We don’t need “Cuts”: we need commonsense and discipline in public spending

It is depressing that so many in the media are still following the Labour line that the choice is “investment” in public services or “cuts”. You woudl have thought that after the MPs expenses and the BBC salaries rows it would now be obvious to everyone that there are plenty of costs to squeeze out or down in the public sector without damaging services. The Today programme struggled with Mr Mandelson who intends to draw imaginary lines between a caring and brilliant Labour government printing as much as it takes, and Conservative policy based around his fiction of their proposals based on major cuts. Mr Mandelson did in fact tell us more housing spending would be paid for by cuts in Home Office and Transport budgets, but was not asked to elaborate or explain those cuts.

After 10 years of throwing huge sums of money at the public sector, and claiming this proves things are getting better, there are huge areas of waste, incompetence and over spending. Reading through the salaries of the BBC top executives, it is impossible to say that the top of the public sector understands the need for cost control, value for money or even still operates on the basis of “public service values”. What is true of the BBC is true of many quangos and Whitehall departments, of Town Halls and nationalised companies. The pay of the nationalised bankers is still based on the assumption that these are highly competitive businesses making good profits, with senior people at risk of losing their jobs. Instead they are now subsidised state employees. The pay of so called Chief Executives in local government is modelled on private sector CEOs who have to bring in the business and the revenue or else lose their posts, when Council CEOs just put the tax up and send people to prison if they don’t pay.

Labour should remind their overbloated public sector that it is meant to believe in public service values. They should ask all public sector employees earning more than the Prime Minister to take their pay down to his level of remuneration until they have got their organisations under financial control in a way which produces a realistic level of overall national budget defcit. They should all be set targets to make a quantum improvement in quality, efficiency and cash conservation. When was the public sector last asked to cut its stocks? When was it last given productivity targets that drove real progress?

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24 Comments

  1. Colin D.
    Posted June 29, 2009 at 6:58 am | Permalink

    In view of the incredible salaries now paid to many public sector employees, the Government should crack down on the bonus culture. If you are paid an outstanding salary then we expect outstanding results (or you’re out!). The totally unnecessary carrot of bonuses should be forbidden for the public sector except as Reward and Recognition to more junior staff and even there, 5 -10% of salary should be the maximum.

  2. Posted June 29, 2009 at 7:19 am | Permalink

    In an article on the Guardian website by Jacki Ashley on Brown’s strategy of attacking ‘Tory cuts’ as opposed to his own assurances that public spending will continue to rise under him, she makes the point that even the Labour party is split on this when she says:

    ‘The Blairite “quitters”, like the Tories and the Liberal Democrats, think this strategy is deluded and can’t possibly work. With the Bank of England and key international organisations all pointing to the disastrous state of the public finances, they say, voters know that cuts have to come whoever wins. It will therefore not be a straight fight, not between “Labour investment” and “Tory cuts” as Brown would like, but between lies and the truth.’

    The worry is however that apart from yourself, Andrew Lansley and others, the leadership seems to be using the soft pedal on this issue, which is presently allowing the Lib-Dems in general and Vince Cable in particular to make it their own.

  3. Richard
    Posted June 29, 2009 at 7:27 am | Permalink

    Exactly right. Lets hope George Osborne and other Conservative front benchers read this and use this kind of language. At the moment there is a danger Vince Cable (much the BBC’s favourite politician for economic issues) is going to lead this debate. Whilst he talks some sense he’s also wrong on much. I think your piece above has strong resonance (at last) with the public. Talking about ‘investment’ in public services is nonsense with the government borrowing £1 in every £4 it spends and with the level of public sector waste which is now (again, at last) apparent to everybody.

  4. NickW
    Posted June 29, 2009 at 7:31 am | Permalink

    The first step is to apply FOI to all publicly funded bodies. That would include all NHS and Foundation Hospitals, all quangos, all councils, the military, the BBC, the whole of the State Education system, and the whole of the civil service.

    The NHS should be given a target to comply with which sets management costs as a percentage of the total wage bill.

    There is only one single target which matters in the public sector and it is both simple and highly complex. You ask service users if they are happy with the service they have received. That is the only target which hospitals need, it is simple to collect and cannot be manipulated.

    Once the need for manipulating statistics is taken away from hospitals, whole swathes of management could go with it.

    Referenda, point of use information gathering, questionnaires sent out with council tax, they can all be used.

    I particularly like the washroom satisfaction monitor which allows the user to press buttons for Good, OK and Unacceptable, as they exit motorway washrooms. Put a few of those in hospital foyers and wait for the results.

  5. alan jutson
    Posted June 29, 2009 at 7:35 am | Permalink

    Thought Vince Cable made the sensible comments on The Andrew Marr show yesterday.

    “Let us have a grown up debate about it” when explaining that we cannot go on keep on spending money we have not got.

    Why is it that the Conservative front bench are not making more of Labours borrow and spend policy in a sensible way.

    David Cameron was better at Prime Ministers Question time last week because he could quote labour figures at Brown from an approved source. We need very much more of this, not only at Prime Ministers Questions, but whenever they get a sensible media chance.

    We need Facts.

    Yes of course the Public sector are wasting money left right and centre, most people are aware of it, but not of the huge scale of things.
    Let us have a list of costs.
    Let us see the actual figures for Pension deficit.

    The Conservatives at the moment are ahead in the polls by default, not by skill of argument.

    I feel a very frustrated tax payer, like many who are being treated just like a cash cows at the moment.

  6. Matt
    Posted June 29, 2009 at 7:56 am | Permalink

    The reason they are being called “cuts” is because that is what they are. The issue is whether that is a bad thing – in my opinion it isn’t. What I don’t want to see is the issue of cuts being hidden behind some clever use of language – a commonly used political tactic that fuels the mistrust of all politicians by the public.

    I don’t think your black and white view of public and private sector CEOs is fair. Many private CEOs have extraordinary renumeration packages (see Mr Goodwin and his ilk) and are protected from dismisall through complex compensation arrangements. They don’t expose themselves to much financial risk – just the companies they run and the employees of those companies. How do you determine the pay levels of senior management in the public sector – my understanding is that most are agreed by conservative councillors!!

  7. Brian Tomkinson
    Posted June 29, 2009 at 8:09 am | Permalink

    Mandelson effectively prevented any questions of details by droning on about the Conservative cuts. He did, however, announce that there is to be no comprehensive spending review until after the next election. Presumably the Speaker has no power to reprimand him for making such announcements to the press before parliament in the way he can with the Chancellor? The way this country’s economy is being put in such jeopardy by Brown and Mandelson brings into question their mental competence to perform their public duties properly.

  8. Robin
    Posted June 29, 2009 at 8:09 am | Permalink

    The public sector is a political body dependent on the private sector taxes.

    All public sector jobs are political appointments at the behest of the voters. Jobs can come and go depending on the political view of the public. There is a risk in public sector jobs that comes when you accept the position.

    Over 50% of the public sector is paid for by less than 10% of the private sector. When the private sector shrinks the public sector will shrink.

    • alan jutson
      Posted June 29, 2009 at 5:32 pm | Permalink

      Exactly.

      All Public Service people are funded by the wealth of those working in the Private Sector, from their taxes, from Corporation tax, and from VAT on the goods and services they provide.

      The sooner the Public Sector realise this the better.
      The sooner they realise that it is not sustainable the better.

  9. Posted June 29, 2009 at 8:21 am | Permalink

    We have got to reduce the amount we pour out into the welfare state and reduce it fast.
    We all know of scandals: people getting benefits who do not need them, swindlers who rip us off with their expenses, fat cats who just gobble up our taxes, the appalling sums given away in housing benefits (£15 billion a year) and the rewards given to the feckless.
    Meanwhile the State payroll grows like a thundercloud.
    Now we are at a critical moment. The amount handed out in State benefits will, by the end of the year at this rate of growth, actually exceed the government’s income tax.
    Already the Governor of the Bank of England and, yes, the Chancellor, are concerned about this.
    Mr Brown’s response has been to stick his head in the sand and insist there is no need to cut public expenditure. Mr Brown’s present course risks economic ruin: investors will doubt Britain’s ability to pay its debts, and stop buying Treasury bonds. That will cause a collapse of the currency – and rampant inflation will return to destroy what is left of the nation’s wealth.
    You think this is alarmist? I copied that last paragraph straight out of yesterday’s Telegraph leader.

  10. Waramess
    Posted June 29, 2009 at 8:36 am | Permalink

    True, you do need common sense and discipline in public spending but you will also have a mountain of debt to repay and that will require a bit more. These debts exist and they will not just melt away.

    The Government secretly hope that the refloating of the banks will save them from themselves but this is just not going to happen. More likely that interest rates will start climbing and the banks will find themselves in ever deeper trouble with a refloat not possible for decades.

    So where else can Brown see the possibility of such formidable growth wiping clean the debt? Try to wipe the slate clean with inflation and he will see interest rates climb and appetite for funding government debt disappear.

    This is a trick too far, even for crafty Gordon and one is to hope the Tories don’t fall for it.

    Certainly the pragmatic British public are in no mood for such silliness and the polls will show they are not quite as gullible as Brown imagines

  11. Denis Cooper
    Posted June 29, 2009 at 8:49 am | Permalink

    I think it’s time for the opposition to start asking a very simple, very blunt question every time the government moots some increase in spending:

    “Where are you going to get the money for that?”

    and then immediately follow that up with:

    “You’re already having to borrow a quarter of everything you spend; you’re already having to borrow a billion pounds every working day …”

  12. Robert K, Oxford
    Posted June 29, 2009 at 9:52 am | Permalink

    In the part of the private sector where I work, there is a very clear connection between pay and peformance. We get a basic salary and the firm’s profits are split between shareholders and employees. If the firms makes more money, whether due to employees’ efforts or buoyant market conditions, we get paid more. If we make less we get paid less.

    The relationship between employee and employer is one of mutually beneficial tension – we work hard to maximise income and they pay us as little as they can get away with, knowing that if they push to far we will quit. If we’re no good or the business fails we get sacked. It’s a tough but fair system that is highly motivational.

    I see none of this in the public sector, which is why talk of “investment vs. cuts” is so fallacious. Public sector spending can never be more efficient than in the private sector. Yes, by all means slash back the quangocracy and unnecessary regional governement. But the real solution is to cut public spending at every opportunity by asking a simple question: “Can Whitehall do this task better than individuals and enterprises working in exchange for a market rate of return?” If the answer is “no”, which in the vast majority of cases it will be, then the solution is either to scrap the activity or privatise it.

    By the way, why is Vince Cable so lionised? Apart from being able to point to some Hansard quotes saying that we have all borrowed too much and sticking a few good punches on Mr Brown, his ideas for reform come from the same old tax-and-spend hymn sheet that caused this mess in the first place.

    Finally, a nice little slogan caught my eye today: “Capitalism is what happens when you leave people alone.”

    • Lola
      Posted June 29, 2009 at 12:16 pm | Permalink

      It isn’t acrtually capitalism that happens when you leave people alone. Capitalism is a word invented by Marx for anti Communism.

      Capitalism as such doesn’t exist as a political or economic philosophy. It just is. It’s what you get when free people get on with dealing with each other in a civilised way with minimum state interference, the rule of law, the rights to enjoy private property, a sound currency, democarcy, a free press and goverment as umpire not player. Adam Smith’s invisible hand ensures that wealth creation then ensues.

      • Adrian Peirson
        Posted June 29, 2009 at 9:20 pm | Permalink

        I agree, we have not had True Capitalism in the West, if only because our banking sustem itself is not based on sound money but something that can be conjured up out of thin air to create debt and credit.

  13. Posted June 29, 2009 at 9:54 am | Permalink

    The media should never let politicians away with calling all government spending “investment”. The difference between investment & running costs is central to any discussion. With an investment you have more useful structure. for most purposes the term subsidy would fully cover running cost though it can also apply to investment which makes no economic sense thus we subsidise both the building & running of windmills.

    It is quite corrupt of the BBC not to make the distinction clear when it is brought up.

  14. Posted June 29, 2009 at 10:03 am | Permalink

    I believe the Tory Leadership are playing “catchee monkey”. Trouble is, every time MonkeyBrown is ccornered another unelected primate is chucked in the pen.

  15. Posted June 29, 2009 at 10:04 am | Permalink

    I’m stuttering like James Brown at PMQs! ccccornered!

  16. Acorn
    Posted June 29, 2009 at 11:26 am | Permalink

    “… we need commonsense and discipline in public spending”. Errrrrr, how exactly is that going to happen then? In the eternal triangle of Purchaser; Provider and Consumer of any service, public or private, there has to be a strong cost benefit relationship between the three.

    In the private sector, I have choices of providers, where I am the purchaser of a particular bag of goods or services. I may also be the consumer of those purchases or provide them to someone close to me. It is easy to see the results of my purchases. What I can’t be sure of is, have the prices I was offered been manipulated by a cartel, or hidden tax/duties. I make the choice, I decide if it is value and can I afford it.

    In the public sector it is impossible for me to see the relationship in the triangle. Often, I consume these state goods and services for free at the point of use. I pay for them (and usually someone else’s) by a mechanism of taxes quite remote from the transaction. I haven’t got a clue if I am getting value for money via the tax system. Or; if the purchaser and the provider have any interest whatsoever in my tax value for money. Particularly as the purchaser and the provider are basically one and the same entity.

    Over ninety percent of UK taxes are raised nationally, until we reduce that to a much lower proportion, that is, more raised by local government for spending on recognisable local goods; services and desires, (make them all unitary counties and limited companies with proper accounts), “we need commonsense and discipline in public spending”, ain’t going to happen.

    The power is where the money is. Let’s have national taxes for national government and local taxes for local government with all Quangos operating as de-facto local government departments, included as local government spending for now. We will sort out the bank accounts later. That’s if we decide we still need them. I think we will be amazed at the amount of unnecessary spending that will be flushed into the open, just going through the process.

  17. Simon D
    Posted June 29, 2009 at 12:07 pm | Permalink

    I agree. We need a new form a contract with public sector employees. As a nation we have far too many people in comfortable and extremely well-paid public sector employment who have become market leaders in spending other people’s money.

    A good test case will be Michael Jackson’s funeral. How many people will the BBC send to Los Angeles to cover it? Will there be enough five star hotels to accommodate them all? Will there be enough Club Class seats on transatlantic flights? Will it break the world record for the number of employees of a media organisation covering an international event? The BBC should produce a business plan for the Michael Jackson coverage and at the end of the event tell us the total number deployed, the total cost and the variation (plus or minus) against budget. Alternatively, if money was no object, they should tell us so.

    The over-paid public sector managerial class has been created by stealth and magic whilst a supine press failed to notice. It was simply not around when the Conservatives fell from power in 1997. Prudence has not been the name of the game in the public sector for the last 12 years.

  18. Freddy
    Posted June 29, 2009 at 1:10 pm | Permalink

    All public sector remuneration packages to be reported in terms of *total* cost – i.e., including all benefits.

    Most especially, any pension rights must be reported as salary equivalent to get the same pension benefit in the private sector.

    Then ensure that all remuneration packages above, say, £50k, for all public sector bodies, are published on the internet. Let us see what we are paying, so we can decide if it is worth it.

  19. David Logan
    Posted June 29, 2009 at 2:46 pm | Permalink

    407 BBC employees at Glastonbury. Where do you start? There will be difficult decisions on public spending but top slicing the licence fee for other public interest broadcasting and freezing or even cutting the fee will not be one of them.

    • A.T
      Posted July 1, 2009 at 12:01 pm | Permalink

      “407 BBC employees at Glastonbury. Where do you start?”

      That one’s easy. Sell off the Beeb. Sorted. Ends the “salami tax” licence fee as a bonus.

  20. Dr Dan H.
    Posted June 30, 2009 at 10:51 am | Permalink

    The point that wants hammering home as often as possible and as loudly as possible is that when anyone or anything borrows money, it eventually has to pay this money back, with interest on top. Also, over a certain level of borrowing the risk of default increases and the lenders become more reluctant to lend.

    The forthcoming cuts aren’t Tory cuts, they are Labour cuts caused by the Labour government spending more money than they had coming in, and borrowing to make up the shortfall. At some point the borrowing party will come to an end and the money will dry up.

    The cuts will happen whoever is in power; the only difference being that a putative Tory administration will likely wield the axe before being forced to do so by an inability to sell Government bonds.

    But above all, get this over to the public: the cuts are coming and voting Labour cannot magically suspend reality.

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    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.

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