Public sector cuts make no sense in age of banking mega-bungs

The actual money spent on these supposedly “spendthrift” policies is a drop in the bucket compared to the colossal sums being handed to the banks. Together they cost less than half the £1bn RBS wants to pay in bonuses this year to its staff as a reward for screwing up the British economy.

It seems blindingly obvious that this is an irrational and morally inexcusable use of public money. But people find it hard to make the connection. There is a kind of fiscal myopia that afflicts politicians and commentators when it comes to public spending. There is also a deeply ingrained prejudice against the state – a belief that all money spent on public services is by definition a drain on the productive economy. But at least money put into the public sector has the virtue of employing people – and employed people spend money on things, thus stimulating economic activity.

About 60% of Scottish GDP comes through the public sector and about one in four employees are employed directly by the state, mainly in the NHS and education. Many more jobs are in firms dependent on public-sector contracts and in service industries that depend on public-sector salaries. Yes, there are too many public-sector bureaucrats pulling down big bonuses and there is a lot of structural inefficiency in our fragmented and unco-ordinated local government system. But the vast majority of public-sector employment is useful and productive. Certainly, if you were to cut the public sector tomorrow by the levels suggested by Robert Black’s auditors, there would be a significant and immediate economic slump.

So, here’s a thought: why not divert a few hundred million a year from the £45bn now being poured into RBS’s toxic waste dump in Gogarburn and send it down the road to the Scottish ­Parliament? Problem solved. The Scottish budget deficit would be eliminated and RBS wouldn’t even notice the loss since it is burning such enormous mountains of cash.

In one month – September – it lost almost the equivalent of the Scottish budget deficit. Public money given to the RBS largely disappears into its

£2.3 trillion balance sheet. A scandalous amount goes abroad to compensate other banks for RBS losses; some of it goes back to the taxpayer in “insurance” payments to the state for looking after its hundreds of billions of toxic assets. Very little of it actually goes to businesses, because, according to the RBS boss Stephen Hester on BBC radio last week, in the recession firms “aren’t asking for loans”, right now. This must come as news to all those small businesses that are going bust.

RBS insists that money put into the bank is money well spent since it will ultimately return to the taxpayer when the bank shares recover. But surely money put into public services comes back to the taxpayer much more reliably in the form of services. At least these are tangible and carry no moral hazard. Care workers don’t get bonuses and nor do teachers, nurses and dinner ladies. But arguments like this simply aren’t taken seriously. The “party’s over” on public spending, we are told, and apocalypse awaits.

As the Auditor General’s report on the Scottish deficit was published, I happened to be at the sharp end of the public-sector crisis: a Herald-sponsored debate at a conference of personnel directors – the people who will be handing out the P45s if and when the great public-spending squeeze happens. I have to say, they didn’t seem very fearful. There were forecasts of doom, but no-one seemed to think it was imminent. There was the usual talk about “hard choices”, getting rid of elderly care, school meals etc. There was curiously little enthusiasm for cutting the salaries of council chief executives, freezing public-sector pay or curbing copper-bottomed final-salary pensions. As for efficiency savings, I was told by one expert that it costs so much to get rid of senior staff in local government that it was pointless trying. Even the idea of merging some of Scotland’s 32 local authorities to get rid of duplication, would, I was assured, add to costs because many new officials would have to be hired to supervise the mergers. They could do with some of these people in the banks.

Certainly there is fat that could be cut out of the public sector and there are privileges which are no longer sustainable at a time when private-sector wages are falling and final-salary pensions are being axed. But there is little point in making very deep cuts in the actual provision of services, most of which are essential. What is profoundly damaging for the future is the erosion of confidence in the value of money. All that cash thrown at the banks, along with quantitative easing and other policies, spreads a corrosive cynicism throughout the public sector. Why should they be counting the pennies and sacking lots of staff when countless billions are being handed over to financial institutions which are not only unfit for purpose, they actually obliterate the wealth they are supposed to be holding in trust?

No – the time will come for economies in the public sector. But not now. It’s just about all that’s keeping the Scottish economy going.

McCHATTER Spare a dime for our poor politicians, for ducks’ sake

But what about the ducks? Has anyone thought about them? It’s all very well ­cutting MPs’ expenses, but what about the mallard community, deprived of shelter at this crucial time of the year?

As the duck houses of Britain fall into decay and disuse, we face a major scandal of homeless ducks, geese, coots, grebes and other winged aquatics wandering around the gardens of suburban Britain cold and destitute, unable to raise their families, at risk from predators like cats and rats. Spare a thought for them this Christmas, after Sir Christopher “Duckling Killer” Kelly cut off this vital source of government support.

And then there are the moats. These are a vital natural resource, part of our great British heritage, a home to many and varied life forms, including

primitive creatures like the Douglas Hogg MP. The Kelly clampdown means that the moats of Britain will now go uncleaned and unloved. Putrid circles of shame surrounding some of our greatest historic houses. A blot on our national character.

And during a recession, when millions are losing their jobs in manufacturing, is this really the right time to be destroying a vital market for toilet seats, bath plugs, fake tudor beams, porn films and many other consumer industries which were being supported almost entirely by MPs misusing their second homes allowance? Have the parliamentary standards commissars given no thought to the impact on the wider economy?

And what about family life? It is widely reported that, once MPs are banned from employing their wives, Members of Parliament will start wife-swapping. There is nothing in the new rules to stop MPs hiring their colleagues’ wives, husbands, children and mistresses. But this is surely nothing less than state-sponsored prostitution. For we all know what MPs get up to with their secretaries and researchers on those long and lonely all-night sittings. What example will our legislators be giving to the people of Britain if they turn the Palace of Westminster into a bordello?

Parliament must act. A new bill, the Duck House Compensation Bill, should be passed as a matter of urgency to provide a fund for the protection and shelter of all endangered aquatic birds. There must be a doubling of parliamentary salaries forthwith to allow MPs to keep a proper roof, or two, over their heads. And as of tomorrow, this column will be accepting contributions to the Lords and Members of Parliament Relief Fund. They need your help now and there is no more worthy cause this Christmas. So, please, give generously.