Boris shows the way on spending cuts

Boris Johnson has cut 120 posts at City Hall today as part of restructuring plans.  The London Evening Standard reports that "The Mayor wants to save about £7.5million from an £80million budget by the cuts, many of them middle managers earning about £40,000."  That's 9.4%.  The Standard continues: "The main cuts are expected to be among administration staff. Short-term contracts will not be renewed."

I suspect that similar overstaffing exists across much of government.

The Standard also notes the new departments and their chiefs:

• "Resources, led by finance director Martin Clarke.
• External Affairs, headed by Guto Harri, director of communications.
• Communities and Intelligence which will receive policy advice from Kit Malthouse, deputy mayor for policing.
• Development and Environment, advised by Sir Simon Milton, deputy mayor for planning and policy."

Tim Montgomerie

Comments

[John Moss]

Across local government there are huge numbers of "Heads of..." who report to Assistant Directors who report to Directors. Below them, are the people who actually do the job.

There are very few "Heads of..." who cannot be lost with little impact on service delivery.

[Phyllis Crash]

I hope Danny Finklestein has seen this.

Savings can be achieved with sufficient will.

[ToryBlog.com - The usual health warning about me to keep the Editor happy :-)]

Boris for PM! :-)

[Comstock]

" The usual health warning about me"

I'm still not sure what we are being 'warned' about!

[Colin Smith, Bromley]

Respect !

[pp]

Fantastic for the country. An example for all Conservatives to follow.

This is obviously bad news for the individuals involved, but I hope they can rapidly establish themselves in the wealth creating private sector and make this a double win for the taxpayer.

[Malcolm Dunn]

I think people should sound a bit less jubilant. These redundancies whilst probably necessary are a tragedy for those inolved many of whom are probably hard working decent individuals.
We will see in the months to come whether their departure will impact on how well City Hall operates.

[Englandism.co.uk]

Can Boris do no wrong? What a week! First, seven days of St. George promised, 45p dissed and now proper in your face red-blooded sharing the burden of recession Conservatism.

Tooth and tail. Do the ratios. For every useful public 'servant' doing the business there is a wagging tail of administrative, purposeless, cartilage in need of docking.

If Boris is not PM within short order I shall eat a wyvern.

[A Reformed Labour Voter]

Well done Boris!

At last some positive news with regards the administration of our nation.

Now Mr Cameron, just win the election and do the same nationally and we might just stand a chance of saving ourselves...

[ToryBlog.com - The usual health warning about me to keep the Editor happy :-)]

comstock,
The Editor feels that just using 'toryblog.com' should not be allowed by me and would have banned me if I did not change it because I have not been a 'loyal' Tory.

I appear to be the only person with 'Tory' in their name to have been served such an ultimatum.

Anyway, name now changed, so move along, nothing to see here! :-)

[Ross Warren]

"I suspect that similar over-staffing exists across much of government." Of course we must feel for the 120. Boris shows us the way, we might as well be honest about the amount of overmanning that government under Labour has brought. This recession is only now starting to bite. We are caught with no savings and for many no income and yet we are seeing real inflation in our food pricing. The Bank of England is finally making some sense, now can we convince Brown that he should throw no more good money after the bad. Many people are having to cut back very hard by choice of their own.
So I would advise we quickly loose the note of triumph when we talk of Boris and he very first of the many cuts to come.

[YMT]

Apart from the odd verbal gaff, as we all know actions speak louder than words, and Boris tends to perform sublimely when it comes to his actions.

[Pete]

Talking about 'Showing the Way' have you seen Daniel Hanan's speech tearing Gordon to shreds in the European Parliament? A new star is born! (see it via Guido)

[Pete]

Sorry, that should have been 'Hannan'

[Pete]

Oops! Just seen it's here - doh!

[John Broughton]

From my experiences in local government (recent enough) the quantity of dead wood is immense and efficiency low to nonexistant.

We must cut but I do feel for those who will lose their jobs but there is no other choice.

[Freddy]

It would have been a lot better if the previous Labour regime hadn't let things get out of hand in the first place!

We need some mechanism to prevent the creation of unnecessary public sector jobs - there are far too many senior managers and too few operatives. We also need a mechanism to stop the absurd job titles and excessive salaries paid (for quite mundane jobs) to many public sector managers.

Everybody high or low seems to be some kind of manager and yet the management in public sector enterprises is often hopeless. They are always mugs for the latest managemnt theory, or management jargon, and they seem to think that attending endless meetings and drawing flow disgrams is some kind of substitute for effective problem solving.

What we need is some kind of public sector management school. We should insist that all candidates for middle or senior management jobs in the public sector, have graduated from this school. The syllabus would include IT,law, especially human resources law,construction, and transport managemnt to degree level.

A commission would regulate entry to all public sector jobs by competitive examination and interview.

[ToryBlog.com - The usual health warning about me to keep the Editor happy :-)]

So Cameron scrapes the next election, Osborne completely farks up, as expected, bringing Cameron down with him, and Boris decides to step aside as Mayor in 2012 to step in and stand for PM in an early election...

A pleasant thought. :-)

[John Broughton]

Freddy @ 20:03

(This admission could completely destroy any credibility I have) You are right about the term manager. But it is prevalent in the private sector too. Look at the Archers (OK BBC and politically correct) where Emma is manageress of the cafe but in reality is a waitress.

My personal take = if the money is right the title is irrelevant!

[Steve George]

Excellent, it's about time City Hall shed some of its bloated administrators earning high salaries but delivering very little.

When you are managing a budget built from taxpayers' money the cash should only be spent on staff that deliver value for money.

Boris is setting an excellent example to Conservative Councils.

[Anthony Scholefield]

Crikey,only two days ago our esteemed editor was recommending a 1 and 1/2 per cent cut in public spending.I countered with 25% mentioning the May committeee in 1931 wanted a minimum cutback on all governement salaries,benefits and pensions of 10% or more.
Now Boris has raied the bar to 12%-perfectly achievable and the sky has not fallen.
Long may the 'flint faced accountants ' be honoured in the halls of conservativehome.

[Anthony Scholefield]

Correction to my last post. I see Johnson has cut 9% of staff costs instead of 12%.
Whatever it is is an exceedingly large multiple of the figure being touted by the Tory Front Bench-thought to be really looking at increasing public spending-or even the 1 1/2 percent advocated in Conservative home.

[Steven]

Well done Boris!

[Freddy]

@John Broughton

If you want to reduce the cost I agree with you!

Every day, however, the newspapers and media are full of the consequences of poor public sector management.

I think that it is vital that the next Conservative government takes steps to improve the performance of all parts of the public sector.

I want public sector workers to have a good career structure where merit is rewarded, but failure is not. At the moment you would have to do something really serious to get the sack.

Root and branch reform is required.

[Will S]

Toryblog.com, apparently your domain name is for sale...

Not much point advertising it if the site doesn't have any content.

[Jill, London]

Whilst feeling desperately sorry for the people who are being made redundant – especially in today’s economic climate – it’s about time Boris acted like a version of St George [and thank you Boris for triggering a great Lefty howl over your seven-day St George’s Day celebrations!] and started slaying the jobs his predecessor Comrade Livingstone allowed to proliferate.

I cannot find the information quickly, but I think under Livingstone’s regime the amount of jobs at City Hall doubled – as did the cost to London taxpayers!

No wonder that Evening Standard article says: “Some staff suspected the cuts were a politically-motivated attempt to cut back on what one worker described as the "fun and games" of Ken Livingstone's administration. One woman who did not want to be named told the Standard today: "It appears as though they are just trying to get rid of the people who worked on Ken's pet projects on very good salaries.”

Considering a lot of Livingstone’s appointees were – to take a quote from the article – “politically-motivated” – no wonder Boris wishes to sever their employment. It is strange that the people involved are surprised. And, as I posted on a previous thread, it is quite wrong that Livingstone [or whoever is the London Mayor] was allowed to employee people – on such a political basis – with contracts beyond electoral terms.

Now what’s needed is for Boris – and his team – to visit every council in the country – and do the same. There are far too many people on the public sector payroll, and it’s about time the beleaguered tax payer get some tax cuts so we can spend OUR money as we wish.

[Terry]

To drive the point home, we need to emphasise in simple terms that it is completely wrong to waste public money. Repetition, repetition and repetition of a simple theme is needed to drive it into the public consciousness so that it gains acceptance.

[Richard Calhoun]

This is only the beginning, we are going to see unemployment breaching 3m +

The Tories better have some solid proposals to put to the electorate or they may get a shock come polling day in only around 14 months at most

[ToryBlog.com - Usual health warning about me to please the Editor :-)]

"Not much point advertising it if the site doesn't have any content."

LoL! Thanks for the advice Will S, but it is not for sale, that's a default page.

However, perhaps you could also explain your valuable wisdom to Rick Schwartz and Frank Schiling as they will be interested to know how they have survived without content... ;-)

[Tim Montgomerie]

Of course we have to sympathise with those losing their jobs but a sensible government will also know that the £40,000 salaries are being paid by families who, on average, earn a lot less and by many businesses who can't afford to properly pay their own essential workers. If Boris and City Hall can manage without these 120 workers then that frees resources for more meanigful employment for everyone.

[Richard]

This is great news. With the Conservative Party running most of our town halls we should see Boris's cost cutting measurers rolled out across the country and if we do not we should be asking why!

[ToryBlog.com - Usual health warning about me to please the Editor :-)]

And Boris has written an excellent pro Free-Trade article in the Telegraph today.

Boris is clearly the man to reshape Britain.

[Comstock]

"Boris is clearly the man to reshape Britain"

If Cameron loses narrowly in 2010, I wonder if Boris will run for Tory leader?

[pp]

Freddy | March 24, 2009 at 20:03

The problem with 'mechanisms' to prevent spurious jobs being created is that they will be 'rules'.

And once a public servant sees 'rules' they vacate all personal responsiblity and replace integrity with letter of the rule following.

We need people who can operate with integrity with out having to refer to 'rules'.

Regarding the ever expandig public sector - it is natrual 'shoaling' or 'flocking' mentality, the more of you there are, then then less likely it is you who will be picked off.

A nasty extension to this is that if you take on people more useless than yourself, then you know your job is safe until all the others have gone.

In the private sector the shareholders will insist on avoiding this kind of waste - in the public sector we have millions of 'appologists' insisting that nothing can ever be cut - or even suggesting that such waste is a good thing.

It takes a brave man (such as Boris) to get the job done.

Other more timid individuals might have aimed for a 1.5% reduction each year for the next 10 years...

[judyelliot]

Remember Parkinson's Law: 'Work expands to fill the time available'.

This insight is more than 50 years old now, but it has been in full play in the Mayor's departments for many years and is at last being unwound.

[resident leftie]

Boris has removed Ken appointees and shipped in his own people. On his past record, I wonder how many of them will last a month?

The most dangerous cuts are those to the team responsible for responding to bombs and other similar incidents.

[pp]

lefty

You think there are dangerous changes, Boris does not. The people of london specifically chose to trust Boris.

Now if Boris stepped down, and an unelected replacement was messing around, then you might have a point.

Isn't it funny that the left have become so 'conservative' in the face of change?

[Denis Cooper]

People commenting on this article express a certain amount of sympathy for those losing their jobs, and the hope that they'll quickly find new, more useful, jobs.

Some may, but in the present climate of rising unemployment, and restricted credit to businesses, it seems likely that most won't.

Just taking the headline numbers, Boris will save the state £7.5 million a year by cutting these 120 jobs. On a simple pro rata basis, the state would need to shed 2.9 million workers to eliminate the projected £180 billion budget deficit for the coming year.

However, that doesn't take into account the costs to the state of having 120 people added to the dole queue. £8000 per unemployed person per year, according to this:

http://www.bristol.ac.uk/efm/news/2009/32.html

but that's probably an underestimate even for the average person, and these 120 were mostly being paid well above the average, so the loss of direct tax revenue will be higher than average.

Let's say the cost to the state will be about £10,000 per head, probably an under-estimate, but that's £1.2 million to be taken off the headline £7.5 million.

Nor does it take into account that these 120 will lose a large chunk of their power to purchase goods and services - a loss of indirect tax revenue to the state, and a loss of business spread across many private sector companies. Set on one side the possibility that some will default on their mortgages, with effects on both their lenders and the housing market; let's just say that while they remain unemployed, between them they'll have to cut their annual personal expenditure by about £2 million.

That would be equivalent to the overheaded costs of employing something like 50 average workers, and so inevitably a certain number of private sector workers will also face losing their jobs because of that loss of consumer demand, resulting in further losses of tax revenue for the state and and of course a further drop in consumer demand.

Plus there's the (probably smaller) effect that with 120 fewer employees, City Hall will also be cutting its expenditure on goods and services.

So while deliberately avoiding over-statement, it could easily be the case that in the end the state will save only £6 million, not the headline £7.5 million, and for the loss of 130 jobs, not the headline 120.

In which case, elimination of the projected government budget deficit through this route would require the addition of 3.9 million workers to the dole queue, not 2.9 million, which added to the present 2 million, rising rapidly, would mean that total unemployment would peak above 6 million - ie above 20%.

Insofar as Boris "shows the way", he shows that:

a) It's relatively easy to find cost savings in the public sector; but

b) Those savings in state expenditure necessarily imply job losses both in the public and private sectors; and

c) Because the state is running such a huge deficit, the scale of the job losses required to balance the budget would also be huge; so

d) While superficially attractive, this is not a feasible route out of our present economic difficulties.

If City Hall was a private company, none of this would matter: it needs to save £7.5 million; this is how it will achieve that saving, by shedding 120 workers; and the company must take care of its own business, and not concern itself with the external effects of this action.

However the state is not in that position, because effects which would be "external" for a private compamy are internal for the state.

[Richard]

The size of the public sector must be reduced, not just slightly, but significantly. This will mean thousands of people loosing their jobs and yes for those involved it will be tough, many will however very quickly find work and within time all will be in work and we will all be better off as a result.

[Jamal Akhbar]

120 today: 800,000 additional public servants under Labour: to go. When can we get to vote?

[pp]

Denis Cooper | March 25, 2009 at 12:07

I think you should think it through more.

The £7.5 million no longer being wasted will remain with the taxpayers who originally earned it - so they can spend it on things to benefit themselves instead of seeing it wasted.

With an extra £7.5 million in the pockets of taxpayers, there is opportunity for the private sector to *earn* it from them by providing goods or services.

The 120 may end up on benefits (at a cost, but a much lower cost then employing them in make work schemes) or they may start creating new wealth in the private sector - generating other new jobs, generating new wealth, paying real taxes.

On another note, if those 120 are content on benefits (at £8,000 a year) then why on earth were they being paid £40,000 in the first place?

If public sector workers are prepared to take a 50% reduction in pay, instead of a 50% reduction in jobs then maybe there is room to negotiate.

While MPs (of whom there is no shortage of candidates) pretend not to recognise 'supply and demand' and contine to whinge that they need more money, the are clearly not the right people to be deciding these issues.

Go Boris! Hannan is looking on pretty good form too, telling Brown how it is regarding the 'squeezing of the productive sector'.

[Denis Cooper]

What you say might be true, pp, if the £7.5 million, or £6 million, was returned to taxpayers.

But it won't be - as Mervyn King pointed out yesterday, there is no room for tax cuts.

What is needed is the gradual redeployment of about 10% of the UK workforce from jobs which are directly or indirectly funded by the state, to jobs which don't depend on state funding, so the tax burden can be cut by about 10% of GDP.

But that can only be done when unemployment is low and falling, so that displaced workers are able to get new jobs in the private sector. Attempting it now would lead to their unemployment, rather than redeployment.

It's one thing for Boris to get some favourable publicity by shedding 120 jobs and saving a headline £7.5 million, it's another thing to adopt the same approach on a scale which would have an appreciable effect on the state finances.

[pp]

Denis

I think you are missing a basic point - either the taxpayer has the money and spends it on what he/she wants, or the taxman takes it and the government spends it on what they want.

Either way it ends up spent.

The only question is who decides where it is spent, and who benefits from the spending (which supplier gets the cash and who receives the goods).

Each taxpayer can choose what is best for them - some may need new shoes, some may need a holiday, some may need road-tax, some may need an MOT, some may need to pay their rent.

Or - the taxman can take it and pay 120 people to do nothing useful - but then the taxpayers don't get all those little things that their peculiar circumstances make necessary to them. Instead 120 people doing nothing useful get to spend it on things that suit them !!

Taxation is tolerated by the public as a necessary evil -- but taxing people when the money is not actually needed for the state to discharge its essential duties is just plain theft...

The

Denis

Mervyn King said no such thing, he said there was no room for further borrowing.

This £7.5 is not being 'borrowed', it is a genuine saving on boris's budget.

If it is not returned to the taxpayer, but instead spent on essential services the taxpayer has still been saved a £7.5 million rise in taxes - so either way the economies around the taxpayers are £7.5 million better off than they would have been otherwise.

Also if the £7.5million is spent elsewhere by Boris (instead of being returned) it will still be ending up in the pockets of people who can then go on to spend it.

If you just want to give money to people because you think it is a good thing - fine, as long as you but put me front of the queue.

In fact give me the whole £7.5 million - I'll happily promise to spend it all, local tradesmen will be delighted (not so sure about the taxpayers though).

I think you are still missing the point that taxation doesn't increase wealth

[pp]

oops - second half of the previous post was an earlier draft. Still valid, but not the main point I was choosing to make.

[Denis Cooper]

pp, Mervyn King was clear that there is no room for another "fiscal stimulus" - ie, tax cuts.

Otherwise I don't disagree with what you say, and I myself would like to see more money circulating entirely within the private sector, and less passing through the state coffers, so the tax burden was reduced to say 30% of GDP.

However now is not the time to do that.

I could use much more pessimistic assumptions to extrapolate from Boris's exercise.

For example:

These 120 are being paid more than the average, and if he wanted to achieve a headline saving of £7.5 million by sacking workers on average pay then he'd have to sack 180, not 120.

If their combined loss of purchasing power was still equivalent to the overheaded costs of employing 50 average workers elsewhere in the economy, then eventually 50 would indeed be sacked, not just 10 as assumed above - making a total of 230.

Then that the purchasing power lost with those 50 jobs would itself lead to another 10 jobs being lost, making 240 in total.

And that the annual costs to the state of having 240 average people unemployed at £8000 a head would be £1.9 million, not £1.2 million as above, and the headline saving would be cut back to about £5.3 million.

On those more pessimistic assumptions, the number of jobs lost for the state to save £1 billion, net, would be 45,000, and therefore the elimination of a £180 billion deficit by that route would increase unemployment by about 8 million.

Which on top of the present 2 million, would mean a total of 10 million unemployed, which would be about a third of the workforce.