If charity begins at home, should cutting public spending begin abroad?

They say charity starts at home. In that case public spending cuts should start abroad.

The Uk does not just have a problem of overspending in the public sector. It also has a big balance of payments problem. The UK needs to buy too much expensive overseas currency to pay its bills abroad. This is helping drive the pound down, making us even worse off.

So if the public sector can cut its spending in foreign currencies, that provides a double help to the struggling economy. Fortunately, it should not be that difficult to do so, as some of the more wasteful or less desirable spending is the spending the government does abroad.

Here are some examples:

1. Withdraw the army from Germany, and house them in UK barrracks. Follow the suggestions on this site to allow soldiers to own their own married quarters whilst in barracks, and to sell them back at market values on leaving, using private finance. This will save large Euro based spending, allow disposal receipts of assets in Germany and provide extra private capital for much needed improved housing.

2.Cut the wasteful and often undesirable expenditure incurred by the EU. Much of the non agricultural spending is at best marginal and at worst undesirable. All EU states are wrestling with budget problems, and the EU itself says they should all cut their budget deficits to 3% of National Income. Shouldn’t the EU lead by example and slash its own spending to make that easier? That’s more hard currency cost for the UK. The government says it has influence in the EU – now’s the time to use it. Would Labour rather cut the NHS than the EU budget? If so, why?

3. Transfer spending on reconstruction and development in Afghanistan and Iraq to the Overseas Aid budget where it belongs, removing aid to richer countries from that budget whilst continuing to meet the international targets that both main parties have agreed. Overall betweent he Defence and Overseas Aid budgets there would be a cut, but the overseas aid budget would go up and be better targetted on need.

4. Pull the army out of Afghanistan as soon as possible. We should not commit ourselves to an intensification or prolongation of the war in a situation where the effort needs to be put into the politics rather than the fighting.

5. Review all the imports of goods and services within the public sector and hold competitions to see if domestic suppliers can provide a good alternative as contracts come up for renewal. Every transfer of a service or good from overseas to UK will help relieve pressure on the currency, and will help cut the benefits bill as more UK people go to work to service the state.

The UK has to earn its way out of this mess. It is importing too much, and that includes the public sector.

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34 Comments

  1. JohnOfEnfield
    Posted April 5, 2010 at 9:49 am | Permalink

    Very good John.

    My Dad served in the British army in the North West frontier between 1929 & 1938. He was adamant that no one has every successfully invade Afghanistan in modern times and that no one ever will whilst it remains an essentially tribal state. Such a state cannot support a national army or a national police force. The current allied approach is therefore doomed to inglorious failure.

    Import substitution is for the birds – and you know it. We should encourage free trade and concentrate on our comparative advantages. That is what makes us all richer.

    I am delighted at the reaction of the rest of the electorate to the proposal for the removal of the rise in NI. Brown needs to recognise that tax payers are sick of the oppression they feel.

    What amazes me is that Labour talk about "efficiency saving" reducing expenditure over the next few years. If the public sector is so inefficient why are these savings not being pursued right now, in this financial year.

  2. Posted April 5, 2010 at 9:57 am | Permalink

    "Withdraw the army from Germany, and house them in UK barrracks… This will save large Euro based spending"

    This is a genuine question, to which I would like to know the answer if you have it. There is an oft-repeated story that the German government pays the support costs of British troops stationed in Germany, under the terms of the founding treaty of West Germany in 1949. If true, it was presumably to get themselves a much larger armed force comparatively cheaply to guard against any potential Soviet aggression.

    Is this true, and does the arrangement continue? I can't find anything to support it, but it's oddly difficult to find evidence that disproves it outright.

    If it is true, I must admit I struggle to see how withdrawing troops from Germany will make any meaningful impact on either the defence budget or our euro reserves.

    reply: It's not true any more.

  3. Brian Tomkinson
    Posted April 5, 2010 at 10:21 am | Permalink

    I haven't heard one main political party say that the UK's contributions to the EU were "ring-fenced". Does that mean that they will be one of their "hard choices" when looking at ways of reducing excessive government spending whilst still adding to our enormous and burgeoning debt? Of course not, but the fact that they are cynically ignored shows just how the basic anti-democratic basis of the EU is spreading through our own democracy like a virulent cancer.

    • TerryP
      Posted April 6, 2010 at 1:51 pm | Permalink

      Withdraw the army from Germany? I’d love to know what they are doing there – and how it fits into the overall plan – then it must be up for debate? Ask the EU to reduce its spending – this is surely a no-brainer. Pull out of Afghanistan? I once read that the point of military interventions is to create a space for a political solution. We’ve only just got to a starters for ten on this aspect. Now isn’t the time to pull out but continuing to press the Afghan government to become self sufficient far more quickly is essential. Review imports to the public sector? Surely this just adds to the bureaucracy? Why not add another criterion in tenders that takes into account the additional benefits of UK sourcing – instead of food miles we could have public sector miles on the “wrapper”. The obvious quick cut is one that has been ring fenced – let’s just ditch the Trident replacement and save ourselves between £20 and £97bn depending which analysis you believe

  4. waramess
    Posted April 5, 2010 at 10:41 am | Permalink

    How about: pull out of Germany, pull out of EU, pull out of Afghanistan and pull out of Iraq.

    We have no business in being tied up in any of these places nor have our politicians any right to keep us there.

    In all instances we are there on false arguments and should depart

  5. LevelPlayingField
    Posted April 5, 2010 at 10:46 am | Permalink

    Good thinking, but none of these work IMVHO.

    I am sure we will wind down overseas defence commitments asap, but thats probably 20 years for Afghanistan.

    A Tory government would attack EU spending to the extent they are able, but may not be very successful, and now we have a French financial services regulator, we have to watch our step a bit.

    The last item is pure protectionism, and I would turn it on its head and say how much can we outsource our bloated, over-pensioned public services to cheaper places overseas.

    We only earn our way out of the mess by increasing productivity, by making as many or more things for less. That means cutting jobs from non-productive sectors and fixing the supply side, not a new idea to Tory thinking but not yet a palatable one for the electorate.

  6. Posted April 5, 2010 at 10:47 am | Permalink

    I can't understand why we provide aid to India which is apparently financially in a position to carry out space research.
    We should look seriously at all foreign aid and ensure, where ever possible, the money is spent on UK goods or services, and not on given as cash which can be hidden in the leaders' Swiss bank accounts.

    • Bangalored
      Posted April 6, 2010 at 3:08 pm | Permalink

      This is paticularly galling as so many of this country's highly experienced IT professionals have lost their jobs under 'globalization' to workers in India.

  7. Donna W
    Posted April 5, 2010 at 10:57 am | Permalink

    I think we should get out of the EU asap. But as Cameron has no intention of doing this, at the very least we should cut our contribution.

    The EU has failed to reform the CAP, which was the proposal when Blair agreed to give up our rebate. Under those circumstances, we should simply reduce our EU contribution to pre-renegotiation levels.

    We should also stop providing aid to countries like India which have the resources to develop their own space and nuclear technologies.

    We should stop sending 'armies' of Govt Ministers, Civil Servants, aides and special advisors to all the international junketts which Gordon is so fond of. They achieve very little – just grandstanding on the world stage.

  8. Jabez
    Posted April 5, 2010 at 11:13 am | Permalink

    We don't own the military estate in Germany: it is effectively on loan under the Status Of Forces Agreement. We pay for the running costs, but on withdrawal we simply hand the facilities back to the German government free of charge.

    It would cost more to shift the units to the UK and house them here than it does to keep them there. Frankly it's a good deal and one of the few benefits we have ever obtained from being one of the occupying powers, so I wouldn't be in a rush to give it up.

    reply: we do own substantial assets as part of the force in Germany.

  9. Stuart Fairney
    Posted April 5, 2010 at 11:20 am | Permalink

    I have to confess, I did not know we still had troops in Germany. It does however show the massive inertia which prolongs most of government way past its sell-by date. It also makes a compelling case for sunset clauses on all government spending.

    Of course we should withdraw the BAOR if we still call it that.

  10. Geoff not Hoon.
    Posted April 5, 2010 at 12:00 pm | Permalink

    Mr. Redwood,
    I doubt if anyone will disagree with anything you say here. However the BUT has to be how can we stop buying abroad when so much of what UK PLC buys is no longer made here. In the transport sector just as an example trains, buses (other than Stagecoach virtually building for themselves by buying Alexander from the receiver of Mayflower PLC)light commercial vehicles are all imported in the so called push for lowest cost. It seems to me simple economic fact will follow and we are slowly going to be taken to the cleaners by foreign manufacturers and then one day in the distant future we will again become a low wage, low cost economy with 'things' made here in abundance.
    I think the concern has to be how socially we deal with the transition from where we are to where you quite rightly want us to be.

  11. gac
    Posted April 5, 2010 at 1:05 pm | Permalink

    Borrowing to spend on overseas aid and unnecessary presence etc is a nonsense.

    But when we can afford it – fine, give to needy countries and projects generously, so long as it does not keep the 'governments' in luxury at the expense of their peoples. The lesson however is that you cannot, should not give away that which you do not have.

    This Brown flaunting on the World stage boasting that he can give away more than the others, thus saving the third world, has to stop.

    In fact the sooner we consign him to his home in Scotland to spend his time watching Raith Rovers the better for the rest of us!

    • Kenneth
      Posted April 6, 2010 at 5:57 pm | Permalink

      As a Scot, I can’t wait for Gordon Brown to be kicked out of Office.

      He is downright dangerous to Scotland because he is so sensitive at not having a UK mandate for Domestic Issues while the SNP are in charge of almost everything that happens domestically.

      If he got 5 more years he might try and get rid of Scottish Institutions to make himself seem more appealing to England.

      In my opinion, since Devolution, it is only really credible to have an English Prime Minister governing the UK.

      To get a massive majority all David Cameron now has to do it say English Votes for English Laws.

  12. Iain
    Posted April 5, 2010 at 1:07 pm | Permalink

    Why tinker around with which department spends aid money when it would be much simpler cutting the structural Aid budget completely.

    Politicians attach themselves to this policy to show they are touchy feely, which is a rather expensive way to make them look human, but in reality it doesn't even do that, for people see the aid budget as one big waste of money so despise politicians even more for wasting our tax.

    What evidence is there that structural aid as a policy works? For 50 years we have been implementing this policy, we, the West, have ploughed in some $2trillion, for that investment of time and money you might have expected to see some evidence of the success of the policy, it should be there within our grasp, but no, success is further way than ever, we are being implored to pour even greater amounts of money into the policy, that can hardly be called success.

  13. Doppelganger
    Posted April 5, 2010 at 1:56 pm | Permalink

    I agree with all the above.

  14. HJ
    Posted April 5, 2010 at 2:39 pm | Permalink

    John – It has long occurred to me that the cost of maintaining armed forces in Germany has resulted in us paying a large subsidy to the German economy.

    Can you enlighten us to the current cost of maintaining the army in Germany? I know that there are a few difficulties in bring all forces back (for example, we don't have suitable plains for tank training in the UK) but, in general, I'd rather that the money was spent here, not there.

  15. Posted April 5, 2010 at 2:49 pm | Permalink

    Good start, but there is a lot more to go.

  16. Posted April 5, 2010 at 2:53 pm | Permalink

    Mr Redwood, I believe that you have not considered all aspects in your main argument – cutting government imports (or transfer payments abroad) to save the pound from a slide. There are two aspects to this.
    First, the pound will be propped up in the next few years by foreign purchases of our debt. This will be a number of times greater than the outbound purchases of which you speak.
    Second, the Government already gets poor value for money for concentrating on UK suppliers. There are plenty of notorious examples in defence, for instance delivery years late, massive budget over-runs and failing to meet the initial specification. This is often on initial contracts with plenty of fat built in. Here the solution might be tighter procurement procedures to enable UK companies to compete better abroad.

    Perhaps the biggest risk we are facing is with the foreign purchase of our National Debt. The resulting high value of the pound would further erode the ability of our exporters to compete. Also, if the deficit is not brought under control we may not only have to pay higher interest rates, but issue debt in other currencies, to protect the lenders against any weakness in the pound. Then we will be like the emerging economies in the 1980s and 1990s.

  17. Lindsay McDougall
    Posted April 5, 2010 at 3:30 pm | Permalink

    1 Why do we have troops in Germany at all? In case anyone hasn't noticed, the Franco-German alliance is achieving its objectives by peaceful means via the EU. Spend the money on our Air Force and Navy to defend these islands and wreck the EU from the inside while there is still time.

    2 So are we going to veto the next EU budget and refuse to finance its expenditure, not only on inefficient agriculture but also on the new 'permanent' EU president and foreign minister?

    3 Which Overseas Aid benefits the recipients, never mind the donors? Were the vast amounts paid by Clair Short to KPMG (telling African nations how to govern themselves) during her time at DFID of any practical value? Private charities serve Africa much better.

    4 Agreed but we can't tolerate our reconstruction workers being attacked.

    5 Be careful how far you take this. Should we still buy British if an imported article or service is better value for money? I don't think so – the reason that we have floating exchange rates is to make this sort of decision easier.

    6 How about killing off the International Mischief Fund? It was designed to prop up the Bretton Woods accord on fixed exchange rates, which has now been abandoned. Nowadays, it just encourages debtor nations to carry on borrowing. Watch Dubai become its next client.

    7 UN and EU staff are grossly overpaid. How about identifying salary caps and overmanning?

    8 The World Bank Group now has a fund to insure private sector contractors wishing to carry out projects in dodgy countries (e.g. Ivory Coast, which postpones its presidential elections every year). Will that service make a profit? Don't fink so!

    So the answer to John Redwood's question is 'yes'.

    • Simon
      Posted April 6, 2010 at 1:44 pm | Permalink

      Surely the problem with item 5 is that the true cost of the trend of offshore oursourcing is not apparent until years even decades later .

      Offshore outsourcing has been made fashionable by management consultants to such an extent that boards are expected to do it even when there are no cost savings to be made .

      I don't see management consultants promoting inhousing or onshoring as the next silver bullet but it's not impossible .

      Indeed for intangibles like software which are more difficult to define than things like buildings , offshore outsourcing typically represents poor value for money even in the short term .

      • Lindsay McDougall
        Posted April 6, 2010 at 6:55 pm | Permalink

        The man next door to me runs a top Merc, his wife runs an SUV and his children have cars. He is a director of a company that gets bespoke software written on the Indian sub-continent. Thirty years ago I worked for a UK company that did something similar and in its best year sold 17 supermini turnkey systems. That sort of change can only be down to cost. People working in those countries can work for less because they don't have to finance social protection and they don't have a booze habit to support.

  18. alan jutson
    Posted April 5, 2010 at 3:53 pm | Permalink

    Seems like commonsense to spend money at home instead of abroad, unless the goods or services required are not available in the UK.

    I would look very closely at the overseas aid budget as well as I am sure not all of our money is being spent wisely.

    Very simple and personal view, but if you wanted some work done in your home, and you had a relative who was skilled in that trade and who had no work, would you use someone else, or use your relative. No brainer really as long as your relative was up to the job.

    Think we also have to look at how we handle Budgets for each Department, both Nationally and in Local Authorities.

    At the moment we have the silly situation where they all HAVE to spend their budget each year, otherwise it seems it is reduced the following year. Hence pavements and roads are resurfaced, new white lines appear like magic, new road signs etc, etc. March seems to be the spending month given a need or not.

    Time we rewarded thrift and money management in all areas.

  19. no one
    Posted April 5, 2010 at 3:57 pm | Permalink

    Re “removing aid to richer countries from that budget” absolutely, top of the list for cuts is the half billion quid a year we give to India, we have plenty of serious need for that money of our own

  20. Johnny Williams
    Posted April 5, 2010 at 4:03 pm | Permalink

    A full review of all Pubilc Expenditure must be essential. We have continued to allow this Sector to grow to twice as big as when Blair arrived at No 10 Downing Street in 1997.

    Big Government means less for the Private Sector and less “Pounds in our Pockets”. With the State spending over 50% of all Goods and Services now produced there is no chance of us exiting this Recession quickly following such policies of largese. I do not think however Military Personnel buying up thier married quarters will work as a policy.

    Town Hall staff and Civil Servants however, appear to be still in denial as to how their cosy lives are about to change for the worse. The next Government will have to move fast and hard to cut into these people’s gold plated pensions and other perks.

  21. Tony
    Posted April 5, 2010 at 4:04 pm | Permalink

    When I first saw the headline “If charity begins at home, should cutting public spending begin abroad?” I thought at last, a politician who wants to cut Overseas Aid. Alas no. Whereas I have no argument with the thrust of what is proposed I still remain unconvinced that giving money to other countries in the form of charitable gifts has any merit and indeed can be counter productive. Witness the millions given to India, in return she shows no loyalty towards us as it spends billions on arms and nuclear power with the Russians. We are universally despised throughout the world why do we feel a compulsion to improve the lives of others whilst our economy is in such a state?

    Reply: please re-read it – I say lets cut out aid to any country other than the very poor.

  22. Posted April 5, 2010 at 5:09 pm | Permalink

    The idea that by us giving vast amounts of money to India and China at a time when we do not have it makes no sense.

    Especially when both have a active space program and also develop nuclear weapons.

    we are in effect allowing their government off the hook on doing the right things for there own people.

    In these bad times ,spending money you do not have , in countries that can spend the on these things is the economics of the mad house.

    oh hang on we have Brown in charge, in that case it makes perfect sense:-)

  23. Mike Stallard
    Posted April 5, 2010 at 7:39 pm | Permalink

    It is a matter of will.
    Why should we pour money into the EU? You are right. But why should we pour money into Africa? Or China? Or India? Or keep the army in Germany? (The war ended some time ago as I recall).
    Why shouldn’t we make huge cuts in the public sector from the duvet merchants through to the quangocats and people who earn a lot more than the PM for ruining local government?
    I am just reading about (adjective left out) Harris who realised on assuming control of Bomber Command in 1942 that there were far too many people in Head Office. So he just reduced the whole thing by the stroke of a pen by 40%. Well, for a week his office was full of beggars in gold braid. Then they stopped. He also found that the number of unnecessary meetings fell dramatically too.
    It is all a matter of will.

  24. David Price
    Posted April 5, 2010 at 8:30 pm | Permalink

    In response to your headline question – absolutely and yes to all your points.

    We seem to have been far too generous with our direct and indirect aid in the past, time to reduce it to levels which match the respect we have been and are shown. Anyway, we can’t afford to be as generous until we have a zero deficit and have reduced the debt.

    With regards to item 5, I suggest assessment is based on true value to the economy. For example, an Indian programmer costs say 10K versus the the 30K or so of a UK programmer in part because the Indian company hasn’t funded any of the R&D, training, support and market making that the UK company has. Not only is our money being exported but also the education, skills and jobs we invested in over the years.

    Secondly, I suggest not following the apparently preferred HMG route of contracting to some big systems integrator for everything. The seem to have large CEO bonuses to support and typically outsource everything back out to India anyway.

  25. no one
    Posted April 5, 2010 at 9:48 pm | Permalink

    Re “Review all the imports of goods and services within the public sector and hold competitions to see if domestic suppliers can provide a good alternative as contracts come up for renewal. Every transfer of a service or good from overseas to UK will help relieve pressure on the currency, and will help cut the benefits bill as more UK people go to work to service the state.”

    start with outlawing use of Indian nationals in this country on intra company transfer visas

    move on to stop anything that risks moving data outside of the EC where protection applies, as was supposed to be imposed by the Data Protection Act, and especially stop NHS data going to India

    stop allowing our state funded intellectual property disappearing out of the country with the outsourcers that are nicking it

  26. Javelin
    Posted April 6, 2010 at 3:44 pm | Permalink

    John, but there has been too much charity at home. Money is given away to the weak too easily. The real charity cases are being robbed by scroungers.

    Here is some of the hidden damage at home by New labour

    1) Creating half a million of non-jobs in the UK public sector
    2) Signing ludicrious contracts as part of the Public Private Partnership
    3) Not promoting private business and small companies in the UK
    4) Burdening small business with red tape
    5) Burdening small business with taxes
    6) Seeing the destruction of the UK manufacturing base
    7) Allowing highly paid immigrants to take highly skilled jobs instead of graduates being promoted
    8) Allowing lowly paid immigrants to pay low taxes and burden the other tax payers
    9) Keeping interest rates too low and allowing house price inflation
    10) Paying the public sector more than the private sector
    11) Over a million young people on the dole
    12) Allowing millions to claim benefits when they could work
    13) Creating a culture of binge drinking
    14) A culture of child sexualisaton
    15) Allow knife culture to run amock in the UK
    16) Raising stealth taxes
    17) Not planning for future energy needs
    18) Destroying private pensions
    19) Promoting cultural relativism rather than morals
    20) Creating a spend today culture rather than a save for tomorrow culture
    21) handing out disability benefits to people who don't deserve it
    22) Treating the elderly like they had not paid any taxes

    The list goes ON, and ON ……

    Whilst I can see the part of the private sector that benefits from globalisation improving, I can see the vast majority of the country sinking under it's own weight.

    • no one
      Posted April 6, 2010 at 4:15 pm | Permalink

      they only way to stop the cycle of deprevation and dependance on the large welfare dependant estates is…

      radical improvement of the schools their kids go to, accepting that the parents have not been educated well enough to help their kids much

      there is no other way of doing it

      sadly the schools serving the worst council and housing association estates are still rubbish after years of promises that they would be sorted

      we need some compasion for genuine good folk doomed to cycles of deprevation by being born onto these estates, with no chance of a decent education

  27. Richard
    Posted April 6, 2010 at 11:32 pm | Permalink

    Point 5 made me spill my tea. I’ve been accused of all sorts of things for inferring the same: (including racism)

    “Review all the imports of goods and services within the public sector”

    I run a UK company that sells a niche IT product. Doing very well within private sector. We have almost given up trying to sell to Universities and Schools because they prefer to buy less-capable solutions from other countries, for more money!

    They prefer to help fund education (tax) in other countries, rather than their own. It baffles me every time.

  28. Richard
    Posted April 7, 2010 at 12:40 am | Permalink

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