Eamonn Butler: Britain must follow the Canadian model for cutting the deficit

Dr Eamonn Butler is director of the Adam Smith Institute and author of The Alternative Manifesto: A 12-Step Programme to Remake Britain, which was published last week.

A strike by two million people against the Greek Government’s ‘austerity’ package – weak as it is – must make David Cameron doubt the wisdom of mentioning any kind of ‘cuts’ agenda. Yet we need to balance the books. The last time we were in debt this deep, at least we had seen off Napoleon and Hitler.

Taxation has grown by half since 1997. All that extra spending has certainly bought us plenty of intrusive new quangos, much more expensive doctors, and superlative pay and pensions for local government officials and Whitehall civil servants. But has it bought us, the taxpayers and citizens this great leviathan is supposed to serve, anything we would really miss?

I hardly think so. Indeed, all this taxation and spending – and off-the-scale borrowing, of course – is actually getting in the way of enterprise, economic growth, and personal liberty. It’s also getting in the way of people getting on with running their own lives, which they mostly do for themselves rather better than civil servants can do it for them.

Dr Eamonn Butler is director of the Adam Smith Institute and author of The Alternative Manifesto: A 12-Step Programme to Remake Britain, which was published last week.

We could cut public expenditure by a third, back to the 1997 level, and lose nothing of value. But only through a reform strategy, not a cuts strategy. Across-the-board budget and salary freezes might buy you a little time. But it is no long-term solution. It just breeds resentment among public workers – many of whom are low paid, and would be hit disproportionately. Ministers will squabble about their share of a diminishing pie.

Canada found this when trying to cut its deficit in the late 1980s and 1990s. There were strikes and plummeting morale. Important services were cut along with marginal ones. Efficiency drives had a little impact. The incoming Liberal government of 1993 faced a national debt the size of ours, but they managed to cut their deficit from 9.1% of GDP to zero in just five years – not by raising taxes (the last straw for battered entrepreneurs), but by working out how to run government a lot cheaper.

As I explain in The Alternative Manifesto, the Canadians’ first key move was to appoint a minister with the specific responsibility for public service renewal – a single figure with the authority to drive through a change process and make sure every other minister did their bit. They put nothing off limits – even healthcare. There were no spending targets – because departments simply spend up to targets, instead of making economies, but there was a complete review of all government activity.

Ministers had to define what their department was there to do – their purpose. Did it really need civil servants to achieve it, or could it be done better by private bodies, or by the public themselves? With a reform rather than a finance minister in charge, everyone bought into this as complete re-think of how the government served citizens – not just an exercise in penny-pinching.

There was no place to hide from the hard decisions. Pressure was kept up through cabinet retreats at which ministers’ progress was assessed and new targets set. Everyone accepted that the prime minister, the finance minister and everyone else had to speak with one voice, and there could be no departmental squabbling.

A ministerial task force took successful techniques from one ministry to the next. They recognised that some public services remained vital, while others could be completely redesigned or even eliminated. The end result was small cuts (or even increases) in some departments, but large savings in others – massive cuts in transport and farm subsidies, for example, but rises in benefits for the elderly.

Within three years, Canada’s budget deficits were eliminated and the debt was coming down. Within five years, the size of the civil service had fallen by nearly a quarter (23%) – with no strikes or civil unrest.

With the UK government bloated and misshapen from years of overspending, the Canadian strategy seems exactly the right model for the UK to follow. Let’s appoint a senior minister for public sector renewal, and conduct a complete review of what government does, what it needs to do, how to do that better, and what to leave to other people. Focus on that, and the savings will come anyway.