Cutting spending is easy

To all those who say cutting public spending means tough choices and services “decimated” I say just two words: “MPs expenses” – and four more words “public sector fat cats” – and two more words “RBS losses”.

The government should require all MPs to cut their total expenses by 10% in 2009-10. It would not be that difficult, especially for those of my colleagues spending over the average. Indeed, why not ask the big spenders to cut by more? Then, armed with the modest moral authority that would bring, the government should demand a 10% cut in all the other administrative overheads of the public sector.

It should also tell RBS there will be no bonuses, and no salaries above a Cabinet Minister’s, until they are making profits.

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33 Comments

  1. Adrian Peirson
    Posted April 6, 2009 at 1:27 pm | Permalink

    Banning Socialism outright would cut a lot more, all these MP’s, Civil servants, Quangos are simply unnecesary maddle men, eating into the earnings of the country’s true earners.

    • THE ESSEX BOYS
      Posted April 7, 2009 at 12:05 pm | Permalink

      OINK OIK!

      BREAKING NEWS…

      The whereabouts of the former Royal Bank of Scotland chief executive Sir Fred Goodwin, the most wanted man in Britain – by hungry paparazzi, angry shareholders and disillusioned taxpayers – has been a mystery since he vanished from his Edinburgh home a month ago amid the furore over his £700,000-a-year pension. As one shareholder put it at a meeting last week, after Goodwin refused to give up any of his pension, which will now have to be met from the public purse: “He’s the biggest benefits scrounger in the country.”

      But his vanishing act may be short-lived: word reaches The First Post that Goodwin is holed up in Switzerland at the home on Lake Geneva of the former F1 racing champion, Sir Jackie Stewart.

      These digs would make sense: Stewart is paid £1 million a year to be a “global ambassador” for RBS, a nice little earner he was given by Sir Fred before his downfall. (He is one of a number of sports personalities including tennis player Andy Murray and the Queen’s horse-riding grand-daughter Zara Phillips to be taken on by Goodwin as part of a “sponsorship binge”, as it was later described by critics.)

  2. Denis Cooper
    Posted April 6, 2009 at 1:48 pm | Permalink

    But if MPs’ expenses were cut, that would hit all those who currently rely on their personal spending.

    For example, the purveyors of porn films.

    Then some spotty youth would be called in by the boss, and told that with the business doing so badly, what with the cuts in MPs’ expenses, sorry, son, but he’d have to go.

    And with loads of other people losing their jobs as well, he’d remain unemployed, and the government would be paying him benefits, and even if on balance that saved the government money it would mean that he’d have less to spend, hitting other businesses, and so on.

    The unpalatable truth is that about 40% of the money flows in the economy now pass through various state coffers, and it isn’t safe to suddenly throttle back the outflows even if the inflows from taxation start to dry up.

    In that case, additional sources must be tapped to restore the inflows – the obvious, and principle, source being to borrow from private investors.

    And if it looks like the inflows from private investors might start to dry up, the Bank of England must create new money, and pass it to them so that they can pass it on to the government, minus something for their trouble.

    It’s Scylla and Charybdis, and it’s wiser to steer closer to Scylla and pay a limited price, rather than having the whole ship sucked down into the deflationary whirlpool of Charybdis.

    I suspect that George Osborne would agree, if he was already Chancellor and he actually had to decide what to do now, under the immediate circumstances.

    • Adam Collyer
      Posted April 6, 2009 at 4:28 pm | Permalink

      Denis, if you take your argument to its logical conclusion, State spending would never be cut. Borrowing from private investors has to be paid back, with interest. “Printing” money simply causes inflation. This sort of short term thinking is what almost led to the demise of Britain in the 1970s.

      I agree with John. State spending needs to be cut urgently, and the urgency is becoming greater every day. And I’ve seen enough ridiculous waste in government to know that he is right about it being easy to cut. The argument from civil servants is always that cuts in spending means cuts in services. That’s ridiculus too – the public sector needs to learn the everyday reality from the private sector, that efficiency needs to continuously improve. Of course the public sector has no incentive to do that, because they can always take the easy way out, of taxing or borrowing.

      The truth is that much (not most, but much) of the public sector basically achieves nothing by their work. I’ve lost count of the number of times I’ve heard public “servants” on the radio telling us all how a “strategy has been put in place” and confusing that with action. Politicians – both central and local – need to stop trusting civil servants and start making them answer awkward questions.

      • Denis Cooper
        Posted April 6, 2009 at 8:54 pm | Permalink

        Not so, because for much of the economic cycle the statement:

        “And with loads of other people losing their jobs as well, he’d remain unemployed”

        would not be true.

        Cutting public expenditure is the right policy, but this is the wrong time; doing it now, on any significant scale, would risk economic meltdown.

        I freely admit that this is short term thinking, but then if we don’t survive the short term – the next couple of years – we may not be in a position to make any long term plans.

        • Adam Collyer
          Posted April 6, 2009 at 9:54 pm | Permalink

          I had to come back on this again. I don’t accept that having the State gobble up private sector resources is any help to the country surviving the next couple of years. The £150 billion of government borrowing this year is £150 billion taken OUT of the private sector. It leads directly to job losses in the private sector.

          Keeping State spending up right now simply means that private sector workers lose their jobs instead of public sector workers.

          Put it this way: in your example, to pay that MP his/ her allowance caused government borrowing to rise. That in turn meant that real market interest rates rose. The government tried to cut rates anyway. Result: a shortage of credit. So the purveyor of porn films couldn’t get any more finance and had to lay off the spotty youth anyway.

          Government borrowing does NOT create wealth, even in the short term.

        • Denis Cooper
          Posted April 7, 2009 at 1:11 pm | Permalink

          Adam, the State does indeed “gobble up private sector resources”, but it then excretes them, manuring the private sector and in that sense promoting its growth.

          It’s often the wrong kind of growth; but those who calculate the GDP statistic make no distinction between productive, unproductive and counter-productive activities – provided money changes hands, and the transaction is included in some statistical report, then it’s treated as a contribution to the overall economy.

          Some people have the wrong mental picture of the part played by the State in the UK economy, seeing it as a kind of black hole which sucks in money and destroys it, or perhaps rather more prosaically visualising civil servants extorting bundles of banknotes from taxpayers and then burning them in a furnace.

          That’s not the case at all. Apart from a relatively small fraction sent abroad, all of the money that flows into State coffers from the private sector flows out again, back into the private sector.

          Which is why it would be misleading to say that the State “consumes” about 40% of everything which is produced in the country, but correct to say that about 40% of the money flows in the economy now pass through the State coffers.

  3. Posted April 6, 2009 at 1:49 pm | Permalink

    Public sector fat cats is four words Mr Redwood, but other than that I agree with you. Will you need any help with the final tally or can the party manage to add beyond 4 on its own? – lol

  4. David H
    Posted April 6, 2009 at 2:12 pm | Permalink

    Mr Redwood, Very often your suggestions are so sensible, I wonder whether you are planning to cease being an MP in the near future. Although you do not represent me, I hope that will not be the case.

    Reply: No, I am not planning to step down and will be available should the electorate want me to carry on.

  5. Duyfken
    Posted April 6, 2009 at 2:47 pm | Permalink

    A very small start in the right direction: “… all MPs to cut their total expenses by 10% …”, but by no means far enough. With the continuing revelations of MPs’ venality, I doubt that the public will countenance anything other than a complete clean out of the stable – I certainly shan’t.

    • alan jutson
      Posted April 6, 2009 at 6:16 pm | Permalink

      Agreed.
      The sooner we get MP’s and any other Public funded figure, having exactly the same Inland Revenue Rules on what, and what is not allowed, with regard to allowances and expenses as the rest of us the better.
      There should be no special tax free allowances for MP’s.
      All PAYE Employees (as MP’s are) should be entitled/limited to the same benefits and penalties.
      If this then means we have to look again at the annual salary of Mp’s, then so be it.
      All MP’s staff should be paid and Employed direct by Parliament with a set scale/rate for the job.
      If friends and family want to apply, then apply along with everyone else to an advertisement for the vacant position.

  6. Posted April 6, 2009 at 2:49 pm | Permalink

    I think this is far too modest, John.

    We need to cut back on spending dramatically, for it has risen dramatically since 2001. If you cut spending back IN REAL TERMS to 2001 levels you will get room to end Income Tax, which will be the most equitable “stimulus” to the economy possible, for it takes nothing from any group while not giving to any group – you cannot “give” people their own money, only not take it!

    People spending their own money will almost certainly spend it more wisely than this Government can, and be best able to direct it to products and services they want, so ensuring that jobs created – and created they will be – shall be genuine, productive and long lasting.

    No income tax will make UK employment cheaper and more attractive to wealth creators. It will improve efficiency no end. Further, the very rich will not benefit, for they can out-fox the HMRC already. Ok, they will benefit, for they will not be paying Accountants, who will probably be the main losers.

  7. Susan
    Posted April 6, 2009 at 3:24 pm | Permalink

    You’re right; MPs have no moral authority at the moment and this is what has placed our country in the greatest danger since 1647.

  8. Posted April 6, 2009 at 3:35 pm | Permalink

    I fear your eight words are too many for the Government to comprehend. Currently, they only have a vocabulary of two. One is “more”, the other is “money”. The rest of what they have to say is simply an incoherent jumble of consonants and vowels.

  9. Nick
    Posted April 6, 2009 at 3:54 pm | Permalink

    It should also tell RBS there will be no bonuses, and no salaries above a Cabinet Minister’s, until they are making profits.

    —————-

    Last time I look, cabinet ministers were on a very good whack.

    Even MPs are on 3 times average income. Where does that put them in the list of richest people in the UK?

    Lets have a reverse auction. Top 10% of expense claimers have to stand for re-election every year.

    Nick

  10. Posted April 6, 2009 at 4:00 pm | Permalink

    Under this government there will be no tax cuts because the aim of socialism is to bring the “poor” up to the standard of everyone else.
    In order to do this, you have to teach them how to behave and live because, poor things, they do not know.
    This means that the State and all its experts has to be there for them.
    Hence the taxes which started off big and have swollen ever since.

    I think that accounts for the pure fury on Labour List that has erupted over Dan Hannan’s “attack” on the NHS over on Fox.
    They have stopped questioning. It is now dogma; Big State, big Taxes.

    Nevertheless, you are quite right: with a willingness to act, the State could be pruned back to where it ought to be, and spending and the economy could start to recover from ten years of borrowing.

    • Amanda
      Posted April 7, 2009 at 6:48 am | Permalink

      Of course Dan Hannan is also ‘Labour enemy no 1’ at the moment. He doesn’t play their game, he is everything they are not, and their green, slimy, socialist hate oozes out of every pore. Dan currently has had 2.1m views on yourtube from around the world, I wonder how sales of ‘The Plan’ are going?

      John, your site is excellent for it’s economic commentary – I recommend it to many people. But, maybe you too need to raise your ‘man of the people’ standard with a PR coup to get on the Labour-hate-list.

      Where has David Davis got to, by the way, in leading the fight to get our freedoms back?

      Reply: I will continue to provide hard htting commentary – would be happy if readers would spread the word so I can extend my reach.It does get quite a lot pf pick up in other media.

      • Posted April 7, 2009 at 8:20 am | Permalink

        David Davis is, to my mind, making the mistake of not blogging. But his website is good:
        http://www.theyworkforyou.com/

      • Rob
        Posted April 7, 2009 at 11:07 am | Permalink

        For what its worth, John, I always recommend your blog. It does do something to restore my faith in Tory vision and competence (as does Dan Hannan).

        And yes, David Davis should blog.

  11. Frustrated taxpayer
    Posted April 6, 2009 at 4:57 pm | Permalink

    What about banning changes to the Machinery of Government. Ed Balls is presiding over a disaster called the LSC, so he brings forward plans for 2 new agencies to replace the LSC and plans to devolve administration to the Regional Offices and local authorities. So presumably we are being asked to write off all the expensive investment in LSC office and IT systems, which will now be replicated in some form by the new agencies and an expansion of Regional Offices. No doubt all these bodies will decide that they need further investment in space, staff and yet more IT systems to cope with this increase in responsibility! And who is going to foot this bill for shuffling the chairs on the Titanic again – Oh the taxpayer of course.

  12. AndrewSouthLondon
    Posted April 6, 2009 at 5:12 pm | Permalink

    Well I can think of how to save a significant part of £3.2bn at a stroke, by removing the duplication of function between the BBC and the public relations office of the Labour Party

  13. THE ESSEX BOYS
    Posted April 6, 2009 at 5:49 pm | Permalink

    Yes, a good start!

    The MP expenses issue that we foresaw as crucial once the MoS latched onto Smith and then Mc Nulty is picking up pace and Cameron should go further and faster.
    Your proposal should be adopted by him. As we have said before, hopefully DC is reading this because his office has stopped even acknowledging constructive emails.

    Hoon’s financial cunning has been on the public record for years but is only now being publicised. It’s a disgrace.

    We read there’s one fewer Labour snout in the trough tonight as a result of the Boatengs losing office in South Africa.
    2 extracts made an impact today as follows:

    “While Boateng, 57, manages an army of 180 (YES ONE HUNDRED AND EIGHTY!…ESSEX BOYS EXCLAMATION MARK!) diplomatic and consular staff his wife, a social worker by training who became a social-services administrator, is in charge of running of the two official residences”

    “The Boatengs are having to give up a life of luxury: the residence in Cape Town has a stunning view of Table Mountain and boasts nine bedrooms, a swimming pool surrounded by landscaped gardens and floodlit tennis courts. When John Major visited Cape Town as Prime Minister in 1994, he is reported to have been staggered by the opulence: “I’ve learned a lot in a few hours. For example, that the British High Commissioner lives in unimaginable luxury. And we pay for it.” And that was before he visited the High Commissioner’s other home, an eight-bedroom mansion in Pretoria.”

    OINK OINK…but the Abbatoir is now calling for another former Blair favourite!

  14. SarahB
    Posted April 6, 2009 at 8:58 pm | Permalink

    Cutting MPs’ expenses by 10% would make such a paltry difference to the total amount of public expenditure as to be unnoticeable beyond numerous decimal points as a proportion of public spending.

    Why waste political will and effort on this when the current and future Government will have so many other pressing issue to focus on?

    Reply: So we can cut 10% from all the rest of the adminstrative overhead, which is a big number.

  15. DiscoveredJoys
    Posted April 6, 2009 at 9:01 pm | Permalink

    What we *don’t* need is any more ‘reviews’ or ‘focus groups’ or ‘inquiries’.

    What we *don’t* need is artful inactivity to avoid pain to ‘special interest groups’, whether they are bankers, business men, trade unions, or people on benefits.

    The cuts are going to hurt, so lets cut the soft and floppy bits which don’t add a great deal. Substantially reduce or cease the Quangos. Any necessary work they do could be moved to local government – who will have manpower capacity if they cease diversity officers and 5 a day coordinators, and large rafts of middle management. No senior manager in public service (or MPs) to have salaries more than 5 times the average wage. Ban all recruitment – retrain people into necessary jobs.

    But most of all *don’t* have a 5 year plan to do this – just give the tasks to hard bastards and tell them to get on with it.

  16. Ian Jones
    Posted April 6, 2009 at 9:46 pm | Permalink

    Good luck, Sir Humphrey will never allow it!!!! Unless you do a New Labour job and clear out the civil servants who dont agree……

    By the way there is no way a Govt can survive for long making cuts so the deficit will keep rising until we are bust. The excuse will be to compare us to “other countries” debt….

  17. Posted April 6, 2009 at 10:38 pm | Permalink

    I do not think that a 10% cut is the right way forward. It will hurt most those who have been frugal and spent wisely, whilst being easily achievable for the politicians on the make. Rather what is needed is a change in the mindest of politicians away from “complying with the rules” to being concerned with only claiming enough to live in a manner of the average income earner.

  18. Posted April 7, 2009 at 6:55 am | Permalink

    10% would at least set a good example – something which the Labour government seems not to understand.
    However, 80% of our legislation (or thereabouts) comes from Brussels/Strasbourg. That is why the green benches are usually empty, or the House of Commons is off on another holiday.
    Also, the whips hold such power of promotion that they cannot easily be disobeyed. (Secret voting would destroy this power).
    The voters have realised all this. We understand that MPs are not the decision makers any more. Instead, they are just people waiting for promotion and people who, very, very often are living off the hog’s back while we are getting more and more frightened of the future.
    I do hope the Conservatives realise that we know and are waiting to set a good example.

    • Denis Cooper
      Posted April 7, 2009 at 11:27 am | Permalink

      Secret voting would destroy the power of the whips, but it would also make it impossible for an MP’s constituents to know how their representative had voted.

      We’d be drifting back to the days when it was deemed unlawful to report debates in Parliament:

      http://www.historyhome.co.uk/c-eight/people/wilkes.htm

      “His argument was that MPs could hardly claim to represent the people if the people did not know what was going on in parliament. MPs said that Wilkes’ activities were a breach of parliamentary privilege … ”

      I believe that a more direct attack on the whipping system would be for Parliament to agree that some of the laws which apply outside Parliament will also apply inside Parliament, notwithstanding the protection of Parliamentary privilege enshrined in Article IX of the 1689 Bill of Rights.

      If anybody in the wider world behaved like the Parliamentary whips, they would probably end up in a criminal court or at least before an employment tribunal.

      • Posted April 8, 2009 at 8:36 am | Permalink

        You are the first person to understand the importance of trimming the party system down!
        Well done!

  19. Posted April 7, 2009 at 9:31 am | Permalink

    The things I would say are “windmill subsidies”, “public sector overmanning”, “quangos” (which iI admit is similar to fat cats), “small & over complicated subsidies”, & “decisions made for political rather than economic reasons”. In particular I incline to Digby Jones’ advice that it could run better with half as many civil servants.

    That would get us out of recession. To get into fast frowth all we need is to cut the refulations that bring the government share in the economy up to 75%.

  20. Posted April 7, 2009 at 11:35 am | Permalink

    I have posted an e-mail sent to the BBC (including the quoted odd cost of the EU at 55, 775 billion, perhaps it is a continental decimal) about yesterday’s radio broadcast where no mention of cuts in EU costs were apparently even mentioned.

    Can you clarify why you allowed this to pass and also advise whether you believe any EU cuts can only be negotiated among the 27?

    Reply: I want a renegotiation of the UK’s position as I think the EU spends and wastes too much. I have made this clear endless times.

  21. Rare Breed
    Posted April 7, 2009 at 12:55 pm | Permalink

    What about the contracts of employment in the banks?

    They should have just let them die.

  22. Adrian Peirson
    Posted April 8, 2009 at 4:49 am | Permalink

    I promise not to Bleat on and on and on about Printing our own money instead of Borrowing it.

    I’ll let Senator Ron Paul Do it instead, he’s much better at it than me anyway.

    We need to stop Borrowing and spending ( on credit ), we need to get back to work building things with which we can trade with other nations, then we can have the flat screen tv and the holidays abroad.

    There are no free lunches.

    http://www.youtube.com/user/campaignforliberty

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

    Promoted by David Edmonds on behalf of John Redwood both of 30 Rose Street Wokingham RG40 1XU

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