Britain's trade union conference is underway, and its members are calling for major hikes in government spending. They want new money for government agencies, for capital investments, and for public sector wage increases.
It is the latter proposal, wage increases, that has the best chance of winning support from the governing Conservative Party. That's because British public sector pay growth has been capped at 1 percent per year since 2013, frustrating the 5 million affected workers and the politicians who support them.
And it's true, after four years of below inflation pay caps, pay raises now seem increasingly justified.
But nothing is free. Whatever extra money is now given to public sector workers would have to be offset by other cuts, or incurred in higher government spending. The sizes aren't small: According to Britain's Institute for Fiscal Studies, inflation-tagged pay rises would cost between $7.9 billion and $9.2 billion over the next three to four years. But with the U.K. already forecast to run a $91.94 billion deficit this year, the added spending is hardly affordable.
The issue isn't just this year's spending, but Britain's deficit track and national debt load. After all, while the deficit is not set to be cleared for at least five years, the net debt-to-GDP ratio is already over 85.9 percent. That's exceptionally high, and very concerning in the context of Britain's aging population.*
As I've explained, a high deficit and debt drains capital investment, individual opportunity, and productivity.
The best solution would be offsetting wage hikes with spending cuts elsewhere, but the conservative government has little interest in any spending cuts. Facing a rising socialist candidate, Jeremy Corbyn, and the possibility of another election in the next two years, the conservatives want to stay quiet and uncontroversial.
The British Left knows it, and they are pushing hard for as many public pay concessions as possible.
Still, the conservatives should be careful. While releasing pay caps for police officers and prison workers might be justified to retain experienced staff in those depleted sectors, most pay caps ought to remain in place. This isn't just about long term economic stability, it's about balancing private and public sector interests. Consider the fact that even today, and even excluding their higher pension returns, public sector workers receive higher salaries than their private sector counterparts.
Ultimately, the matching of the national deficit to public sector wage concerns illuminates the broader issue here: Britain's challenge is not that its public sector workers are underpaid, but rather that its government remains too big. Consider the chart below, it shows that even as the government has reduced spending, it has cut only a marginal percentage of its bloated workforce.
Seeing as the public sector is less productive than the private sector, those jobs don't simply represent an unjustifiable drain on taxpayers, but millions of lost, better private sector opportunities.
If Britain wants to balance future prosperity to shared economic justice, it must shrink the size of government.
* Although, unlike the U.S., Britain is showing seriousness about the need for entitlement reform.