Director General speech at the BCC Annual Conference 2006

In April 2003, employers began paying an extra 1 per cent on their NI contributions to fund improvements in the NHS. Three years almost to the day, British Chambers of Commerce (BCC) Director General David Frost at the BCC Annual Conference, will question where the money has gone.

“While life in the private sector has got tougher with rising costs and tougher economic conditions, the public sector has enjoyed rising salaries, better working conditions, and generous final salary pensions.

“Businesses are facing further increasing pressures on costs. We have proposals to make employers contribute 3% to employee pensions. We know that 20% of firms would be forced to lay off staff if forced to pay into a pension scheme. Secondly, we have the prospect of congestion charging across our road network. Thirdly, we have the continuing increases in energy costs and finally, we have the worrying discussions on the relocalisation of the business rate. If these schemes were implemented this would hammer the prospects of businesses across the country.

”Businesses have paid billions towards increases in funding for the NHS. It is increasingly clear that the money has been invested with little thought into delivering real value for money.

“Would a business have gone on such a spending spree without being absolutely clear what extra output it would get? The answer is clearly no.

“We did some research into the performance of the public sector and found it a worrying picture. Despite the huge growth jobs and investment, the public sector productivity fell by 10 per cent between 1997 and 2003 while those having to pay for it all in the private sector have faced rising costs and pressures.

“When you compare life in the private sector and the public sector, the imbalance is depressing. Wages in the public sector are outstripping those in private sector – pay growth in the public sector was 4.4% in the past year, compared to 3.3% in the private sector. Between 2000 and 2005, public sector employment increased by 10.5%. Over the same period, private sector employment rose by only 2.8%. And while jobs have increased in the public sector, it has masked the whopping loss of over 1m manufacturing jobs since 1996.

“Despite these worrying figures public sector workers are still not facing up to the reality that things simply cannot continue as they are. Only last week we saw more strikes about public sector pensions, yet the cost of unfounded public sector pension schemes stands at £960 billion – equivalent to £43,835 for every household in the UK. How can anyone believe that cost can be met? And certainly not by our businesses which already have global challenges to meet.

“We need reform of our public sector soon – business doesn’t have a bottomless pit of money.”