Today I had an article in the Telegraph and Tasha Kheiriddin had an article in City AM. They are both based on the soon to be released book How to cut public spending (and still win an election). Copies reached the TPA office today and it is available to preorder now. Here are a few of the questions that the book should help ConservativeHome readers answer:
How big is the challenge over the next decade?
The TPA is working on a big new project to remind everyone just how big the national debt has got, and how fast it is growing. But an important point, to remind anyone who argues against public spending cuts of, is that everyone is planning them now. In their Budget 2010 Briefing Note, Reform point out that all the major parties are planning significant cuts in spending. Policy changes to reduce Total Managed Expenditure, from planned levels, by between £57.8 billion (Labour) and £67.8 billion (Liberal Democrats) between 2010-11 and 2013-14. Reform, to their credit, go further than the parties to keep down tax rises.
All of the debates about cutting in 2010-11 or 2011-12 are important, and as I've written on the TPA blog there is a strong economic case not to delay, but they will quickly be in the past. Sooner rather than later even the most ardent of Keynesians will have to admit the need for a big fiscal adjustment. Another way of understanding the scale of adjustment needed is to use the Government's plans as a baseline and look at the cumulative amount of money being taken out of people's pockets over the next ten years. Since Budget 2008, the Government have announced £341 billion in reduced spending and increased taxes between 2011-12 and 2017-18. Add the investment needed to connect people up to high-speed Internet, upgrade the water network, keep the lights on and meet climate change targets and you're talking a grand total of nearly £23,000 per family over the next ten years. Managing that without placing an intolerable burden on families, crashing the economy or creating a political crisis will be the big challenge facing policymakers.
Where can we make cuts?
The book features an updated list of cuts adding up to £50 billion in savings, based on the list produced for our joint report with the Institute of Directors. It includes a big list of quangos to be abolished and programmes to cancel, "cake slicer" cuts as Jens Henriksson puts it in a chapter on Sweden's experience, as well as big across-the-board "cheese slicer" cuts like curbs on pay and perks in the public sector.
Was the James Review an idea before its time?
William Norton, a contributor to this site and a part of the James Review's staff, writes about how it brought in private sector experience to find potential cuts, and how a similar attempt could find big potential cuts. Dave Williams, from Citizens against Government Waste in the United States, discusses the Grace Review. That review was a similar attempt to get private sector experts involved to "work like tireless bloodhounds to root out government inefficiency and waste of tax dollars" launched under President Reagan.
What other policies might help a government make spending cuts?
The book looks at a number of other policy areas that can make the fiscal adjustment easier. Transparency to build public support and ideas for cuts. Fiscal rules with expenditure targets which evidence from the OECD and IMF suggests help countries get their public finances in order. Reforms to climate change policy to reduce the burden on families, so they don't have to cope with a fiscal adjustment and doubling electricity prices at the same time.
Of course, we also need to increase efficiency in the public sector, work out how to get more for less. Mike Denham, a former Treasury and City Economist and author of the Burning Our Money blog, discusses fiscal decentralisation; giving local authorities more responsibility for their own finances. He makes the economic case for localism that can give us more efficient services and faster economic growth.
Have people done this successfully in other countries?
Quite a few people have written about the achievements of the Canadian federal government in getting its finances under control. But one of the things many of them say is that most of the real action happened in the provinces. Tasha Kheiriddin and Scott Hennig write about the experience in Ontario and Alberta, two big provinces, where robust governments were elected on a platform of cutting spending to get debt and taxes under control. They delivered on that mandate and won strong public support. As I mentioned earlier, Jens Henriksson also writes about the lessons for other countries from Sweden's fiscal consolidation.
