Business View: The public sector feels the pain; that's what it's there for

Do we believe that all we are doing is getting rid of lazy people who are a drain on society?
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If Fred "the shed" Goodwin had stood up last week and announced that he was cutting 40,000 jobs, the outcry would have been deafening. The Royal Bank of Scotland boss would have been attacked in the Commons, headlines would have screamed about fat cattery and corporate insensitivity, and the unions would have been up in arms.

If Fred "the shed" Goodwin had stood up last week and announced that he was cutting 40,000 jobs, the outcry would have been deafening. The Royal Bank of Scotland boss would have been attacked in the Commons, headlines would have screamed about fat cattery and corporate insensitivity, and the unions would have been up in arms.

But when a fellow Scot, Gordon Brown, announces that he is scything 40,000 jobs in Whitehall, relocating tens of thousands more and is on the hunt for thousands of further cutbacks, there is hardly a murmur. When the Chancellor goes before the MPs at the Treasury Select Committee on Wednesday, I can predict that civil service redundancies will not be the main topic of conversation.

Why? Is a bank employee's job worth less than a civil servant's? Do we not sympathise because it's our money that pays their wages (which is also true for a bank employee - or a shop worker - or indeed anyone in a service industry)? Or do we believe that Whitehall is wasteful, that somehow the public sector is inefficient and all we are doing is getting rid of lazy people who are a drain on society?

While you cannot deny the public sector is inefficient, it is hard to know how inefficient. Studies by learned bodies, such as the Institute for Fiscal Studies, show you can gauge the relative efficiency of different countries' public sectors. We rank just behind Germany and the US, and well off the leaders, Japan and Luxembourg. But sensible comparisons between public and private sector efficiency can't be made. So while we think savings are possible, we are not sure how to make them.

This Government has embraced the Conservatives' affection for private-sector solutions to public-sector problems. This has led to a proliferation of PFI and PPP deals, the success of which is still uncertain. Many hospitals, prisons, roads and schools have been built, but have they been built more cheaply? The evidence is not compelling.

What they have done, though, is move billions of public-sector investment off the Government's balance sheet. Given that the Chancellor is lucky to be within the fiscal rules he drew up seven years ago, and is in danger of breaching them before this Parliament is out, this is crucial. Attacking public services has saved his bacon so far. Will it save it again?

Tech boom, version 2.0

Maybe even more than the overhyped flotation of Lastminute.com, the merger of Time Warner and AOL signalled the end of the dot-com boom. A solid media company, brimming with world-class assets, merged with a virtually profitable online group, with a great brand but little else. The deal brought resignations, anger and regulatory investigations.

And now it is being dismantled. First, chief executive Dick Parsons got rid of the AOL name. Now he may be getting rid of the company altogether. Time Warner's bankers are looking at "strategic alternatives", and we all know what that means.

Perhaps Time Warner is a contra-indicator. Prices for internet firms recovered last year, which is no doubt why Parsons feels he should cash in his electronic albatross now. But if Time Warner is selling, surely the conclusion is that a fresh boom is about to occur.

The logic behind higher values for tech companies exists. Electronic delivery of services and, to a lesser extent, goods is more efficient, cuts prices and speeds the flow of commerce. Payment security is better than it was four years ago. The quality of handheld devices has moved on a pace and the use of them for e-commerce is taking off.

The word is that Microsoft might be interested in AOL. It has certainly eyed it up before. And it needs to diversify as its main business is under attack by every regulator from Washington to Wellington.

Would a Microsoft purchase of AOL stimulate a fresh boom in the technology sector? I should think so.

j.nisse@independent.co.uk

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