Eamonn Butler: Ten international lessons on how to defeat the deficit

Dr Eamonn Butler is director of the Adam Smith Institute, which has just published his paper Re-Booting Government, and he is author of The Alternative Manifesto (Gibson Square 2010).

(1) I was delighted to see David Cameron telling us the budget cuts would be extensive and painful – not because I’m a spending sadist, but because it’s the first honest thing I’ve heard from a politician in years. Frankness is the first essential in defeating deficits, says Jens Henriksson, the finance minister who defeated Sweden’s. If you tell people it won’t hurt, they’ll hate you all the more when it does. And don’t think you can mollify them with a little fresh spending here and there. Everyone will still remember the pain, not the sugar pills.

(2) Canada, which in the 1990s turned UK-size deficits into a stream of budget surpluses, teaches a second lesson: start quickly and make defeating the deficit your top priority. If it’s just one of many political aims, or if you put it off, the deficit will defeat you instead. It’s sound advice: you can’t blame the UK’s deficit on bank bailouts and think it will go away when growth resumes. Half our overspend is ‘structural’ – that is, chronic. It won’t go away on its own. And growth may not resume at all quickly when our main customers, America and Europe, are also drowning in red ink.

(3) The OECD cites a third lesson of the international experience. A few tax rises aren’t going to solve your problem. In the UK, already so highly taxed, you would just see talent leaching away as it did in the 1970s brain drain. No: you actually need to put your bloated government on a diet.

(4) You don’t lose weight, though, by eating a few less chips and a few less vegetables. You need to eat more vegetables and cut out the chips entirely. You need to change what you eat. Another lesson from Canada is that it’s the same for public spending: slim down by cutting out the ineffective and unloved bits, not the essential bits.

(5) At first, Canada tried – and failed – to control its budget through across-the-board pay and budget cuts. They discovered that by cutting the good along with the bad, you annoyed the public and alienated civil servants. Using a more structural approach, they erased their deficit in just five years. Yes, they made huge cuts in ineffective or marginal things like transport and farm subsidies; but that allowed them to spend more on what people really valued, like higher benefits for the elderly. Our own coalition too has understood this fifth lesson, which is why it is actually asking the public what bits of government they wouldn’t mind losing.

(6) But with their Star Chamber idea, the coalition has not understood the next Canadian lesson, that you need a single minister in charge. Failure must be a career-breaker for that person – who will then make darn sure the strategy succeeds. With four ministers in charge, as the coalition proposes, the accountability is too diffused.

(7) The seventh lesson is that the approach needs to be led by a reform minister, not a finance minister. You want cabinet colleagues to buy in to a wholesale restructuring of the entire government – not defending their own empires against penny-pinching.

(8) The Star Chamber might at least uphold the eighth lesson from abroad, namely that you need to keep ministers focused on the reform objective. The Canadians used regular cabinet retreats at which ministers would be scored on their progress. The Star Chamber needs similar clout.

(9) The ninth lesson is that nothing is sacrosanct. This has to be a complete re-think of what and how government delivers. That lets everyone know you mean business. If you make exceptions, not only do you destroy the comprehensiveness of the exercise, but you also breed resentments from all those who haven’t been spared scrutiny. With its ring-fencing of foreign aid and the NHS – especially the latter, with its huge, Brown-inflated budget – the coalition have not learnt this lesson. Those pre-election promises will exact a high price.

(10) Tenth, like dieting, success depends not just on getting the weight off, but keeping it off. There’s no point in re-booting government if you then overload it with new programmes – creating some new quango to look at every problem that arises, or dreaming up new initiatives to capture each day’s headlines. And that, as anyone who has been on a diet or run a government will tell you, is the most difficult but important thing of all.