We must cut public sector salaries, not jobs

Public sector savings should come from salary cuts rather than job cuts. And there's no better place to start than with the hordes of highly-paid managers.

A few months ago I spoke to a local school governor. Cuts were already underway, she said. They'd had their budgets slashed, so they had had to let a teaching assistant go, despite the fact that she had been "vital."

Any idea what a teaching assistant makes these days? I'm guessing around £13,000. And a head teacher? Around £55,000-£60,000. So why did the teaching assistant have to go? £5,000 off the head teacher's salary and a bit off a few of the other high-level ones and no job losses would have been necessary. And was there no one at a more senior level who might have been less vital to the children's well being?

I thought of this conversation again this week when I looked at the employment numbers. In the three months to April, 7,000 public sector jobs went. You might think that's a good thing after all there are far, far too many public-sector workers. But look at which ones went many more teachers and social workers than managers.

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This matters. If you ask an overpaid manager to save money on salaries, his instinct is not to cut his own salary and it isn't to cut the salaries or indeed the jobs of his fellow managers. It is to dump the people at the bottom of his pyramid and in particular the ones who have no say in management the ones with the least voice. No matter that they may be the ones actually doing the work.

That's why I'd really like to see savings come via salary cuts rather than via job cuts (although they will come in time, 750,000 of them, according to Capital Economics).

I've said here before that we should adopt a radical policy of saying that no one in the public sector should earn more than, say, £150,000 (the level at which Labour believes people are being paid enough to pay a special rate of rich people's income tax), and we should cut all salaries below that by a set percentage. Say, 15% off all salaries between £100,000 and £150,000; 10% off all from £75,000 to £100,000; and 5% from £50,000 to £75,000.

Along with that we need to look very quickly at the non-jobs and start cutting them (see my blog from earlier this week: How to get rid of public sector non-jobs). If we don't, it won't be long before there isn't a teaching assistant, let alone a nurse, left in the country.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.