The Summary

The official measures of direct public employment in the UK are anachronistic after 25 years of outsourcing and subcontracting to private firms to deliver services such as nursery education and health care. CRESC researchers devised a robust and simple method for estimating the large number of publicly funded private employees in the UK. This raised important questions for politics about the balance of the economy and how job creation under New Labour depended on unsustainable increases in  public spending.

The Full Story

An Unbalanced Economy?

“ our economy has become more and more unbalanced, with our fortunes hitched to a few industries in one corner of the country, while we let other sectors like manufacturing slide….It has become far too dependent on the public sector, with over half of all jobs created in the last ten years associated in some way with public spending” David Cameron, 28 May 2010 as incoming PM  in his first speech on the British economy

The official employment statistics measure public and private employment. They don't count the jobs indirectly sustained by public funding in the private sector. So how did David Cameron know that half the jobs created over the last decade were publicly funded? The answer is that a CRESC Working Paper from the University of Manchester published four months before he spoke revealed the striking empirical result that he describes. The same paper launched a new measure of state funded employment.

CRESC’s social science innovation was to devise a robust and simple method for estimating publicly funded employment (including private firms) from Annual Business Inquiry  data. This generated new and striking empirical results. Hence, the widely reported national estimate that more than half the new jobs created since 1997 were dependent on public funding. Other findings were that nationally more than 80% of new jobs for women jobs were dependent on public funding and there had been no autonomous  private sector job creation at all in fomer industrial areas such as the North East and West Midlands.

The Para-state: counting publicly funded private employeess

Like much CRESC research, this changed the field of the visible. It also highlighted new empirics and unexpected relations. Working Paper 75 made visible the existence of a large para-state sector of publicly funded private employers. These employ around a third of those directly employed by the state. This is a social science insight which required a new research method and an understanding of what the available sources would yield. It complemented investigative jounralism. What had previously been suspected or guessed could now be estimated with reasonable reliability.

This benefitted the public interest. Our results becme important in debates in civil society and politics.  David Smith , economics editor of the Sunday Times wrote a very fair news story and report on 31 January 2010. Ruth Sunderland in the Observer on 7 March 2010 gave us her whole column as well as a mention in a two page feature on Teesside. The highlight of national broadcast coverage was an interview on the Today programme. In terms of take up, the Treasury picked upon our work so, that both David Cameron (28 May 2010) and George Osborne (19 May 2010) cited it in their first major speeches.

The politics of employment

There was also much discussion on the web. Working Paper 75 was cited on both left and right web sites, with interesting comment also coming regionally from Wales and Scotland about the balance of our national economy. Our users read our results through the frame of their political beliefs about the economy and society. Many disagreed  with our interpretation. Working Paper 75 raises questions about the incapacity of the UK’s finance-led private sector and about the regional implications of public expenditure cuts. When David Cameron and George Osborne, as incoming PM and Chancellor, cited our findings in their first major speeches, they rather differently assumed or asserted that more tax cuts would stimulate the private sector to create jobs.

The research results in CRESC Working Paper 75 were subsequently reworked in a more academic format in a forthcoming paper accepted by the Accounting  Forum  journal, and in the September 2011 book by Engelen et al. After The Great Complacence.