a few large companies looking for new laws or regulations that directly benefit them with tax payers cash or similar?

    • Andy
      Posted December 25, 2014 at 11:53 am | Permalink

      The fact remains John is right – Government spending on whatever measure you care to take has increased, certainly in cash terms. While your daughter’s plight might be regrettable what about people like us who are being taxed out of existance to pay her wages and overly generous pension ? It was Lady Thatcher who remarked that ‘the trouble with Socialism is that you eventually run out of other peoples money’. And that in a nut shell is where we are now.

  3. Narrow Shoulders
    Posted December 24, 2014 at 7:42 am | Permalink

    Government spend per capita has not grown though has it Mr Redwood? nor has GDP per capita.

    Another set of figures issued where selectively it can be shown that unfettered immigration has increased the economy and government services provided. The underlying figures however show that government is spending less per head as the economy is generating less per head.

    We are mostly getting poorer as we ship in labour to do unskilled work rather than invest in training and productivity

    Reply Yes, public spending per head grew in real terms over the last year as these figures show.

    • acorn
      Posted December 24, 2014 at 12:21 pm | Permalink

      ONS says. “In Q3 2014, GDP per head increased 0.6% compared to Q2 2014 but remains 1.8% below pre-economic downturn levels. This was a slightly slower growth rate than the 0.7% quarterly increase seen in GDP.

      • Net National Disposable Income (NNDI) per head, which represents the income for UK residents, has remained broadly flat since Q1 2012 and remains 5.6% below pre-economic downturn levels.

      • In Q3 2014, household income (RHDI) per head decreased 0.2% on the quarter, but remains broadly in line with its pre-economic downturn levels. However, despite recent improvements, households still consider their financial position to be slightly worse than a year ago.

      • In Q3 2014, household spending per head grew 0.8% compared to the previous quarter – continuing the general upward trend that started in Q3 2011. • In 2012/13, median income fell 1.4% compared to 2011/12 to £23,300, its lowest level since 2002/03.

      • Between 2011/12 and 2012/13, there was a slight increase in income inequality. • In 2013, the net wealth of the economy as a whole increased 4.4% to £7.6 trillion. In the same year, household net wealth increased 2.6% mainly due to an increase in the value of dwellings.”

      As I said previously, Osborne’s “zero deficit” plan is dependant on the private sector increasing its debts, Pound for Pound; or a massive reduction in importing goods and services to get to a similar “zero deficit” on the UK trade balance. Metrics also show that over two thirds of this “growth” is going to capital owners, not wage earners.

      It sounds like the penny has dropped at the Treasury! I am not expecting to hear the words deficit and debt so often and so loudly for a while. The economy is now where it would have been three years back under Mr Darling. Mr Darling now knows that the 11% deficit he was running in Q1:2010 was too small, if anything, for the situation. Anyway, in Q2:2010, Mr Osborne pulled the plug and flatlined the economy for the traditional Conservative, three years of slash and burn the public sector.

      Fortunately, the deficit reduction plan is about 80 – 90 billion a year behind schedule and that is the fiscal stimulus which is currently driving the growth in the UK and the US economy. Long may it continue at this level.

    • Lifelogic
      Posted December 24, 2014 at 1:37 pm | Permalink

      People are paying higher and higher tax rates but getting less and less of any real value or quality in return. Even taking the rubbish away regularly seems to be beyond them.

      There are so many pointless jobs which can increase GDP yet depress living standards on average. Far too many lawyers, bureaucrats, tax experts, HR experts, expensive green energy grant “experts”, planning & building control, tree and bad experts, health & safety experts, climate change experts, PPE lectures, lefty economists, BBC and government propaganda staff, profit figure (the “massaging” of experts)……..

      If (for example) you make tax (HR, H&S, planning, the law etc.) absurdly complex you waste vast quantities of people’s time and create endless parasitic jobs. It increases GDP by forcing people to use professional experts but on balance everyone (but the experts perhaps) are worse off, and on average everyone is much worse off and diverted from productive activity. About half of government activity comes into area.

      • Lifelogic
        Posted December 26, 2014 at 9:56 am | Permalink

        “bat” experts not “bad” though that too.

  4. Dame Rita Webb
    Posted December 24, 2014 at 8:11 am | Permalink

    Erm John how does this “People are saving less and spending more.” match with this “…. the UK (h)as the fastest growing major economy apart from the USA”? Instead of complaining about a biased press and their obsession with “the cuts”. Why are you not telling your readership that survival through public consumer spending is unsustainable in even the medium term? It cannot be too long before the papers are full of pictures of the lower orders invading the supermarkets not in search of a cheap TV but for a loaf of bread.

    • Paul
      Posted December 24, 2014 at 9:39 am | Permalink

      There are no votes in honesty. People want to believe that with some magic policy change (or some inane ‘bash the rich/bankers/benefit seekers/Romanians policy) that the magic boom years of 2000-7 will somehow return and we will become a land of plenty.

      They don’t grasp that we never *were* a land of plenty in this time, it was built on fantasy money.

    • Anonymous
      Posted December 24, 2014 at 4:37 pm | Permalink

      Erm… Dame Rita Webb,

      Why do you keep saying ‘erm’ ?

      • Dame Rita Webb
        Posted December 24, 2014 at 8:05 pm | Permalink

        I am very shy with strangers!

  5. alan jutson
    Posted December 24, 2014 at 8:13 am | Permalink

    Unfortunately we tend to get selective news now, because we do not have reporters any more, we have a range of so called experts with opinions, and those opinions reflect the beliefs of the organisations who employ them.

    The craving for 24 hour news means the facts take up too little time, it would simply be too repetitive without the additional time taken up with the experts opinion.

    • turbo terrier
      Posted December 24, 2014 at 5:47 pm | Permalink

      Well said Alan

      It might be the season for goodwill and all that, but it just highlights how useless the BBC really is. If they showed an interest in real concerns and politics without all the “experts” the British public just might wake up and really smell the coffee

  6. Ian wragg
    Posted December 24, 2014 at 8:16 am | Permalink

    The biggest winners in spending are aid, EU and debt servicing. None of which benefits the indigenous population. This is growth due to government borrowing and totally unsustainable

    I see we are now recruiting paramedics from Poland
    Soon we Brits will be wholly serviced by foreigners who may have very different priorities to us. We will be very much like the children in the movie looking through the window at the warm Christmas scene whilst freezing out in the snow.
    Only 4 months left.

  7. Lifelogic
    Posted December 24, 2014 at 8:17 am | Permalink

    The UK public sector grows in real terms (and that is the problem) and adds to UK overall growth (but not in any real positive sense).

    It add to overall growth only in the way the official figures are produced. It decreases on balance the average standards of living hugely. This as the state sector delivers so little of any real value and much of it is actually negative in outcome.

    It is similar to a situation where the state borrows £1Bn (on the backs of future generations) and then used it to employ people to go round kicking people or fining people for some invented dust bin infringement. It perhaps increases GDP but its effect is entirely negative.

    Perhaps we should start to talk about what the state sector actually delivers that people might actually want and is of some real value to them. Better roads, cheaper energy, lower taxes and to be left alone might be a good start.

    We have very poor school, a dreadful health care system, many second/third rate Universites, a lack of decent road (& full of potholes), a mad incompetent rubbish collection systems, silly grants for green PV & Wind lunacy and electric cars, counter productive wars, police whose main aim seems to be avoiding crime reports or investigating thought and hate crimes, a very poorly equipped military, a mad equality industry, a slow/expensive legal industry that is largely out of control, absurd employments laws, a tax system that makes designing a jet aircraft look simple, CAP, idiotic damaging fishing laws, virtually a criminal social services system, a restrictive planning systems, OTT building regulations, over prices energy, a policy of flooding the Somerset levels, …… This is largely what the state delivers.

    It is nearly all negative and is all funded by borrowing or taking money of people who were largely doing positive things with it until it was taken off them under threat of imprisonment.

  8. alan jutson
    Posted December 24, 2014 at 8:19 am | Permalink

    So the Government have not made any cuts overall this year then.

    Does not bode well for the reduction in our deficit or debt.

    The fact that we are importing more because of our seeming inability to manufacture enough is also a worry, but has been for many years for many of us, who have seen the demise of so many industries over the decades.

    You cannot pay your way as a Nation simply by selling/purchasing cups of coffee to each other, because even the beans are imported.
    Time for politicians to learn the lesson.

    • turbo terrier
      Posted December 24, 2014 at 5:49 pm | Permalink

      Alan

      You really must control the urge to speak common sense!! After all it is Christmas

    • Lifelogic
      Posted December 24, 2014 at 8:33 pm | Permalink

      The UK cannot easily compete in manufacturing industries because we have such high taxes, high energy prices, a parasitic litigation culture, not enough decent engineers, mad employment laws, an anti-business government, EU insanities, over expensive factory buildings, restrictive planning, a lack of competition in banking and over regulation of virtually everything.

      Dyson now manufactures abroad (due to planning issues) and Rolls Royce aerospace are currently laying lots of people off in Derby. They are two of the better ones too.

      • fedupsouthener
        Posted December 26, 2014 at 7:46 pm | Permalink

        Add CityLink to that!

  9. alan jutson
    Posted December 24, 2014 at 8:23 am | Permalink

    Hi John

    Just a short post to wish yourself, your family, and all contributors to this excellent site, a Merry Christmas, and I hope, a happy New Year.

    • Atlas
      Posted December 24, 2014 at 10:58 am | Permalink

      I second that !!

      Happy Christmas all.

    • Mondeo Man
      Posted December 24, 2014 at 4:59 pm | Permalink

      Seconded, Alan.

      Dr Redwood,

      I must often come across as ungrateful and insubordinate. So I am. But I value the outlet that you give us beyond measure.

      Thank you so very much for this and your good works.

      Happy Christmas to you and your family.

    • Lifelogic
      Posted December 24, 2014 at 8:35 pm | Permalink

      Indeed, I am amazed you find the time.

  10. formula57
    Posted December 24, 2014 at 9:01 am | Permalink

    The figures you quote are not so surprising as there has been so much Keynesian-type stimulus that one could almost believe it is back in fashion. Let us hope for credible plans now to reduce the deficit and the debt.

    (And best wishes to you for Christmas and thank you for another year of top blogging. This blog is a marvellous resource that enhances politics, not least through your willingness to admit such a variety of reader comments. Thank you.)

    • Lifelogic
      Posted December 24, 2014 at 1:43 pm | Permalink

      I mainly want a reduction in the vast quantity of pointless government waste, pointless and damaging expenditure. Also the governments misdirection of the private sector with all the green crap, CAP and the likes. If they actually did this the deficit would vanish.

  11. Paul
    Posted December 24, 2014 at 9:37 am | Permalink

    The left has its own mantras which it believes in the teeth of any evidence – the huge cuts and austerity which are all the fault of evil Tories such as the excellent Mr Redwood is one of them.

    I sometimes think they are psychologically incapable of accepting reality because of the damage it would do to their bizarre view of how the world is. I find discussing it with them bizarre. It’s like trying to explain mathematics to someone who thinks 2+2 = 7

    • Lifelogic
      Posted December 24, 2014 at 1:51 pm | Permalink

      Indeed some are dim but lefties at the higher level are clearly just immoral & evil. They understand reality of economics but think they can buy votes with magic money trees, soak the rich, rent controls, price controls, endless green crap and other lies.

      Denis Healey even put incomes taxes up to 98%, so clearly he was either (prey to foolish theories or misleading people ed). He managed a double first in Greats so the latter seems the more likely.

    • Anonymous
      Posted December 24, 2014 at 4:53 pm | Permalink

      Paul

      Without a dependency/underclass culture the left has no raison detre’ and no power.

      Economic and social success is anathema to them.

      All socialists should be taxed at 90% and be restricted from owning property. Their kids should be restricted to the local ‘bog standard’ comp. And with this they should be perfectly happy. Otherwise shut the **** up !

      • Anonymous
        Posted December 24, 2014 at 4:54 pm | Permalink

        Clarification:

        THEY should shut the **** up ! Not you.

        Sorry if you were upset by that.

      • Dame Rita Webb
        Posted December 24, 2014 at 8:20 pm | Permalink

        Thats not such a bad idea and the state could raise a lot of money from it. Just remember a former “pipeman of the year” recently left £7million in his will. This is despite his wish that everyone should receive a “comprehensive” education and preferably live in a council house. While a former “father of the house” and another man of the left lives in a large castle not too far from Edinburgh.

    • acorn
      Posted December 25, 2014 at 7:07 am | Permalink

      JR, why does this sort of stuff get through moderation and my stuff doesn’t? (words left out ed) Is this the direction you want the Conservative party to go?

      Reply I set out my views in my pieces, not by selecting who to post by way of comment. I have set out what I disallow, which is unrelated to the political slant of the contributor. Posting something someone else has written certainly does not mean I agree with it!

  12. Bert Young
    Posted December 24, 2014 at 10:32 am | Permalink

    The end of the year is always the time for putting the records straight . GDP has been modified slightly downwards and we are still on the road of recovery . Real wages look like moving up in the right direction and consumer confidence remains at a high level .

    On Saturday – in the evening , I was doing a “meet and greet”at Luton Airport . Standing in the “Arrivals” section I believe I was the only English person . Everyone was polite and good natured but I heard no English spoken ; the place was crowded . I (words left out ed) felt out of place . Leaving with my guest I felt the truth of Farage . There is no doubt that the election will be won and fought on “immigration”.

    With thoughts to myself in the car , I mused over the wrangling with the EU during the past few months . Whatever happened to the promised “red lines ” that were to be made known? We have been let down in so many ways . I came to the conclusion I had reached my point of no return and made up my mind how I would vote .

    The end of the year then and many reflections . Some good things and some bad . Corners have been turned and there is some sunshine . Theresa is definitely a breath of fresh air and Boris stands waiting in the wings . A leadership challenge ? – definitely . Positions are being taken up and obvious defences are being put in place . All I hope is that the SNP will not finish up where they would like to be .

  13. eeyore
    Posted December 24, 2014 at 10:43 am | Permalink

    Should public-spirited citizens 1. spend to boost the economy, or 2. save so they do not become a burden on their country?

    I asked Mr Brown when he was PM but, like jesting Pilate, he did not stay for an answer.

  14. Brian Tomkinson
    Posted December 24, 2014 at 11:12 am | Permalink

    As I have written numerous times during the life of this parliament, it is Cameron and Osborne who have happily promulgated the myth of government cuts. Party leaders know the facts but it suits them all for their own separate political motives to play along with the distortion. As for the latest revision to the growth figures, it makes Osborne’s recent ‘Autumn statement’ even less credible than it was at the time.
    Sitting where we are and not where you are in that cosy Westminster bubble, the three main parties offer little choice in policies but regular doses of spin, lies and deceit. Alleged paedophile rings involving all those parties appear to have been protected for decades. It is disgusting and outrageous and none of them is worthy of support.

  15. Mike Wilson
    Posted December 24, 2014 at 11:14 am | Permalink

    As a result of the better growth rate, the UK economy is now 2.9% above the previous peak, and has recouped all of the 6% crash in output recorded in the Great Recession at the end of the last decade.

    Why are we still borrowing one hundred thousand, million pounds a year?

    Reply Because state spending is high and continues to increase overall!

    • Terry
      Posted December 27, 2014 at 2:23 pm | Permalink

      But when the State spends, GDP rises. How weird is that?

  16. Francis Lankester
    Posted December 24, 2014 at 11:17 am | Permalink

    We now have a balance of payments deficit of 6% of GDP. What are its consequences, and how might we deal with it?

  17. oldtimer
    Posted December 24, 2014 at 11:29 am | Permalink

    OT: I draw your attention to a post at politicalbetting.com by Nick Sparrow, former head of polling at ICM, under the heading Online Polls, Big Stories, Shaky Foundations. He draws on, and provides a link to, research by Steve Abbott of the British Population Survey.

    He says that those who respond to online surveys account for only c10% of the British population and are, probably, the most influential minority in British politics. But they do not represent the views of the population as a whole. He cites the results of the Scottish referendum as evidence of this. Off-line polls are only slightly better.

    The same can probably be said of those who respond the political blogs like this one – they reflect the views of a small minority. Nevertheless, I for one, welcome the opportunity you provide to understand and to comment on your views. Please keep up the good work and best wishes for Xmas and the New Year.

  18. zorro
    Posted December 24, 2014 at 11:35 am | Permalink

    GDP per capita is not rising and will not rise unfortunately…. Merry Christmas and a Happy New Year to you John and fellow bloggers and commentators. May all your hopes come to fruition and peace and sanity return to international diplomacy.

    Seasonally adjusted greetings
    zorro

    Reply GDP per capita is rising.

  19. Qubus
    Posted December 24, 2014 at 12:04 pm | Permalink

    Didn’t Churchill say that there are liars, damned liars and statistics … or was it someone else. In any case. they were correct. However, the fact remains: public spending is too high.

  20. Denis Cooper
    Posted December 24, 2014 at 12:11 pm | Permalink

    I could understand if you were becoming a bit frustrated, JR, that you keep laying out facts but most of the mass media persist in disseminating fantasies.

    It is of course true that while the population continues grow at a significant pace changes in public spending should not only be adjusted to real terms to account for inflation but also put on a per capita basis, and similarly changes in GDP should be considered on a per capita basis; and moreover it should be taken into account that some of the money being spent by the government is not spent in the UK but is sent abroad, and so should not be included in the calculation of total public spending in the UK; and it is of course true that it is only possible for the government to sustain this level of spending through massive borrowing and the accumulation of more debt.

    So it could well be that overall real terms per capita government spending within the UK has in fact gone down not up, but if so it would just be a marginal decrease and not the deep cuts usually portrayed in the media, and all this is still at the price of building up more government debt which will have to be repaid in the future.

    Recalling that about six years ago there was a body of opinion calling for immediate and drastic cuts in public spending to eliminate the budget deficit, on the theory that this would provide a quick and only briefly painful cure, it could be said that really nothing much has happened since then beyond the patient being kept more or less stable by means of constant transfusions of borrowed money; maybe not now in an intensive care unit but certainly still in a high dependency unit.

  21. Terry
    Posted December 24, 2014 at 1:52 pm | Permalink

    To me, this is all smoke and mirrors accounting – Growing the Public Sector adds growth to the UK economy? How does that work? By magic? By magical accounting procedures.

    The Government takes some of our earnings from us and with that cash, employs more people in the public sector and/or invests in Ipads or new railway carriages, et al. Apart from boosting the profits of Apple Corp and Siemens AG that investment does nothing to pay off the outstanding debts of THIS country. So what, exactly, is it doing to generate UK growth?
    It is merely recycling OUR money, it is not adding anything to the British economy so how can it be used to grow UK GDP?
    Gordon Brown once proudly declared that he had banished boom and bust and this is the reason why. All he had to do was spend more and more in the Public Sector and the UK economy would grow forever. And where there was a shortfall from income taxes he just borrowed instead. It did not work out his way, did it?

    In Private Sector accounting there is always a Profit and Loss and a Return(or loss) on Investment. No such columns exist in the Public Sector so, how can the economy be growing in net terms? The Government has no money of its own, it does not earn anything but if takes from our earnings only to spend on themselves. This is the way of socialism and not the way of Conservatism and it will bring the country to its knees again.

    Stop spending OUR money, cut back on all Government expenditure and save to pay down our enormous debts. For once, do the right thing and give the future generation Brits, a chance. Or don’t you care enough about them?

    Reply Educating a child in a state school is as much GDP as educating a child in an independent school. Treating a person in a state hospital is as much GDP as treating someone in a private hospital.

    • Kenneth R Moore
      Posted December 26, 2014 at 10:49 am | Permalink

      It’s a ponzi like scheme – pay council bosses more than the prime minister, employ more NHS managers than doctors and nurses. Invent useless expensive quangos that spray money about like confetti. It all adds to government spending and GDP so Brown’s spending revolution wont voluntarily be rolled back.
      Thes economic activity that all the non jobs replaced has long since been destroyed by short term thinking and grand incompetence.

    • Kenneth R Moore
      Posted December 26, 2014 at 11:25 pm | Permalink

      Brown also swtiched to the retail price index excluding housing costs allowing him to keep interest rates low and thus create a cheap credit boom based on sky high house prices that continue to this day.

    • Terry
      Posted December 27, 2014 at 2:16 pm | Permalink

      How can it be?
      Neither the NHS nor State Schools receive direct payments for their services. Private Healthcare costs extra as does Private Education. Taxes are not reduced for the buyer in either case so they are both generating some wealth for those organisations whereas the State monopolies are merely utilising the money previously taken from the workers. That is Recycling but using a middleman to add to the overheads.

  22. CHRISTOPHER HOUSTON
    Posted December 24, 2014 at 1:59 pm | Permalink

    GROWTH in the service industry/ Public Sector has the connotation of nutritious and wholesomeness as when there is growth of ones very own garden cabbage. In this sense, the cabbage never gets harvested, in full, and requires once sown not just the same resources/nutrients but more and better because of our GROWING expectations. We wish a bigger and better cabbage year on year. For now, it can be said to have true economic growth, because it is being funded by an economy producing proportionately more wealth/nutrients. If that wealth producing economy becomes weaker; if Poland and others suddenly find their hospitals devoid of adequate staff; if voters find the possibility of the withdrawal of life-saving drugs and equipment unacceptable. Catastrophe.
    The Labour Party says it “Defends the NHS” Has it got contingency plans for the SAS kidnapping poor European nursing staff in dawn raids? How will it cope if it cannot afford to pay them its minimum wage? The limit has been reached, though most politicians are unaware, of phrases such as “We are not afraid of making tough and difficult decisions. ” Well they should be afraid. Very afraid.

  23. Terry
    Posted December 24, 2014 at 2:36 pm | Permalink

    To quote Milton Friedman- “Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilised, you have to do it through the means of private property.” and “When everybody owns something, nobody owns it, and nobody has a direct interest in maintaining or improving its condition. That is why buildings in the Soviet Union — like public housing in the United States — look decrepit within a year or two of their construction…” Ditto the UK and Cuba!

    These are sound reasons why we must cut, cut ,cut. Hack the Public Sector to pieces and let Private initiatives and innovation take the strain. We cannot borrow and spend our way out of recession so why do the Government think we can?
    Could it be just standard electioneering because they desperately want to retain power in 2015? Creating the illusion that GB is doing very well might just do it for them as it worked so well for Blair.

  24. The PrangWizard
    Posted December 24, 2014 at 3:10 pm | Permalink

    Merry Christmas Mr Redwood, thank you for giving us the opportunity to know your views and to let go with ours. It is greatly valued.

  25. ITF Tory
    Posted December 24, 2014 at 3:16 pm | Permalink

    My concern is whether the deficit will be eliminated during the next Parliament. After GE2010, we were promised that the deficit would be eliminated by 2015. As we approach GE2015, we’re nowhere near eliminating the deficit. Depending on the chosen measure, the deficit has been reduced by between a third and a half. If the deficit couldn’t be eliminated after Gordon Brown’s great recession (when the public understood the need), then what chance is there of eliminating it in 2015-2020 (when the public have had enough of the “cuts”)? I fear that it will be kicked into the long grass again. In 2020, I think all the parties will once again be promising deficit elimination in their manifesto.

  26. waramess
    Posted December 24, 2014 at 3:48 pm | Permalink

    Let’s forget for a moment that the GDP figures have now been totally discredited.

    Government spending is made possible by borrowing more because still it’s expenditure exceeds its income by around £100 billion. This means that they are adding to the debt each year by that amount and effectively bringing forward in time future income to spend now.

    The question that springs to mind is how does the Government think future administrations will manage on a significantly reduced income, for that is the effect of expecting a future administration to repay the debts being incurred.

    The Government has absolutely no chance of growth getting us out of this little rat hole nor indeed will increasing exports come to the rescue given the decline in manufacturing and the slow but certain decline in invisibles.

    Growth is being created by pumping up house building with a government guarantee of part of mortgage repayments to banks. Hardly a very satisfactory way to grow the economy.

    The brave and confident declarations by a new incoming Conservative administration have evaporated. No longer will they eliminate the deficit with their bonfire of quangos, in fact they now boast of expanding government spending in much the same way as they once declared they would match Browns spending plans.

    How does it feel, I wonder, for a Smithsonian to be part of a new socialist party?

    Five months left to the election and needs where the devil must, I suppose, even when getting re-elected means more than ones free market principles.

  27. Jon
    Posted December 24, 2014 at 4:13 pm | Permalink

    We have been seing the growth of a type of nationalisation of the financial “advice” area though, they can’t give advice, it’s guidance. In the last few days we have seen a peer table an amendment that the governments proposed pension guidance should be extended to the persons entire financial position. It’s not just the creeping up of nationalisation of this area in the industry but they are not giving advice and are un qualified and un regulated. That posses a significant liability risk.

    Okay the Money Advice Service is to be stripped of much of its remit but it could never give “advice”. The Citizen Advice Bureau is not allowed to give advice on financial matters as they are un regulated and unqualified but praise the part they play in society. The regulator takes the view that if someone thought they were given advice then they were. That opens up redress payments. In terms of pension freedoms and the amendment by the peer I think state costs in this area could rise significantly.

    There are solutions, a voucher system via a small basis point annual management charge that would bring back the cross subsidy that used to allow the less well off to get regulated advice. The government should be looking to return this sector back into the private sector and relieve the potential liability risk and the state cost of running this guidance when it arrives. 10,000 IFA’s have gone as a result of regulatory changes, it needs to re engage with the private sector in this area.

  28. DaveM
    Posted December 24, 2014 at 5:28 pm | Permalink

    Once again, there is an omission of the word “waste”. Growth is good, increased public spending is good, but the waste in the public sector has to be eliminated as far as is practicable.

    • Lifelogic
      Posted December 24, 2014 at 10:31 pm | Permalink

      Indeed and so very much of it is clearly waste. Worst still much of the money spent does active damage inconveniencing, rendering uncompetitive and hugely distracting the productive. That or on pointless wars, propping up the Euro or encouraging healthy people not to bother working.

  29. turbo terrier
    Posted December 24, 2014 at 5:58 pm | Permalink

    John

    Thank you so much for a brilliant year on your blog. Try as I do it seems a shame that more do not link in to your straight forward thinking.

    A classic from a Scottish researcher to a labour MSP:

    What is the definition of the working class?

    On zero contracts and tax credits and everything else that is going.

    What is the definition of middle class?

    All those working and in full time employment trying to better themselves.

    Who are the Scottish Government going to hammer to pay for all this madness?

    The middle classes.

    Just about sums it up on both sides of the border

  30. turbo terrier
    Posted December 24, 2014 at 6:07 pm | Permalink

    A really happy Christmas to you and all your family.

    Your efforts for those outside your constituency is greatly under valued.

  31. fedupsouthener
    Posted December 24, 2014 at 6:13 pm | Permalink

    John, please, if the government does nothing else in 2015 can they stop this ridiculous policy of renewable energy and in particular onshore wind which is so expensive and ensures we pay out millions per year to turn off turbines in Scotland. One foreign company alone has had over £4m in constraint payments to turn off and yet today it has been revealed that over 1400 applications for wind farms of 3 turbines or more have been submitted in the last 18 months. This means councils have to give more time to this than anything else. It also means much of our money is being wasted on appeals because councils are fed up with it all and the public who have to live near them want an end to it all. The Scottish government are obsessed with wind and we need an end to the subisides given to this industry. Please push for this as it is the whole of the UK paying for this and it is pushing more of us into fuel poverty..

  32. Cheshire Girl
    Posted December 24, 2014 at 6:18 pm | Permalink

    May I wish you and your family a very Happy Christmas, and all the very best for the New Year. I have really enjoyed reading and contributing to your blog. You have given a voice to those of us who had thought no one could hear our concerns.

  33. bigneil
    Posted December 24, 2014 at 6:27 pm | Permalink

    Could you please give some honest figures from the govt on how many Big Issue sellers have come from abroad, even though they are not homeless, and how much benefits are these claiming for being “self employed”. I have a friend who is self employed, near to shutting her salon, but won’t get a penny from the DWP. Is this just an anomaly or blatant discrimination against the English?

  34. Ian wragg
    Posted December 24, 2014 at 6:29 pm | Permalink

    Merry Christmas John to you and your family
    I can’t pretend to understand why you defend CMD but I suppose his mother loves him.

  35. Denis Cooper
    Posted December 24, 2014 at 6:47 pm | Permalink

    At this point I’ll wish you a Merry Christmas, and like others above with many thanks for running this blog for yet another year.

  36. Dennis
    Posted December 25, 2014 at 10:50 pm | Permalink

    I ask, what is the fundamental source of this growth?

    I don’t expect you to know this (you’ve never mentioned it as far as I know) as neither of the politicians I have asked on College Green have known so any talk of economics from them is quite valueless without this knowledge foundation.

  37. Bazman
    Posted December 26, 2014 at 9:39 am | Permalink

    There have been cuts to local government funding and the council have to find ways to reduce costs. In my town the local childrens swimming instructors have been given 20% pay cuts. Most quit in disgust to be replaced by less competent people or more desperate if you like. The after school care ran by the council could not be maintained so the new less qualified teenagers running the new after schools care facility renting the councils facilities charging more told not so secretly letting the cat out of the bag that they hardly had enough money to buy the paid for lunch for the children.
    The next is graffiti removal across the town, charging for rubbish removal etc. Leading to more fly tipping and less enforcement of fly tipping. Yes it will as sure as night follows day more cost in cleaning up is better? It is in your world. More cuts in wages leading to a council that in reality provides little service and is no more than a subsidised businesses
    These cuts that all the deluded fools rant on about being necessary come from somewhere and its not about inefficient corrupt councils for them its the fact they spend money on services they believe they should not pay for, but do the most winning about when not available Basically what we are seeing is a dogma that the state is only for the poor and as such they should fund it. Preferably regressive by indirect taxation.

  38. Kenneth R Moore
    Posted December 26, 2014 at 10:34 am | Permalink

    Greetings of the season to all.

    I’m not sure this is meant as a positive piece – the economy chugs along for now fed on a diet of cheap borrowed money and the pretence that some phony grand ‘economic plan’ is in place. Buying time, putting off the inevitable until somebody else (Labour?) is holding the can when the next collision with reality oiccurs.

    It is simply not true that either the economy or the fiscal situation is positive. To my mind JR’s blog today is a thinly disguised condemnation of the coalition’s reckless handling of the economy.
    The economy might have grown by 80bn last year but the government will borrow more than that..then added to that is the increasing sums borrowed by private individuals to buy overpriced housing stock…..

    I have long complained about the chancellors favourite trick of buying ‘growth’ by borrowing to increase government spending. It wouldn’t be so bad if the growth on the economy went with a consumerate increase in revenue. Or if the ecomony was becoming more balanced with manufacturers exporting more.

    Is this what we have to look forward to in 2015 – – borrow money, spend it, and claim that your income (the economy) has risen ?.

  39. ChrisS
    Posted December 27, 2014 at 10:18 am | Permalink

    Belated Christmas Greetings to our esteemed host and fellow contributors. We are in France for Christmas which is probably the only time of year when the French economy does better than the UK. They achieve this simple by not closing down for two whole weeks !

    In a country like ours, all GDP is not of equal value.

    Bottom of the heap has to by public service GDP which should be limited to essential services only. Unfortunately this is no longer the case. Those in charge of the Public Sector have a very different definition of “Essential Services” than most contributors to this Blog !

    Next up is Private Sector Service Industries which, unlike their public sector equivalents, crucially only continue to exist if they provide efficient services that people are actually prepared to pay for.

    Then we have UK manufacturing creating goods for sale within the UK.

    But, GDP of the highest value is that which brings in income from abroad and therefore makes a positive contribution to our balance of payments. Ths can be either manufactured goods or services.

    Naturally Government effort should be mainly aimed at helping to generate the most valuable types of GDP. Often it isn’t.

  40. Terry
    Posted December 28, 2014 at 4:46 pm | Permalink

    Although this subject is pre-Christmas I feel I must add the news I read today regarding UK GDP.

    GDP now contains income figures from Prostitution and Drug Dealing. What??
    I have said previously that GDP figures are easily manipulated and this announcement proves that point – rather dramatically. Such deals are always in cash and they are illegal so how can the Treasury produce such data? Market testing?
    They can only be produced out of thin air, much like the QE that has been eating away at our standards of living over the past six years. I am disgusted that the Government (any Government) can treat us like simpletons and manipulate the figures to suit their purpose. We MUST abandon this indicator as it is so very clearly abused by those with absolute power.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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