Mr Corporatist Shill speaks

Allister Heath in CityAM:

IMF is right... The IMF is upbeat for 2011, predicting growth of two per cent. It makes it clear that slashing the deficit and controlling public spending is the only way forward to avoid a sovereign debt crisis. While squeezing state spending will slow growth (1), the IMF is confident that liberating resources for the private sector (2) will ensure that the recovery continues strongly.

More emphasis should be given to reducing public sector compensation wage premia (3) and achieving savings in benefits through better targeting (4), it argues, policies that will be music to Osborne’s ears as he prepares for next week’s party conference in Birmingham.

1) No it won't.

2) Let's never forget that in 2009-10, public sector salaries and pensions were £169 billion; the total cash cost of welfare and old age pensions was £217 billion and subsidies and other payments to supposedly 'private sector' organisations were £281 billion. If we are serious about reducing government spending, then this is the first place to look - cut all this by half, and hey presto, the annual deficit of £150 billion-odd would be more or less eliminated.

There's no need to worry about strikes or anything, because those private organisations that are providing useful goods and services would not be affected and their workers are largely non-unionised. What's not to like?

3) Sure, only a third of public sector workers are 'front line'. So we can sack a couple of million with no detrimental impact on 'front line services', which are mainly provided by lower paid public sector workers anyway. Thus this automatically reduces average public sector pay. So let's get on with it.

4) The easiest way to reduce cash welfare payments is to keep basic entitlements much the same (OK, cut them a bit for 'single mothers') and reduce marginal withdrawal rates from their current 70% to 100% range down to something humane (no more than 50%). The Laffer Curve tells us that the cash cost of welfare will fall even though the incomes of those in low paid jobs will rise. What's not to like?

And the IMF are a bunch of shysters anyway, sod them and what they say.