As cuts loom, let's scotch bloated public sector myth

If the knife of cutbacks goes in, it will cut flesh, not fat, as public sector spending in Ireland is below OECD average, writes Fintan O'Toole.

OVER THE next few months, anyone interested in decent public services will have to watch the language. The distinction between two words - "reform" and "cutbacks" - will become vital. To sell cutbacks, we will be told that what is happening is really a process of reform. We need to remember that the two are, in fact, very different things.

Mention the words "public sector" to almost anyone who doesn't work in it, and the chances are that the next word that comes to mind is "bloated". The bloated public service - a virulent weed, strangling the pure flowers of the private sector - is a notion so deeply embedded in the collective consciousness that we don't need any evidence to know it exists.

The submission to the OECD review of the public sector by Isme, the association for small and medium-sized enterprises, is a good example of the dominant rhetoric. It cited "concrete evidence that the public sector is overpaid, overmanned, underworked and underperforming". The employers' body Ibec has often called, especially in times of fiscal turbulence, for public-sector jobs to be slashed, as if they were self-evidently a waste of taxpayers' money. In 2003, for example, Ibec called for 10,000 public-sector workers to be made redundant. Demands of this kind have always found a ready echo from the analysts for banks and stockbrokers who dominate the airwaves.

The bloated public sector is, however, a myth. In the first place, there has been no huge, unwarranted increase in public spending in recent times. Though you wouldn't know it from most of the commentary, the OECD report points out that, while public expenditure has risen by 5 per cent a year, "much of these increases have reflected a need to play catch-up from historically low levels." And even so, public spending here is still relatively low: the third lowest in the OECD as a percentage of GDP. If another measure, gross national income (GNI) is used, Ireland's public spending moves up - but only towards the OECD average - and it is still lower as a percentage of the economy than it was a decade ago.

And these very modest (and arguably inadequate) increases in public spending simply have not created the inflated public sector that the dominant ideology so desperately wants to attack. Buried in the OECD report is a rather astonishing fact. For not only has the public sector not grown inordinately, it has actually, in relative terms, shrunk.

Since this goes against the received wisdom, it is worth quoting directly: "Ireland's real average annual growth rate in public expenditure between 1995 and 2005 was 5.1 per cent, significantly slower than real GDP growth of 7.5 per cent.

Government policy therefore has actually decreased the total number of public sector employees as a percentage of the labour force and decreased the overall public sector wage bill as a percentage of GDP." The "overpaid, overmanned, underworked" Leviathan has actually shrunk, in pay and numbers, relative to the overall economy.

The public sector, at less than 15 per cent of the workforce, is smaller than most other developed countries. "In comparison with other OECD countries," says the report, "Ireland thus has been able to deliver public services with a public sector that is relatively small given the size of its economy and labour force."

Scotching the myth of the bloated public service is an important step towards the abolition of another false truism - the notion that the health service has expanded massively without delivering a decent outcome for citizens. The second part of that equation is undeniably true - the political leadership and managerial organisation of the service have been woeful. But the problem is not rooted in having too many people delivering healthcare.

We've certainly been spending more money on health, but from a very low base. Despite the rapid increase in total health spending, it still accounted for only 7.5 per cent of GDP in 2005 - the OECD average is 9 per cent. The US, which right-wing commentators tend to see as the model for all good things, spends more than twice what we do on health as a percentage of its GDP. The consequences are a system that is, by objective standards, too small. The number of acute hospital beds in Ireland was 2.8 per thousand people in 2005, way below the OECD average of 3.9. We also have 2.8 doctors per thousand people - the OECD average is three. We have, on the face of it, a very high number of nurses, but 40 per cent work part-time and unlike other countries we don't have lots of nursing assistants.

These figures tell us nothing, of course, about the quality of the delivery of public services or the huge deficits in leadership, vision and accountability. They don't tell us about the insanity of the so-called "decentralisation" policy, or the neutering of accountability under the Freedom of Information Act, or the explosion of quangos. But they do tell us that when the knife of cutbacks goes in, it is cutting flesh, not fat.