starchamber/

(22) Abolish the £30 allowance for 16 to 19 year-olds in full time education

This suggestion comes from the TaxPayers' Alliance/ Institute of Directors report on saving £50 billion.  For a PDF of the full report (including footnotes for claims made below) click here.

Launched in 2004, the Education Maintenance Allowance (EMA) is a means-tested benefit paid to teenagers aged between 16 and 19 who stay in school or further education beyond the statutory age of 16.  It is worth up to £30 a week, is paid directly into teenagers’ bank accounts, and does not have to be spent on educational materials, or school or college transport etc.  It is designed to increase participation in education beyond the current school leaving age of 16. 

Savings id: Abolition of the Education Maintenance Allowance.
Department: DCSF
Annual saving: £530m

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Previous idea for saving: (21) A 10% reduction in the size of the civil service.

'Why cutting spending is preferable to raising taxes'

Over the last few days we have been featuring ideas for spending cuts from the TaxPayers' Alliance and Institute of Directors. Today in another extract from their joint report on reducing the size of the state by £50bn we republish their argument for cutting spending rather than increasing taxes.  For a PDF of the full report (including footnotes for claims made below) click here.

"The key element for debate is over the nature of the fiscal tightening.  This section sets out why we believe it should be comprised of spending cuts rather than tax rises, although taxes have already increased this month.

There is a wealth of academic evidence on the effects of taxes and spending on economic growth and deficit reduction, which points to three conclusions:

1.     Higher taxes reduce economic growth:

• Surveying OECD countries over the 1980-2000 period, the OECD concluded that a 1 percentage point increase in the tax/GDP ratio reduces output per capita by 0.3 per cent, or 0.6-0.7 per cent if the effect on investment is taken into account.
• A study of EU15 and OECD countries from 1970 to 2004 by the European Central Bank found that a 1 percentage point increase in the tax/GDP ratio reduces output by 0.12 percentage points for the OECD countries and 0.13 percentage points for the EU countries.

2.     Lower government spending, especially government consumption spending, increases economic growth:

• The 2008 European Central Bank study mentioned above also found that a 1 percentage point increase in the spending/GDP ratio reduces output by 0.12 percentage points for the OECD countries and 0.13 percentage points for the EU countries.
• Writing in Fiscal Studies in 2007, Mo found that a 1 percentage point increase in the share of government consumption in GDP reduces the equilibrium GDP growth rate by 0.216 percentage points, while the same increase in government investment raises the growth rate by 0.167 percentage points.

3.     Fiscal consolidations that are largely comprised of lower spending are more durable than those largely comprised of higher taxes:

• The IMF, in its latest Staff Report on the UK economy, stated that “evidence from OECD countries shows that although changes in revenue and expenditure contribute to closing the fiscal gap, expenditure restraint brings about longer lasting and larger adjustment episodes, which are more successful in achieving a debt stabilizing fiscal position.  Expenditure reduction demonstrates a firmer commitment to feasible and substantial consolidation, and may trigger lower interest rates and boost private demand.”
• The EU Commission has also confirmed this view, stating in a 2008 paper that “as regards the composition of successful fiscal consolidation, the EU experience confirms that cuts in current primary expenditure are more likely to produce a lasting effect than higher revenues or large cuts in government investment.”  The EU paper also points out that other factors such as fiscal governance and structural reforms are also key to the success of fiscal consolidation efforts.

(21) A 10% reduction in the size of the civil service

This suggestion comes from the TaxPayers' Alliance/ Institute of Directors report on saving £50 billion.  For a PDF of the full report (including footnotes for claims made below) click here.

"Civil service numbers during the first quarter of 2009 averaged 526,000. If we assume the staff from the quangos (see later in this section for our suggestions) have already been removed (to avoid any potential double counting of savings), then the total civil service workforce stands at around 515,000.  Assuming the annual gross pay of these civil service staff corresponds to the public sector mean of £23,943, the total annual wage cost is £12.3 billion.  A targeted ten per cent cut among this specific group of personnel by 2010-11 would deliver a saving of £1,233 million to the Exchequer. 

This estimated saving will almost certainly be a low estimate, as the saving does not include office and other employment costs nor any future gains accrued from reduced pension liabilities.  There may be an increase in unemployment benefits following this cut, although it would be possible to make a 10 per cent reduction in costs through reduced hours rather than lowering the headcount. 

Rationale

In recent years civil service numbers have dropped considerably.  From a peak of 569,000 in 2005, they fell to 523,000 by the end of 2008.  However this decrease follows an extraordinary rise between 1999 and 2005, when over 66,000 people joined the ranks of the civil service.  Moreover, in recent quarters the numbers have started to creep up once again.

The costs associated with these additional employees are significant, yet there is little if any evidence of an improved service.  Departing Government ministers have gone as far as to suggest the delivery of programmes and policy would be better served by a civil service half the size of the one currently in place.

We would not go this far, but just as we have suggested a targeted cut in ‘backroom’ staff in two key public services, a similar programme should be implemented in the core civil service.  Some particular areas should (and will be able to) accommodate staff reductions greater than 10 per cent, alleviating the pressure on harder pressed or better performing areas.  For example, while some of Defence Equipment and Support’s 25,000 staff have overseen a lamentable deterioration in defence procurement and provision, the work of Job Centres is increasingly important.  Headcount reductions should be applied across the Government surgically, not indiscriminately."

Savings id: A 10% reduction in the size of the civil service.
Department: Across Whitehall
Annual saving: £1,233m

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Previous idea for saving: (20) Halt further orders and upgrades for the Eurofighter.

(20) Halt further orders and upgrades for the Eurofighter

This suggestion comes from the TaxPayers' Alliance/ Institute of Directors report on saving £50 billion.  For a PDF of the full report (including footnotes for claims made below) click here.

This saving of £740m pa is based on the estimate produced by the think tank Reform, who made the same suggestion.  Reform found that the Eurofighter Tranche 3 and planned upgrades would cost a total of £8 billion over nine years, or £888 million annually.  We have reduced Reform’s annual savings figure to allow for the Government’s subsequent commitment to buy an additional 40 Eurofighters under the so-called Tranche 3a.  The remaining scope for savings comprises 48 further planes slated for Tranche 3b, plus the currently planned upgrade programme.

The Eurofighter was conceived during the Cold War to combat the Soviet air force.  It is wholly unsuited to the demands of current conflicts such as that in Afghanistan.  The US government is making similar decisions, with the Senate voting in July to cancel further orders for the F-22 fighter jet, which, like the Eurofighter, was designed in the late 1980s for cold-war operations. The UK already has 34 Eurofighter Typhoons in service, now with a further 40 on the way under Tranche 3a, and we cannot afford to buy 48 more and pay for further upgrades. 

Savings id: Halt further orders and upgrades for the Eurofighter.
Department: MoD
Annual saving: £740m

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Previous idea for saving: (19) Ed Balls' proposals for reductions in the number of education workers and consolidation of school leadership.

(19) Ed Balls' proposals for reductions in the number of education workers and consolidation of school leadership

This proposal is the first to come before the StarChamber that originates from Labour.  It is also probably the least defined.

Although The Sunday Times reported Ed Balls MP as offering £2bn of spending cuts it is not clear if the Schools Secretary's economies do actually add up to that figure but they certainly offer savings.

The BBC reports:

"[Balls] said he planned to make sure wage rises were kept low in the next three-year deal, starting in 2011.  He went on to stress there were no plans to cut the number of teachers and teaching assistants, but said reductions could be made to the number of bureaucrats and senior staff without the quality of teaching suffering. Mr Balls spoke of comprehensives merging to form federations, so a head teacher and a team of deputies would work across the different schools. He estimated this option could save the department about £500m a year.

He told the BBC's Politics Show that "pooling leadership together" in primary and secondary schools could free up resources to release back to the front line.  "If a third of schools did that, that would be getting us about a third of a billion pounds savings," he said.  Another £250m could be saved by losing about 3,000 senior school jobs, mainly through "natural wastage", he told the Sunday Times.  It was also likely that more than 300 jobs in Whitehall which involve advising schools about the curriculum could go, he added in the interview."

Savings id: Reductions in the number of education workers and consolidation of school leadership.
Department: DCSF
Annual saving: Up to £2bn.

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Previous idea for saving: (18) One year pay freeze across the public sector, excluding members of the armed forces serving in conflict zones.

(18) One year pay freeze across the public sector, excluding members of the armed forces serving in conflict zones

This suggestion comes from the TaxPayers' Alliance/ Institute of Directors report on saving £50 billion.  For a PDF of the full report (including footnotes for claims made below) click here.

"The pay freeze would run in 2010-11, and would then affect the baseline for future years.  The calculation is based on the 2008-09 (the latest year available) level of spending on public sector pay of £157,695 million  being frozen for one year rather than increasing at an annual rate of 4 per cent, which is the current rate of increase.   This would, in practice, mean that public sector employees would not move up pay bands during the year, in addition to not receiving any pay increases within their existing band.

To avoid double-counting, this figure has been reduced by 1.66 per cent to take account of the reductions in back-office staff that we suggest (see section 2.3).   The exemption in the pay freeze for members of the armed forces serving in or returning from conflict zones, such as Afghanistan, is morally the right thing to do, and will have a negligible effect on the overall saving.

Rationale

Since 2000, median gross hourly pay has increased by 40 per cent in the public sector, compared with 31 per cent in the private sector.  Median gross hourly pay is now 25 per cent higher in the public sector.  The public sector has now overtaken the private sector in the pay stakes for the vast majority of jobs – gross hourly pay is higher in the public sector for all but the top 10 per cent of employees.   Gross annual pay tells a similar story – median gross annual pay has increased by 37 per cent in the public sector since 2000, compared with 31 per cent in the private sector.

(17) Abandon plans to extend the compulsory school leaving age to 18

This suggestion comes from the TaxPayers' Alliance/ Institute of Directors report on saving £50 billion.  For a PDF of the full report (including footnotes for claims made below) click here.

"According to the Government’s own estimates, spending to raise the school leaving age begins with £226 million of one-off expenditure on training additional teachers and providing additional FE facilities.  We assume this is spread evenly over the years 2010-11 to 2014-15, implying an expenditure of £45 million per annum.  That is our estimate of near-term annual savings, although from 2013 onwards the savings increase from not having the additional pupils in school.  By 2016-17 they are running at £742 million per annum. 
 
Rationale: Many of the young people who do not stay on in school or training aged 16 and 17 will have already dropped out of education before they reach 16.  Indeed, “unauthorised absence” (truancy, in plain English) has increased steadily over the past decade, from 0.76 per cent of half days in 1996-97 to 1.01 per cent of half days in 2007-08 – this represents an increase in unauthorised absence of 39 per cent in 11 years.   In England alone, there are almost 1.2 million children overall, and over 650,000 in secondary schools, who miss at least 10 per cent of school days (whether through authorised or unauthorised absence).  

Low post-16 participation is a symptom of a deeper problem: the failure to ensure that young people master the basic skills early in their educational careers.  Almost 30 per cent of 11 year olds fail to achieve the expected standard for their age (Level 4) in both English and maths,  while, five years later, less than half achieve five or more A*-C grade GCSEs including English and maths.   The vast majority of those children who leave primary school lacking the necessary literacy and numeracy skills to make a success of the secondary curriculum will fail to get five or more good GCSEs at 16.  Those who fail to get five or more good GCSEs are in turn much less likely to continue in education and training in the post-compulsory years.   It would surely be better to focus on improving the quality of schooling, so that young people have the basic skills and the desire to carry on in school after 16. 

(16) Abolish Sure Start

This suggestion comes from the TaxPayers' Alliance/ Institute of Directors report on saving £50 billion.  For a PDF of the full report (including footnotes for claims made below) click here.

"Sure Start is the centrepiece of the Government’s plans to eradicate child poverty by 2020.  It aims to integrate a range of services, including childcare, health and early education.  Introduced in 1999, local Sure Start programmes have been set up in disadvantaged areas across the country, run (in the main) by local authorities.  The intent is admirable. 

But despite the massive costs of this approach, Sure Start is failing to deliver on its promises:

• Sure Start schemes have not appeared to be helping disadvantaged children do better in school and society.  Consistently poor SATs results reveal a distressing lack of change: two out of five of this year’s 11 year olds (a cohort who would have had at least some access to Sure Start schemes from age two) will go to secondary school this September without having reached a sufficient level of competency in all three core subjects.   Illiteracy and innumeracy remain a stubborn feature of Sure Start area primary schools (those with a high percentage of children on free school meals): in 2003 the percentage of pupils on free school meals achieving the expected Level 2 (or above) at Key Stage 1 was 69 per cent; in 2008, that figure had not changed, remaining at 69 per cent.
• In terms of the programme’s actual management, official reports have not been positive.  A National Audit Office assessment in 2006 found that neither Councils nor the centres themselves were aware of what activities cost, and were therefore unable to use resources cost-effectively.   The National Evaluation of Sure Start concluded that programmes provided by existing health services offered more benefits to disadvantaged children than Sure Start ones.
• The Joseph Rowntree Foundation has stated that the Government will fall short of its (Sure Start) target of cutting child poverty by 2010 by some 600,000 children, with 2.3 million still below the poverty line.   Some estimates are higher still.  End Child Poverty – a coalition of bodies including Barnardo’s, Unicef and the NSPCC – reported in 2008 that up to 5.5 million children in the UK were “struggling” on the brink of poverty.   The Joseph Rowntree Foundation also maintains that recessionary pressures do not have any bearing on this: government programmes to eradicate child poverty have simply not worked. 

Vince Cable would save £14bn with measures including public sector pay freeze

Liberal Democrat Treasury spokesman Vince Cable has today said the "time for generalities is over" and set out £14bn of spending cuts in a paper for the Reform think tank.

They are listed below:

• Overall freeze in public sector pay (saving £2.4 billion a year) including a 25% reduction in the total pay bill of staff earning over £100,000 and an end to bonuses for the civil service (saving £200 million a year).
• Tapering the family element of the tax credit – saving £1.35 billion.
• Higher pension contributions from public sector workers and later retirement ages.
• Scrapping major IT systems including the ID card scheme (£5 billion over 10 years), Contactpoint (£200 million over 5 years), the NHS IT scheme (£250 million over the next 5 years) and the proposed “super database” (£6 billion).
• Curbing “industrial policy” by scrapping Regional Development Agencies (£2.3 billion annually) and EGCD subsidies (£100 million annually) and reducing (by at least half) the Train to Gain and Skills Councils budgets (£990 million together a year).
• Scrapping Strategic Health Authorities (£200 million a year) and NHS tariff reform with a view to saving around £2 billion a year.
• Scrapping quangos, saving around £600 million a year.
• Scrapping the Eurofighter and Tranche 3 (£5 billion over 6 years), the A400M (total cost £22 billion), Nimrod MRA4, the Defence Training Review contract (£13 billion over 25 years) and the Trident submarine successor (£70 billion over 25 years).
• Public sector asset sales including some parts of the Highways Agency (land value of £80 billion) and intangibles such as spectrum, landing rights and emissions trading.

This builds on Mr Cable's earlier promises which included an end to 50% of young people going to university.

(15) Delaying restart of state pension upgrade

The Independent reports this morning that the Conservatives are considering a delay to the cross-party commitment to restore the link between the basic state pension and the rise in average earnings.

The restoration of the link is scheduled to start in 2012 but could be delayed until 2015.  The Independent suggests that the Conservatives, unlike Labour, will delay the change and will save £600m for every year of delay.

The full state pension is currently £95.25 a week for a single person and £152.30 a week for a couple. Nick Clegg famously said it was £30 in an interview with ITN.

• Saving id: Delaying restoration of link between the state pension and average earnings
• Area: DWP
• Total saving: £600 million per annum

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Previous idea for saving: (14) Stopping government lobbying government