England Starting to Figure Out Government Spending

(MoneyWatch)  Like the Obama administration's proposed next budget England's Labour government plans to slowly begin to reduce the annual deficits with a goal of cutting borrowing by forty-four percent in 2013. Prime Minister Gordon Brown of course is leaving that, like Obama, to the next administration with a hope that it will continue to be a Labour Prime Minister. The current polls are not supportive of Labour winning the next election.

The Independent newspaper points out that due to this goal spending will have to decrease. Because both Labour and the opposition Tory party have committed to keep spending on health and services the only real areas to cut are defence and ultimately the civil service workforce. There is a consensus building in Europe among industry that after this year English defence spending will see major reductions.

If the government goes through with delaying or cutting defence expenditures it still will not reach the spending required to lower the debt. In fact the government has just proposed raising the highest income tax rate to fifty percent for those making over 150,000 pounds a year. This would make the top rate forty-two percent higher then the current highest U.S. rate. Even with increased revenue there still will be a shortage of funds.

This means that England's government will probably begin to see cuts in the size of the government workforce. As I have written in the past the most expensive part of any government budget today, be it the U.S. defense budget or any department, is the cost of paying salaries, benefits and retirement. In England in 2003 there were over five hundred thousand civil servants. This did not include teachers, medical staff or local government workers. The English have a national police force and these are also not included. By 2004 this figure had grown over four percent. In 2009 there are probably close to six hundred thousand. This unfortunately for the workers are where the deepest cuts and savings can be made.

In many U.S. cities and states there have already been cuts to their work forces. Unfortunately these are not always easy to carry out as many are unionized. If the Federal government goes ahead and has a Reduction in Force (RIF) it will also be governed by union rules. This sometimes makes it difficult to keep newer, non-veteran, non-disadvantaged employees. In some case this means the workforce will lose younger employees who were hired for specific skill sets. At the same time these rules protect those who have served the longest and have the most experience. Any change like this is difficult and the needs of the government must be balance with the needs of the work force.

If England and the U.S. are going to get their spending under control in order to reduce the massive amounts of debt they are taking on then a review of their work forces is required. Both continue to hire people but that can be controlled through retirement and attrition. One would think that both countries are going to have to reduce or at least freeze the size of their staff to make a serious effort to contain growth or reduce spending.