BIG FAT MYTH: "London less reliant on state jobs than the rest of the UK"

From City AM:

LONDON and its commuter belt rely far less on the public sector for jobs than the rest of the UK, official statistics revealed yesterday.

In the third quarter of last year, public sector employees made up 19.4 per cent of the total across the UK, data from the Office for National Statistics showed, with just 16.6 per cent of those working in the South East directly employed by the public sector, along with only 16.9 per cent of London workers and 16.7 per cent in the East of England.

By contrast, 27.7 per cent of all those in employment in Northern Ireland were directly employed by the state, along with 25.7 per cent in Wales, 23.5 per cent in Scotland and 22.2 per cent in the North East. Public employees now total 5.7m, the ONS said, a fall of 55,000 on the second quarter, and 669,000 below the 6.4m peak in the fourth quarter of 2009.

(One factor we could strip out if we could track down the numbers is that a lot of large government bureaucracies have been 'outsourced to the regions' because wages and rents there are lower, so overall, there is a saving to the taxpayer if the ONS is moved to Newport, the VAT head office moved to Newry, the BBC to Manchester etc. OK, scrap that last one. It would seem a tad hypocritical to outsource these bureaucracies and then point the finger at those regions which benefit.)

Taking "London" as the entire population thereof, this is quite simply not true.

The more important metric here is "public sector wages per capita population". Public sector wages do not simply disappear into the ether, they get spent. If you run a private business, you don't care whether your customers are paying with money they receive from a private or a public sector job.

In which case the figure for London is the same as anywhere else, because of three effects:

1) The figures quoted are the percentage of total jobs in an area, not the total number of adults. So if we take two equally sized towns with 10,000 public sector workers each, if Town A has low unemployment and 40,000 people in private sector jobs and Town B is an area of high unemployment and has 30,000 people in private sector jobs, then superficially Town A has 20% of people in the public sector and Town B has 25% in the public sector. That comparison is meaningless; relevant is comparing 10,000 with 10,000.

2) The overall average/median public salary is (say) £25,000 and front line public sector jobs in London/South East have a London weighting of(say) £5,000 a year.

3) Most of the really high-paid public sector job; civil service, heads of quangos, Secretaries and Ministers, the Bank of England, the FSA (or its successor bodies) with an average salary of (say) £100,000 are in London, and the people concerned live in London/South East. Let's assume that one-in-ten public sector workers in London/South East is on £100,000.

Let's assume that the overall unemployment rate in London/South East is 0% and the unemployment rate in Northern Ireland is 10% to keep the numbers simple and put those three factors together and see what we get:

Northern Ireland:

27.7% public sector - 10% unemployment x £25,000 a year = £6,230 per working age adult.

London/South East:

16.8% public sector - 0% unemployment x weighted average salary of [0.9 x £30,000 + 0.1 x £100,000] = £37,000 = £6,210 per working age adult.

My figures are guesstimates, but reasonable ones. It is equally possible that the per capita payments to "London" are slightly lower or slightly higher than in the rest of the country, but it is not a big difference either way.

So the £180 billion annual public sector salary cake is not skewed against London. It is a capital city and lives off its hinterland, just like any other capital city.
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Further, there are plenty of other subsidy cakes; for example £40 billion tax breaks/subsidies for the "pensions industry" and £60 billion a year interest rate subsidies for the banks/borrowers, total £100 billion, at least half of which goes to London. The cream of the "professional classes" (auditors, accountants, lawyers etc) who depend on a steady flow of impenetrable laws and regulations from the government to enable them to soak up wealth from the rest of the economy are primarily in London. And half of Housing Benefit paid to private landlords goes to landlords in London/South East. And what about £13 billion on the Olympics, and so on and so forth?