If you want a strong public sector, you’re going to have to compete on pay and conditions eventually…

There is no way in which one can buck the market. – Margaret Thatcher, 10 March 1988

And yet, Governments, especially Conservative ones, keep doing just that when it comes to public sector pay. Even more ironically, there seems to be a belief that, contrary to the notion that there is no such thing as society, people will take an altruistic view when it comes to their own salary prospects in order to work in the public sector.

There may have been a time when the public sector was grossly overpaid in comparison with the private sector. Personally, as a civil servant for well over thirty years, I don’t remember it, but I’m sure that there’s someone out there willing to make the argument.

But, as shortages of nurses, doctors and dentists become ever more noticeable – my own county of Suffolk is increasingly a desert for NHS dentistry, and the issue was a contributory factor in the Tiverton & Honiton by-election – the question of market forces kicks in.

The market now supports a thriving private sector in dentistry because a shortage of dentists allows them to give up relatively poorly paid NHS work. And the only way to address that is to bring more dentists on stream. You can import them, as we did easily during our years as members of the European Union, or from beyond Europe, as is still the case. But it’s a competitive market, and ours is made less attractive by decisions made on migration policy.

The alternative is to recruit and train more dentists. But education is expensive, and bright people can make more money doing other things. So, the NHS must begin to compete on pay and conditions, or find other ways to treat patients – somewhat unlikely for the time being at least unless you have tremendous faith in robotics.

And it’s not just the NHS. A digital future for government services is more likely if you can recruit and retain the necessary talent. Leadership skills demand competitive salaries, and in fields from procurement to tax professionalism, public sector salaries increasingly require office holders in critical sectors to forego rewards that might be rather more readily available in the private sector.

I’m not saying that you should simply throw money at it, although inevitably there will be a financial cost. But a long-term strategy to remove barriers to recruitment, and a similar view in terms of pay and conditions will allow recruitment sufficient to displace inefficient and expensive agency staff currently filling frontline gaps.

There will be those who will argue, quite legitimately, that average public sector pay has kept pace with the private sector. That said, the contracting out of swathes of public sector delivery has transferred many formerly low-paid public sector staff into the private sector, leaving a smaller, more professional, cadre of public servants behind. Inevitably, that pushes up average pay levels whilst leaving comparative salaries lagging.

Politicians tend to focus on what needs to be done. The “who by” and “for how much” tends to attract less attention and even fewer headlines. But an “Excellent Civil Service” and, indeed, a high quality public sector, needs to be able to compete for the necessary talent on a more even footing. The political party that understands that is on the path towards public sector reform that lasts.

* Mark Valladares is the Monday Editor of Liberal Democrat Voice.

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20 Comments

  • Brad Barrows 27th Jun '22 - 1:10pm

    It saddens me that people are increasingly going to have to pay privately for healthcare or for safe, quality education for their children, as the state provision becomes even more unacceptable than it currently is. As a larger proportion of the population chooses to go private, those people will likely to be less willing to pay more taxation to support state provision. Therefore the cycle will continue with an increasingly divided society with state provision only serving those who can not afford to pay privately. What a sickening vision of the future.

  • Steve Trevethan 27th Jun '22 - 4:27pm

    Might the lack of dentists be but one demonstration of the intended consequences of current Neoliberal Economics?
    The overall aim is to transfer the wealth of the many to the very few who use some of their wealth to influence our « democracy » to favour the very rich.
    Stage 1: Restrict a vital service
    Stage 2: Encourage that restriction to facilitate that service’s privatisation
    Stage 3: Buy up those private services
    Stage 4: Extort as much money as you can from owning those services

    This process is enabled by financially restricting tertiary education so that those who work towards becoming a much needed skilful human resource have a lifetime’s debt burden/control.

    A good, in every sense, response is to make all tertiary education free so that our Human Resources are increased to meet/exceed our needs.

    Doing so would expose the « Deficit Myth » for the controlling lie that it is and would set us on the way to Classical Economics which results in a healthier, more skilfully citizenry, lower internal costs such as those for health, education and housing and so makes us economically more competitive.

    The sooner our party denounces Neoliberal Economics and espouses Classical Economics, the better.

  • Brad Barrows 27th Jun '22 - 5:28pm

    @Steve Trevethan
    I’m surprised you think the Party should support Classical/Neo-Classical economics bearing in mind it was that approach that resulted in the Great Depression. Far more appropriate would be closer support to Keynesian economics as espoused by John Maynard Keynes – who also happened to be a lifelong Liberal.

  • George Thomas 27th Jun '22 - 8:36pm

    “The alternative is to recruit and train more dentists. But education is expensive, and bright people can make more money doing other things. ”

    Perhaps naively, I believe that there are enough people willing to work for worse pay if it means working in public services so long as wider conditions aren’t so stressful – usually working longer hours due to understaffing – and pay deficit isn’t so great that it’s not longer worth it.

    What is the future going to look like? We’ll likely need health professionals more than ever as climate emergency really kicks in but so many teachers are now thinking of leaving the profession even at a primary school/high school level…not so much fixing the roof while the sun is shining but weakening the foundations to steal cash for already wealthy mates – this decade of Tories is the government of cowboy builders.

  • David Le Grice 27th Jun '22 - 11:27pm

    The first thing that should really be tackled is the inequity of pay within the public sector where many public sector bodies will pay less than others for roles at the same grade, or will even employ people at a lower grade than similar work would come under elsewhere.

    It’s particularly noticeable and infuriating when such inequities exist between public sector bodies that fall under the same department; in some cases it’s the department itself that pays its staff more than the agencies it oversees.

  • Mick Taylor 28th Jun '22 - 6:56am

    I am puzzled by Steve Trevethan’s reference to the deficit myth. The deficit myth, as I understand it from Stephanie Kelton’s book of the same name, is the idea that a country that issues its own currency can create all the money it needs to fund government programmes, with one very important proviso, namely that it takes all necessary steps to control inflation. There is no party leader that I know, nor any treasury or economics spokesperson that promulgates this idea. All the main political parties in the UK argue that the deficit is important and that taxes have to be sufficient to pay for services over the long term. How the deficit myth can be the controlling lie is beyond me, because it is not supported by the leadership of any major political party. Whether it should be supported is of course a different discussion.

  • Steve Trevethan 28th Jun '22 - 8:50am

    Stephanie Kelton’s book, “The Deficit Myth” is well worth reading, not least for its emphasis on the greater use-value of skilled/educated people rather than the manipulation of money for the benefit of the very few.

    HMG has to issue more money than it receives because, if it did not, where would the money to run households and businesses come from.

    What might be the fundamental reason for the ignoring of the “Deficit Myth”? Ignorance? Conventional Thinking? Group Think? Job security? Deception?

    Might it be the case that political leaders only believe in Neoliberal economics or have another brand of ignorance?

    Might it be that they do not wish to lose the power that the deficit myth gives them?

    Mrs Thatcher was just plain wrong when she said that the only money was tax payers money. HMG Creates the money (93%) with a keyboard an gets some of it back.

    HMG’s money is not like ours because they can, do, and must create money.

  • Steve Trevethan. Actually, it’s the central bank that creates the money and credits it to the government’s account, but apart from that you sum up the case for Modern monetary Economics very well.
    Isn’t it about time our party started challenging the current orthodoxy on the deficit and should it not stop talking baloney about the need to cost everything down to the last penny and how it would be paid for?

  • Robin Stafford 28th Jun '22 - 10:18am

    We have a government and to significant extent a public that despises service to the public, believing that self service for personal reward in the private sector is all that counts.
    Its been disappointing to me that the LibDems have failed to stand up unequivocally for public services, and to commit to giving them the resources they need. Hand wringing and muttering about ‘care’ is not enough. The party is little different to the Tories on this, still wedded to Thatcher’s tax and spend economics. Fine if you just want to be ‘yellow Tories’ but not good enough if you want to be called progressive.

  • David Garlick 28th Jun '22 - 10:30am

    Many join the Public sector as they feel that is a way of providing a public service which they prefer to making money for private sector employers.
    Govt’s and LA’s have long traded on that as they know there is loyalty to the people of the area served and many employees will endure low pay and reducing levels of conditions as a result.
    Sad situation which will leave us all with poor service where they servive at all.
    You get what you pay for!

  • Robin Stafford makes a powerful point…… which could well lead to the type of ‘hostility’ Mick Taylor has complained about.

  • William Francis 28th Jun '22 - 8:50pm

    I too find it strange how the right adopts a selective use of “There is no way in which one can buck the market”. The continued war on drugs is a notable example.

    @Steve Trevethan

    The UK was perfectly able to pay for decent public services without the use of the money printer during the days of Bretton Woods. Also, MMT doesn’t have a serious macro-economic model explaining how the economy works.

    To quote Bloomberg columnist Noah Smith “What concrete predictions – about macroeconomic aggregates or other quantities – does MMT make that would allow us to determine whether it describes the economy better than, say, Old Keynesian IS-LM models, or New Keynesian models with financial frictions? Also, how does MMT model productivity in the economy?… Does MMT assume that productivity is exogenous, does it assume that productivity reductions will always be of secondary concern relative to the importance of full employment, or does it have some other way of dealing with potential hits to productivity?”

    The best it has is one flawed model explaining how a job guarantee would achieve price stability.

    https://noahpinion.substack.com/p/examining-an-mmt-model-in-detail

    https://modernmoneynetwork.org/sites/default/files/biblio/Pavlina_2007.pdf

  • Steve Trevethan 29th Jun '22 - 7:50am

    Might the provision of decent public services after World War 2 have been made possible by factors additional to socio-economic theory and the high likelihood that the theories of the time, notably those of Mr. Keynes, were not predatory on the general public?

    After World War 2, the nations of America, the U. K etc were full of fit, trained ex-soldiers who would be well able to deal with any predatory government such as those currently in power. That restraint no longer applies.

    As stated, Neoliberalism is a deliberate predatory socio- economic theory, with attendant practices, notably the transfer of power from a reasonably caring and democratic government to a relatively few greedy rentiers and their representatives in governments, plus their significant control over the media.

    M.M.T, as a complete theory, has not been promoted in my contributions. It has aspects which seem valid and worth developing and using, such as the emphasis on resources rather than money and the exposure of “The Deficit Myth/Controlling Lie.

    As previously stated, it is suggested that there are bits of Classical Economic Theory which would benefit the most of us today.

  • Lorenzo Cherin 29th Jun '22 - 2:17pm

    Liberalism ought to be about a flexible attitude to such aspects of evidence based delivery.

    I have a pro public service ethos. That is not a pro public sector one.

    I experienced more caring a service from Ocado and Sky in recent years than from the local NHS and Council.

    A caring and customer driven service has little to do with ownership often.

    We ought to be for decency and delivery likewise.

    Ideologues are not Liberals.

  • Joseph Gerald Bourke 29th Jun '22 - 6:26pm

    With Barristers going on strike and now doctors planning a strike we do seem to be entering a strange period. Teachers unions and the civil service are also being balloted on potential industrial action to add to Britain’s ‘Summer of Discontent’.
    After WW2 taxation was kept at elevated levels. During the 1950s and 1960s, income tax in the UK was at its highest levels reaching 90% at its highest rate. In 1965 a separate Corporation Tax was established for businesses.
    When Margaret Thatcher came to power in 1979 the income tax top-rate was 83% whilst the basic rate was 33%. She personally felt that income taxes were too high and one of her first acts was to lower the top-rate to 60% and the basic rate to 30% believing that the state should receive more of its revenue from indirect taxation such as VAT and National Insurance.
    Since her terms in power, successive governments have followed Thatcher’s lead by steady decreases in the rate of income tax so that the basic rate now stands at 20%. However, these decreases have been offset by corresponding increases in indirect taxation so that VAT is now 20%.
    The 1970s was a period when the UK experienced stagflation. We went into that period off the back of 25 years of post-war growth, rising productivity and rising real incomes. Today we are entering stagflation on the back of 15 years of stagnating real wages, slowing productivity growth and pressure on public services. We are going to need different remedies this time around.

  • I think Mark you have skipped over the first question, namely: is everyone agreed we need a strong public sector.

    From the behaviour of the Conservatives over many decades, I suspect they don’t, and like the US Republicans, only wanting a tax-collecting system that hardly touches them but creates a pot into which they can dip…

  • Laurence Cox 30th Jun '22 - 1:22pm

    Mark,

    When I joined the Civil Service in 1996 (after several decades in private industry), my offer letter specifically stated that my pay level would be lowered, because I would not have to contribute out of my earnings to my Civil Service pension (there were additional optional contributions). In those days non-contribution was reckoned to be equivalent to just over 8% of salary, in return for a final-salary pension of 1/80th of earnings and a lump sum of 3/80th, per year of service, indexed by CPI only. So certainly, the guaranteed pension was a factor in the Government being able to offer Civil Servants lower salaries than they would have to do otherwise. Pensions need to be seen as delayed income and not some sort of gift.

  • Peter John Hirst 4th Jul '22 - 3:36pm

    The attraction of working in the public sector is more around quality of life, good pensions and security than pay or used to be. As long as the pay is reasonable there is a large group who prefer this to the private sector. We need to return to the different ethos of the public sector with different values and principles.

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