Dr Patrick Nolan is Chief Economist of Reform.
Tomorrow afternoon the coalition government will have the opportunity to change the direction of fiscal policy in the UK. As Reform noted in our alternative budget last week, while this will require making the toughest spending choices for a generation, history will judge the government right if they do this in the right way and reduce costs through structural reform.
International experience shows that the right way to cut spending is for this to occur over as broad a base as possible. No areas of spending should be off limits. Areas that account for the greatest shares of government spending, and in which spending performs most poorly, should bear the largest cuts. Signs are, however, that the health budget will be ringfenced from cuts, although this is the largest area of departmental spending, has poor rates of productivity and accounted for 40 per cent of the increase in public sector spending between 1997 and 2007.
Whether the NHS budget should be sacrosanct was a topic for debate on The Big Questions yesterday morning. On this show I argued that the NHS budget should be cut as this would not just save money but help encourage a better health system. I noted that “the NHS doesn’t need more money, it needs reform” and that the public needs to provide more funding for health out of their own pockets through user charges. Julia Manning of 2020 Health also opposed ringfencing the budget and argued that people need to take more responsibility for their own health.
If tomorrow’s Budget is to begin to start the process of rescuing the UK’s public finances it will need to take tough choices. Easy options, such as cutting consultancy budgets or gimmicks such as free swimming for pensioners, will only scratch the surface of what needs to be done. The risk is, however, that the Budget will fail to go beyond these easy options and public services like health will remain unreformed. Rather than rescuing the public finances this will simply be saving trouble for the future.
