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The human cost of slashing public spending


Themes: Economics and policy

What are the consequences for both society and the country’s economic recovery?

Cutting public spendingAcademics from Cambridge Judge Business School have raised concerns about whether the size and speed of Chancellor George Osborne’s cuts will dampen the economic recovery and whether volunteers under the banner of working in a ‘Big Society’ can really take on jobs previously performed by public sector workers.

Michael Kitson, a Senior Lecturer in International Macroeconomics at Cambridge Judge Business School, said he thought fiscal stimulus is the right solution:

“Keynesian economics has not been discredited. Many governments around the world, including the UK, and many European countries and the USA, resorted to Keynesian means to make sure it was not a deeper recession. Keynesian economics was the answer over the past two or three years, and the Keynesian arguments are sound and robust and should be taken into account.”

He said public sector workers generate wealth too and these jobs were as important as the private sector ones:

“It is wrong headed to think we can encourage regional growth by cutting public expenditure. People in the public sector generate wealth, our teachers and nurses, they generate output, and they often spend their wages in the private sector. Private sector prosperity depends on a thriving public sector, the idea you cut the public expenditure and the private sector will fill the gap just doesn’t work.”

If the ‘Big Society’ is to rely on volunteers, managers will need to think carefully about how to recruit these and under what conditions volunteers will work. Dr Helen Haugh, Senior Lecturer in Community Enterprise at Cambridge Judge Business School, said people don’t volunteer unless there is a history of it in their circle of friends and family:

“The evidence tells us that people who volunteer tend to know someone who has previous experience of volunteering. The ‘Big Society’ is trying to encourage people with no experience of volunteering to become active participants in society, and that is a very big challenge because there needs to be resources in place in order to encourage people to start volunteering.”

Dr Helen Haugh, warns that there will be legal problems in trying to get volunteers to do the jobs of professionally qualified staff:

“The implementation of the ‘Big Society’ and extent of participation and the roles that can feasibly be taken on by volunteers will need some very serious analysis. We need to ensure that the services are delivered by people competently qualified to deliver them and that they are suitably protected from any litigation. People generally want to have good quality services, and the idea that those services currently delivered by paid professionals can be delivered by volunteers shows some gaps in the implementation strategy.”

Dr Philip Stiles, University Senior Lecturer in Corporate Governance at Cambridge Judge Business School, said human resource departments will find themselves in a challenging environment:

“I think the human resource departments will be busier than ever, their agenda has never been so important, HR could be inundated with work. However, HR departments are also being cut and their services outsourced. They will be in a difficult bind to effect change and to be the recipient of change themselves.”

Dr Philip Stiles says union strength is growing all over the world, even in China and the US, and that ‘smarter’ companies will give careful thought before laying off staff:

“Smarter companies tend not to go for knee jerk reactions; they look for other efficiencies before they take workers out which in the long term will affect the recovery in terms of lost skills and knowledge.”