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Unions have suppressed wage differentials in the public sector. They have extracted excellent benefits for their members. And they have protected underperforming workers from being sacked.

The annual growth of productivity in the British economy increased by only 0.8% in 2005 the slowest growth since the recession year of 1990. There are many reasons for this sluggish growth of productivity. Part of the reason was the slowdown in growth in 2005 because output and output per worker tend to be positively correlated. In an economy where demand and output is weaker, people in work are not being used as intensively compared to when the economy is stronger. Deeper-rooted explanations for weak productivity performance focus on supply-side deficiencies. These include the effects of skills gaps in industry; and the transfer of the economy's resources into the public sector where productivity is lower. Other factors contributing to sluggish productivity growth include the effects of business red tape and a persistently low rate of spending on research and development.Low productivity growth means that little progress has been made in reducing the productivity gap that exists between the UK and most of her major competitors.

Unemployment rises above 2.5m milestone • Jobless total rises to 2.51m • Unemployment rate at 7.9%• Public sector employment falls by 111,000• Claimant count rises by 20,300 in August•Youth unemployment increases to 972,000

In September, President Castro announced plans to lay off around up to a million state employees - about a fifth of the workforce - and encourage them to find work in the private sector.

Interest Payments. The cost of paying interest on the government’s debt is very high. In 2008 Debt interest payments will be £31 billion a year (est 2.5% of GDP). In 2009, they will be £35 billion (similar to defence budget). Public sector debt interest payments could be be the 4th highest department after social security, health and education. Debt interest payments are rising close to £70bn given rise in national debt.