Not when but how

By Andrew Haldenby of Reform

“When to cut public spending?” is suddenly the question of the moment.  But it’s not the right question, as a Reform seminar led by Hamish McRae of The Independent today discovered.  The real question is “what” and “how”.  The “when” depends on that.  The emergency action that is needed right now – the action that actually is long overdue – is the publication of a credible plan to get the structural deficit down.  The Government’s forthcoming Budget (and / or the Conservative Emergency Budget if that were to happen) is the moment to do that.

The Conservatives have come under pressure over the question of “when”.  Various organisations, including the IFS today, have put pressure on them for their pledge to cut straight away in the new Parliament (in a cautious way).  The FT was particularly dismissive.  Various others, not least the editor of this site, have supported the Conservatives and urged them to go further.

 

What today’s Reform seminar discovered is that “when” is secondary.  The assembled civil servants, business people, PPCs and media (under Chatham House rules) focused on the “how” – what it would take to eliminate the structural deficit, all £100 billion or so of it.  They were excoriating on the structural weaknesses in public spending management.   They said that spending programmes don’t have “exit strategies” so that even when they end, their costs continue.  They said that the civil service rule of the game was to “spend what you get” and if that means civil servants need to create their own tasks to spend the money, they will and do.  They said that the most important and expensive government programmes, such as the Wanless Review of the NHS, consciously decided not to worry about value for money.

A big part of the job is to make every public sector organisation as efficient as the best private or public sector organisations.  That means basic changes to employment in the public sector; it means new contracts between government and private and third sectors; it means new competitive structures in public services so that they are accountable to the consumer.  There is no way that that will happen in the months between May and December 2010, or the year after 6 May, or even the three years that the editor of this site recommends.  It will take years of sustained effort.  (And why should the effort to achieve value for money in the public sector ever end?).

The other part of the “how” is shrinking the scope of government, to remove actual functions – say, the funding of undergraduate tuition.  That will take years of debate too.

The real question is, what is the plan to do this?  The FT has been silent on this.  Its energies would be better served developing and publishing its own version of the long term plan rather than scorning the Conservatives over transient changes in growth.  The IFS does better – pointing out today that a cheaper public sector workforce will mean a smaller one, as Reform pointed out last year.

What does this mean for the Conservatives?  The immediate need is not so much initial cuts (although there should certainly be some to reassure the markets in the very short term, in the form of reductions in welfare payments to middle class people and bad universal benefits like winter fuel payments).  The immediate need is to publish the plan of how to make the government smaller and more efficient.  They were on exactly the right track last year when they said that the ambition was to make the public sector as productive as the private sector.  What is needed is the plan to do it.  That is what is lacking, and why the pledges to protect front line workers and to protect the NHS budget are contradictory to it.

Hamish McRae concluded that the UK is right on the cusp of losing its credibility just as Greece has done.  He wondered whether the plan needed something outside of politics – like the Conservative office of budget responsibility – to give it credibility.  I still can’t see how that body will have the authority to challenge politicians on such innately political decisions.  But I agree with him, for what it’s worth, on the gravity of the situation.  It’s a challenge for years to come.