Neil O'Brien is Director of Policy Exchange. Follow him on Twitter.
Public spending in Britain rocketed from consuming just over a third of our national income in 2000 to just under half in 2010 - from 36% to 48%. In other words, we are right back to where we were before Mrs Thatcher. The coalition aims to get the state share of spending back down to 40% by 2016. But that means it will still be higher after the cuts than it was during most of the Blair years (1997-2004). So we are not heading for some small-state paradise once this is over.
Could the government go further? Over the long term I think it can, and must. Economic research in react years has shown a clear link between higher public spending and slow growth. Our large but inefficient state is one reason the UK has been so comprehensively outclassed by our international competitors over the last couple of decades. At the same time many people feel crushed by the rising cost of living. Anything the government could do that would allow sustainable reductions in income tax, VAT, fuel duty and council tax would help a lot.
Matthew Sinclair is Director of The TaxPayers' Alliance
The largest savings to be found in the public sector tend to be in the biggest budgets: welfare payments and remuneration for staff. However it is also important to look at other, smaller budgets where it is possible to make cuts that don’t affect households in the same way. Any savings there will make the overall fiscal austerity package easier for families to bear. In this article I have looked at six: a further quango to abolish; cutting subsidies to business; freezing the foreign aid budget; cancelling high speed rail; and scrapping the Green Investment Bank.
The Institute for Fiscal Studies described how the “big winners” from the 2010 Spending Review were “the Department for International Development and the investment budget of the Department of Energy and Climate Change”. These proposals would bring them into line with other Departmental budgets. It would lead to a more balanced fiscal adjustment.
1) Abolish the Equality and Human Rights Commission - £48.9 million saving in 2011-12
There are more public sector bodies that could be abolished. Just after the Coalition came to power, we wrote a series of letters to Ministers calling for specific organisations to be axed, focusing in particular on the Carbon Trust, Consumer Focus and the Equality and Human Rights Commission (EHRC). Since then the Government has announced the abolition of Consumers Focus, its powers are being transferred to other bodies, and the removal of the core grant for the Carbon Trust. But the Equality and Human Rights Commission is still there and is receiving total funding in 2011-12 of £48.9 million.
There are two key reasons why we called for the EHRC to be abolished: it has taken on a campaigning role that is inappropriate for a public sector body; and it has shown it cannot be trusted with taxpayers’ money.
The campaigning role should be particularly galling for Conservatives as the quango is setting itself up in opposition to what was party policy in the last manifesto. Their “human rights strategy and programme of action” for 2009-12 set out “no regression in law from the levels of human rights protection and mechanisms for enforcement under the Human Rights Act and other ratified human rights treaties” as something they aim to achieve. As I argued in our original letter calling for that quango’s abolition: that is a political objective, and while the public may want some law to deal with human rights, research suggests a majority think that “too many people take advantage of the Human Rights Act”. It is clearly inappropriate for those people to see their money spent supporting a cause they do not believe in.
There was a new National Audit Office report in June 2011 that again found serious failures at the quango, with millions of pounds spent without proper authorisation. Things may get slightly better and you would expect them to watch the money more carefully now that their budget is being cut. But in the end this still isn’t an organisation that politicians should trust with our money.
Chris Nicholson is Director and Chief Executive of CentreForum, the liberal think tank
The stagnant economy has forced the Office of Budget Responsibility to downgrade its economic forecasts. The structural deficit is now not forecast to be removed until the next Parliament, so the question arises: “what can be done to boost demand and growth in the Budget?” There are calls from some Conservatives for public spending to be cut further and for the savings to be used to fund tax cuts. That would be a mistake.
The coalition government was right to announce cuts in public spending in 2010 to show the financial markets and the public that the government was serious about cutting the deficit. That has been successful as proved by the unprecedentedly low borrowing rates for government. But to cut total public spending further would suck demand out of the economy and harm growth.
Tax cuts for low and middle income earners are necessary but should be funded by removing tax reliefs and allowances for the well off and by taxing wealth, as both Tim Montgomerie and I have argued before on Conservative Home. However, there are certainly areas where, within the present public spending framework, spencing could be cut but also areas where it could be increased.
So let me outline a couple of areas where spending should be cut – areas which many Conservatives might find difficult but which should be tackled nevertheless.
Ruth Porter is Communications Director at the Institute of Economic Affairs
The very language of cuts has been markedly austere and depressing. It is now well established that the reductions the government will make to overall spending are actually tiny. Carving it back to around 40% of GDP by 2017 will take it to roughly the average amount the government spent under Tony Blair - hardly a radical plan.
The coming budget is the chance for George Osborne to reframe this discussion. If he can find further reductions he can create the conditions that will allow more growth in the economy – through tax cuts and more space for private enterprise. A thriving economy means more jobs, more prosperity, more opportunities for people, better education and better healthcare. Spring is a good time to send a more optimistic message for Britain’s future.
Paul Goodman recently called for a 'Lower Spending Commission' to help the Chancellor deliver his deficit goals and finance job-creating tax relief. Throughout this week think tanks will be rising to the challenge with suggestions for saving money. The Reform think tank kicks off the series.
Andrew Haldenby is director of the independent think tank Reform.
The tax and spend debate is in a bad place as the Budget approaches. If the various newspaper reports are to be taken seriously, the Government’s key dilemma is exactly how best to levy more taxes from the very rich.
Even if the 50p rate were to go, it would (in effect) simply be replaced by a mansion tax, or a change in council tax, or a reduction in tax relief for pensions, or a further increase in tax on “non-doms”.
Such a Budget would certainly generate some headlines but nothing really would have changed and certainly no economic benefit achieved. Given what this Budget actually needs to do, such a shallow set of reforms would be a somewhat tragic missed opportunity.