The terms of the national debate about the economy are still stuck in a framework of cutting public spending and services to improve the state of the public finances. Yet the problem the economy faces is not spending on public services or public sector pensions, but the combination of the recession and the scale of the bailout of bankers and bank shareholders.

The TUC has published a new Touchstone pamphlet, Speaking Up For Public Services [pdf], ahead of tomorrow’s unemployment figures, which defends spending on public services and argues that we need the public sector more than ever in a recession.

Touchstone’s pamphlet argues that cuts and pay freezes will take household demand out of the economy and inhibit recovery. It also says that the best way to improve the public finances is growth. “Attempts to reduce the deficit at this stage of the recession will make it worse. Of course, in the longer term, the deficit must start to come down. The best way to do this is through economic growth and a progressive tax regime that asks those who did well out of the economic boom times to contribute more than those who fared less well.”

That is a useful counterweight to the argument that the problem in the economy is public spending.

Cuts to the public services will worsen economic conditions, not improve them. “Widespread cuts in budgets would see workers losing their jobs in the private as well as the public sector,” says the TUC. “According to the pamphlet, for every £1 of public money invested in public services through direct employment and through procurement of supplies and services, a further 64p is generated in the local economy.” The pamphlet also says that a ten per cent cut in spending levels would see around 200,000 public sector workers losing their jobs.  As it’s calculated that around 29 per cent of public sector expenditure goes into the private sector, this would mean a loss of around £16.8 billion in investment – a move which would also lead to many private sector job losses.

It also points to the human cost of unemployment, arguing that every three per cent rise in unemployment leads to a 2.7 per cent rise in heart attacks among men aged 30-44 and increases of 2.4 per cent in murders and suicides in people under the age of 64.

And it makes the following highly valid point:

“We are told it is the public sector that will have to face the consequence of this recession that originated in the bank boardrooms. Those who depend on public services and public service workers did not cause this crisis, but they are being made to bear the brunt of the problem.”

The TUC’s intervention contains many useful points that counteract the prevailing orthodoxy around cuts and public spending. More here.