Britain to Shrink Public Sector



By: YOSEF TASTASSA  
Published: October 22nd 2010
in Economics » World

Bank of England
Pic: WikiMedia Commons

The British government will present to the public a very modest budget for the coming years. Cuts in the public sector will be the largest since World War II. It seems that the Empire where the sun never sets is facing grey skies.

 

The British four year modesty plan will probably touch nearly every Briton personally. The number of people to be fired from the public service is half a million, approximately one percent of Britain's 50 million citizens. In terms of households, the figures are much higher.

 

The plan is to cut 83 billion pounds ($135 billion Canadian) until 2015. The defense budget will be reduced by 8per cent, military units will have to shut down and 25 thousand employees in the British Ministry of Defense will have to start finding a new job in the weak local economy.

 

By 2020 there will no longer by any presence of any British soldiers on German soil. Famous British singer Vera Lynn used to sing "Bring the boys back home" in the 1940's, a line later performed by Pink Floyd in their famous 1979 song "The Wall". It's probably about to happen 60 years later but for economical reasons and not ideological ones.

 

 

Other sectors will suffer as well: the BBC’s budget will be cut by over half a billion pounds. Government bureaus and organizations’ budgets will be cut by 35 per cent, while others will merge.

 

Britain, like many other European countries has no choice but to reduce costs. The alternative is a 20 per cent unemployment rate like in Spain, facing bankruptcy like Greece or the suffering of downgrading its credential rates, something it really wants to avoid.

 

In terms of foreign exchange the British Pound (GBP) weakened in the past years but is still relatively strong; 1 GBP = 1.62 CAD. A strong British Pound will make it harder for the country's economic recovery. The economic winter will probably last longer in the Kingdom.

 

Message to the world

 

Recruiting employees to the public sectors in high scales does not improve the economy’s performances. It only artificially reduces the unemployment rates. European and other western governments should focus on encouraging the private and productive sectors and at the same time go through recovery plans for reducing the public sectors in the long term.

 

What about Canada?

 

According to the statistics department of the Canadian Government, 3.241 million people were employed in the public sector in 2005.

 

By 2009 the number of employees in the public sector jumped to 3.561 million people, adding 320,000 positions in four years, a total increase of 9.9 per cent in four years. In other words, the Canadian public sector is recruiting new employees in a pace of 219 people a day.

 

It seems that the number of people employed in the Canadian public sector is about 10 per cent of Canada's population. The increase in numbers is 10 per cent in four years.

 

The question is: Will Canada face the British dilemma in years to come, or is it time to take steps in advance when it is much easier?



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