starchamber/

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

The scale and cost of Britain's budget deficit

These StarChamber pages are being kicked back into life over coming days with examination of the proposals from The TaxPayers' Alliance and the Institute of Directors for £50bn of cuts in public spending. Before that process begins, however, it is worth reminding ourselves why cuts are necessary. The TPA and IoD set out to do that in the introduction to their report. Their arguments are summarised below:

HOW BRITAIN'S DEFICIT EXPLODES IN SIZE DURING THE RECESSION...

1. The Treasury forecasts that net borrowing will peak at £175 billion, or 12.4 per cent of GDP, in 2009-10.
2. The European Commission predicts that borrowing will reach 13 per cent of GDP in 2009-10.  
3. The IMF forecasts that general government borrowing will reach 13.3 per cent of GDP in 2010.
4. The OECD expects the deficit to reach around 14 per cent of GDP in 2010.  

...BUT WILL PERSIST IN BETTER ECONOMIC TIMES

1. The Treasury expects the structural budget deficit (which excludes the fiscal stimulus as well as the higher welfare spending and lower tax revenues that are due to the recession) to peak at 9.8 per cent of GDP in 2009-10.  
2. The IMF predicts that the structural deficit will peak at 9.9 per cent of GDP in 2009.
3. The European Commission forecasts that it will be 11.6 per cent of GDP in 2009-10.

THE DEFICIT WILL STILL BE 5% OF GDP FOUR YEARS FROM NOW IF ECONOMIC GROWTH HITS 3.25%...

The Treasury forecasts that net borrowing in 2013-14 – four years from now – will still exceed 5 per cent of GDP, but this is based on an assumption that growth will return to 3.25 per cent in 2011-12 and will remain at that high level.

...SLOWER GROWTH WILL PRODUCE A MUCH LARGER DEFICIT

The IoD forecasts that, if growth recovers to 2.5 per cent (rather than the Government’s projection of 3.25 per cent) and the Government’s fiscal plans are followed, net borrowing will exceed 8 per cent of GDP in 2013-14.  If growth only recovers to 2 per cent, then following the Government’s fiscal plans will mean that net borrowing will still exceed 10 per cent of GDP in 2013-14.

Similarly, in a report for the TaxPayers’ Alliance, the Centre for Economics and Business Research found that under a more modest recovery scenario than predicted by the Treasury, the budget deficit will remain over £160 billion in 2013-14 and £140 billion in 2017-18.  

BRITAIN COULD BE PAYING £43 BILLION IN DEBT SERVICING NEXT YEAR... AND MORE IF INTEREST RATES RISE

The Treasury projects an increase in debt servicing costs from £27.2 billion this year to £42.9 billion in 2010-11.   Net borrowing of over £700 billion is forecast for the next five years,  which, at a yield of 4 per cent, would add £28 billion a year to debt servicing costs. 

Treasury forecasts, however, are based on relatively low interest rates on government debt.  They assume the Government can continue to borrow at the current average rate of 4.3 per cent.   But if a lack of credible promises to tighten fiscal policy causes the bond markets to lose confidence in the UK’s fiscal sustainability, the cost of government borrowing will shoot up.  The Institute for Fiscal Studies has calculated that just a one percentage point increase in the Government’s average interest rate by 2015-16 would raise the debt servicing burden by around one percent of GDP, or about £15 billion per annum.   As recently as the 1990s, the average interest rate was 7 per cent, nearly 3 percentage points higher than now. 

(14) Stopping government lobbying government

Proposed by ConservativeHome reader Mara MacSeoinin

The Conservative Party issued a research paper late last year that detailed how public money is spent by government agencies on external PR agencies in order to lobby government itself, often for more money. The paper details almost £10 million spent over a five year period. The Times took up the story here. The comment the Times got from Robbie MacDuff, chairman of the Association of Professional Political Consultants, is all too resonant of the current MP’s expenses scandal: “There is nothing illegal in this. It is part of the democratic process. All businesses and organisations - including public sector organisations - have a right to represent their views to government.” He would say that wouldn’t he?

Bodies spending more than £500K included the National Lottery Commission, Meat and Livestock Commission, Civil Aviation Authority, Crown Estate, Jobcentre Plus and the Health and Safety Executive. Lobbyists and their government customers cover up the true nature of their business with ambiguous terms such as "stakeholder relationship advice", "strengthening of relationships with key stakeholders", "policy tracking" and "strategic communications advice". In the US this type of activity is illegal. There is a ban on public bodies hiring lobbyists. The Byrd Amendment of 1996 prohibits the use of “federal contracts, grants, loans or monies to influence or attempt to influence, the executive or legislative branch”. We propose that the UK government applies such restrictions to itself.

Saving id: Government lobbying government
Area: Various departments
Total saving: £2 million per annum
Traffic light status: TBD

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Previous idea for saving: (13) Cut the cost of Westminster politics by £200m

(13) Cut the cost of Westminster politics by £200m

Proposed by Phil Taylor

Parliament, seeing itself as sovereign, is unwilling to submit itself to the kind of financial discipline that the Treasury applies to the rest of Government, but you can at least keep track of its finances here (House of Commons) and here (House of Lords).

We have heard a lot about MP’s expenses recently in terms of the detail with further revelations in this morning’s Telegraph. The total cost of MP’s expenses has risen from £94 million in 2000/1 to £159 million in 2007/8; a rise of 69%. Just last Sunday we heard of Baroness Uddin’s £100K claim for her empty flat in Maidstone. This part of the £122 million running cost of the House of Lords, again the 2007/8 number. This number is up 82% on 2000/1. In addition to these two bills the administration costs of Parliament were £228 million in 2007/8. In total Parliament cost £509 million in 2007/8 up 9% on the previous year and up 36% on 2000/1. Our law makers, 646 MPs and 738 Lords, cost us £370,000 each.

MP’s expenses are a matter for MPs and their reputations depend on how they tackle them. The Lords need to wean themselves off the gravy too. The wider issue for us as taxpayers is that Parliament’s spending is a joke. As any visitor to the lavish Parliamentary estate will attest there is ample scope to cut these budgets. Halving the number of members would be a good start. At the very least we should be able to take £200 million out of these budgets.

Saving id: Parliament
Area: Parliament
Total saving: £200 million
Traffic light status: TBD

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Previous idea for saving: (12) A fairer distribution of UK-wide public spending

(12) A fairer UK-wide distribution of public spending

The figures above are slightly out-of-date but not by much.  Should the inequality between the nations of the UK be reduced during this 'age of austerity' or should adjustment wait until times are easier again?  Or do you believe that the nature of the Union requires that the existing redistribution of resources from relatively more prosperous (southern) England continues?

On Radio 4's World Tonight yesterday evening Simon Jenkins, discussing devolution to Wales, said that it was in the interests of Wales for its government to start thinking in terms of where its next business will come from rather than its next subsidy.

The Conservatives will probably not want to touch this issue if they are elected.  They will probably win a good number of new seats in Wales but progress is likely to be pretty limited in Scotland.  David Cameron is a very committed Unionist but Boris Johnson has already signalled a concern that London is paying more than its fair share to the rest of the UK.  That might be the solution to this question; to take the Scottish-Welsh-English sting out of the discussion as much as possible and review the public spending relationship between all UK regions?

The target could be a modest £1bn of savings by the end of the next Parliament if the rest of the UK is brought a little more into line with South East England.

Saving id: UK-wide share of public spending
Total saving: £1bn pa within four years
Traffic light status: TBD

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Previous idea for saving: (11) Crossrail

(11) Delaying Crossrail

Today's Evening Standard reports that an incoming Conservative Government could yet postpone or cancel the Crossrail project if elected next year.

Work on Crossrail - which will link Maidenhead in Berkshire with East London and Essex - is not due to begin until the end of next year, so David Cameron could feasibly stop the project before much more is spent on it (already £254 million has been spent on feasibility and development work).

The lion's share of the £16 billion budget is due to be underwritten by Transport for London (£7.7 billion) and the Department for Transport (£5.6 billion), with far smaller amounts coming from Network Rail, the City Corporation and Canary Wharf Group.

The Standard reports confusion on the Tory position on the matter:

"Conservative sources today stressed that no schemes had been ruled out from any cost-cutting measures - but shadow transport secretary Theresa Villiers said there was no "current" review of Crossrail, sparking confusion over the Tory stance".

In addition, Boris Johnson, whilst supporting the scheme in principle, has reportedly clashed with the Government over a levy on London businesses to raise £3.5billion of the TfL funding of the project.

Saving id: Ending Crossrail
Total saving: c£13bn
Traffic light status: TBD

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Previous idea for saving: (10) Scrap Regional Development Agencies

The outrageous uses of British taxpayers' money in EU grants

According to this report published today by the TaxPayers' Alliance, less than half of Britain's £9 billion annual contribution to the European Union Budget comes back to the country in the form of EU grants.

And the report's author, Dr Lee Rotherham, has been rifling through the information for the latest year available, 2007, to identify the kinds of projects on which this money is used.

Here are just a few of the examples he has uncovered of where EU money is being distributed in Britain:

• Oxford University received a number of EU grants, one of which was towards its Explaining Religion programme (EXREL), which “seeks to understand both what is universal and cross-culturally variant in religious traditions as well as the cognitive mechanisms that undergird religious thinking and behaviour”. Value of grant: £1,369,677.
• Consilia  has been given considerable EU funds for "the Implementation of the Eures Information and Communications Strategy", which amounts to training in spin for EU officials. Value of grants: £458,565.
• The Centreprise Trust was part of a consortium awarded a grant to run a carnival "to enable European citizens to better access and understand the history and creativity of people of African descent, and will thus foster intercultural dialogue through enjoyment”. Value of grant: £136,678.
• A considerable number of organisations have been given money for promotional free gifts in
  connection with EU PR campaigns. These include pin badges, pencils, rubbers, T-shirts, clocks, mousemats, keyfobs, stickers, tote bags, rulers, USB memory sticks etc. Value of grants: Over £68,000.

Jonathan Isaby

Boris: "You can cut public spending if you really want to"

Speaking to ConservativeHome to mark his first anniversary as London's Mayor, Boris Johnson declared that "you can cut public spending if you really want to".  His office has provided us with a list of the economies he has made, totalling £180m:

• Cancellation of The Londoner newspaper.  Saving: £2.9m
• Cancellation of the ‘Beijing Bus’ - The previous administration committed Transport for London to spending £300,000 on this, of which £140,000 had already been spent.  The Mayor cancelled the project and stopped all further spending on it.  Saving: £160,000
• Closing down of GLA office in Venezuela and scaling down of other overseas offices.  Saving: £100,000
• Income from the hire of London’s Living Room has increased from £145k in 2007-08 to £167k in 2008-09- as a result of stopping policy of allowing preferred groups and organisations to use it for free.  Saving: £20,000
• Reduction in expenditure on GLA consultants - reduced from £4.7m in 2007-08 to £2.8m in 2008-09.  Saving: £1.9m
• 10 delegates attended party conferences in 2008-09, at a total cost (including attendance, advertising, stands, etc.) of £9,000, compared with 19 delegates in 2007-08 at a cost of £43,000.  Saving: £34,000
• Foreign travel costs for the Mayor’s office were reduced from £107,000 in 2007-08 to £30,000 in 2008-09, while the rest of the GLA reduced its costs from £102,000 to £28,000.  Saving: £151,000

Other, more substantial savings include:

• 20% reduction in the GLA’s Media and Marketing budget.  Saving: £700,000
• Restructuring of the Mayor’s office and reduction in stakeholder programmes.  Saving: £1.7m
• Organising for Delivery – aimed at ensuring that City Hall provides value for money (full year saving £3.5m).  Saving in 2009-10: £1.3,
• Securing cost savings in the police forensic service by negotiating better deals with suppliers and improving internal business processes.  Saving: £10.6m
• Reorganising administrative support functions to improve effectiveness and securing reductions in rents, ICT project and building maintenance costs at the Metropolitan Police.  Saving: £29m
• Streamlining administrative and project support at the Fire Brigade to improve value for money.  Saving: £4.2m
• Transport for London has begun a further major review of operating costs, focusing both on the control of overheads and further exploitation of efficiencies within its operations.  The review has focused explicitly on identifying opportunities to reduce or remove operating cost from the business, with items prioritised for the initial phase focusing primarily on back-office and non-operational expenditure areas.  The review has identified opportunities that could realise some £2.4bn net savings by 2017-18.   Saving in 2009-10: £62m
• The LDA has introduced a more streamlined staffing structure enabling it to release resources to support priority projects such as the Mayor’s Economic Recovery plan.  Saving: £6.6m.

Keep up the good work Boris.

"The NHS cannot be immune" from cuts

Those are not ConHome's words.  They are not from The Telegraph or Mail.  They are not from John Redwood's blog or from the TaxPayers' Alliance.  They are certainly not from David Cameron!  "The NHS cannot be immune" from cuts is the verdict of Niall Dickson of the King's Fund.  He writes in today's Independent:

"The NHS cannot be immune. There is an opportunity now to redesign it. Length of stay in hospital will have to be reduced to push down the cost per patient; day surgery can be increased. We need to do a lot more to stop people being admitted to hospital unnecessarily. They could be better treated in their communities, allowing a reduction in the number of beds. We have too many centres in London for stroke care. Politicians are nervous about anything that looks like closure of a hospital. But if it creates a more efficient service, we ought to get on and do it."

The Conservatives are currently pledged to safeguard NHS funding.

Andrew Haldenby of Reform has recommended a 10% cut in doctors' pay.  Most ConHome readers were unhappy at the suggestion but it would save £1bn pa.