Sunday, 21 February 2010

The illusion of Growth - the 'State' and the 'Parastate'

New research shows that nearly three-fifths of the growth in jobs under Labour during a decade in power was directly or indirectly created by the state.  Across the country as a whole, it says 57% of new jobs created during the period 1997-2007 were state or “para-state” — i.e. jobs dependent upon government spending.  The research, which was carried out at Manchester University’s Centre for Research on Socio-Cultural Change, concludes that Britain’s business model before the financial crisis in 2007 was “undisclosed and unsustainable”.

The researchers define para-state employment as activities such as rubbish collecting or nursery education which depend for revenue on government funding, together with parts of private healthcare and other sectors partly dependent on government support.  It includes consultants employed by central government and local authorities who are officially in the private sector but whose work would disappear if the public spending taps were turned off.

In all, the researchers calculate that of the 2.24m jobs created in Britain under new Labour until 2007, fewer than 1m were true private sector jobs, while 1.27m were in this wider public sector. In the West Midlands there was a net fall of nearly 37,000 in private sector jobs, offset by a 105,000 rise in state and para-state work. In the northeast, 79% of new jobs were state-dependent, compared with 41% in London and the southeast.

One of the report's authors stressed the importance of politicians becoming more intelligent in their approach to public spending: “Longer term we need a debate about a new kind of national business model. The public sector cannot sustainably fill in for an anaemic private sector".

With the illusion now well and truly over, a new national business model is not only needed in the long term, it is needed now, or to be more precise it was actually needed 10 years ago!