RUTH SUNDERLAND: Reeves and Starmer intent on undoing Thatcher revolution

The pedant in me was provoked when a report arrived the other day from the Left-wing Resolution Foundation ‘authored by’ its interim chief executive Mike Brewer.

Quite how ‘authoring’ a report differs from ‘writing’ one remains a mystery.

Language evolves, and at times it does so in ways some of us find irritating. The important thing is that Mr Brewer had interesting points to make.

He drew attention to the ‘big pivot’ which will be executed in 2025 by Chancellor Rachel Reeves towards the public sector, making it a priority above the private, wealth-creating part of the economy that pays for it all.

This, as the Resolution Foundation notes, is a striking change in direction, of a kind not seen in a generation outside of the financial crisis and the pandemic.

Anyone listening to Reeves and her boss Sir Keir Starmer might imagine public sector employees to be morally superior and lowly paid. It’s true many people working in the NHS, the Armed Forces or teaching, members of my own family included, are driven by a sense of vocation. But the assumption public sector workers are downtrodden compared with the private sector is not always correct.

Two of a kind: Chancellor Rachel Reeves with her boss Prime Minister Sir Keir Starmer

Average public sector pay was 6 per cent higher than the private sector in the three months to November, according to the Foundation. In fairness, that is only one period and there have been times when the public sector has lagged.

But any alleged disadvantage looks even more questionable once pensions are taken into account.

Around 9m current and former public sector workers are in unfunded pension schemes. Their retirement incomes are funded by the contributions of members who still work, with the shortfalls made up by taxpayers. The liability of these unfunded schemes is around £1.3trillion.

Employees enjoy gold-plated retirement incomes based on their salaries, something that has largely vanished in the private sector. On average, they receive a contribution from their employer – the taxpayer – valued by the Government at 23 per cent of salary. This is an amount which typical private sector workers can only dream of.

It does not come cheap. The public sector workforce stands at 5.9m, with a cost to taxpayers of £270billion in 2023–24, around 10 per cent of national income and 22 per cent of total UK Government spending.

As private sector firms scale back on hiring and pay rises due to Labour’s employment tax hikes, the state will expand further. Greedy public sector unions will demand more pay rises without committing to productivity improvements. Reeves risks being trapped into higher spending, higher borrowing and higher taxes, with no guarantee services to the public will improve one jot.

And this is the part of the picture that has been erased by Labour: service. The public sector does not exist to serve its workforce, still less to serve a Labour government. Its purpose is to serve us.

Yet this has been turned on its head. Those of us who work in the private realm are treated as though our only value lies in funding increasingly inadequate public ‘services’ through confiscatory levels of tax.

Reeves and Starmer are intent on undoing the Thatcher revolution, which involved shrinking the size of the state and creating conditions for private enterprise to flourish. They believe they know how to spend your money better than you do. They are arrogant, and they are wrong.