Why do governments find controlling spending so difficult?

 

          Many governments have run out of road to borrow more money. Ireland, Greece, Portugal, and now Spain and Italy are having to rein in their deficits owing to the reluctance of the markets to lend  to them. France is undertaking pre-emptive cuts to avoid a run against her bonds. The USA is now into cuts and deficit reductions owing to political disagreements about how much more the US can safely borrow, against a backdrop of the downgrade of the US credit rating by one agency so far. The Uk is one quarter of the way through a five year programme of raising tax revenues to cut its deficit.

          All these governments have overspent substantially, or have inherited a situation where past governments have overspent massively. All seem to find it very difficult to control spending, to discipline their want list, to raise public sector productivity, to buy well and to motivate their workforces. None of them embark on their financial turnrounds in the energetic way a company determined to survive would do.

           In the UK there has been much talk of cuts. There have been some unpopular cuts, especially at local level, and some unpopular cuts are pencilled in for future years. Meanwhile total current spending continues overall to rise strongly, up 5.3% in cash terms and up in real terms in the first year of the turnround strategy. There are some curious features of the progress so far:

1. The civil service and quangos have continued recruiting to replace some of the people leaving. I am still trying to get up to date figures from departments, but it is clear they are not getting anything like full benefit from natural wastage and  from the redundancies they are making rather expensively.

2.The government still presses ahead with expensive new programmes like the payroll computerisation scheme. It is wedded to increases in spending in areas like the EU budget and overseas aid which means less to spend elsewhere. It is still fighting two wars in the Middle East, at some cost.

3. The government has not managed to get its two main banks where it owns subsatntial shareholdings into overall profit, and is subject to delay on much of its asset sales programme which could otherwise raise cash and cut future interest payments.

4. It has delayed raising the retirement age and altering the terms of a wide range of generous public sector pension schemes, delaying the time when these will all be more affordable for taxpayers.

5. Mr Cable’s student fee plan entails higher public borrowing in the early years to advance to the students.

6. The UK has borrowed extra money to advance to the IMF , and certain Euroland countries directly or via the EU.

           As revenues are likely to disappoint as a result of lower growth, the government needs to do all it can to control spending whilst not damaging core services and front line personnel, to keep downwards pressure on borrowing levels. Avoidable or nice to have items should be deferred.

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77 Comments

  1. norman
    Posted August 15, 2011 at 6:54 am | Permalink

    ‘a company determined to survive’

    This is why, in a nutshell. Politicians know that the company cannot really go bankrupt and the doors have to close, there are always wheezes to get around difficulties, whether it be printing money, raising taxes or simply telling investors to go fish.

    It’s ridiculous that national governments have to call in the IMF to sort things out when everything goes wrong and it’s not due to a lack of knowledge of what needs to be done so one can only assume that politicians, on the whole although there are exceptions, are incapable of making the tough decisions for whatever reason (fear of electorate, going native for an easy life, not really personal for them as it is for a business owner who’s built up his own company, comfortable directorships to fall back on regardless, bullet proof pensions removing fear of failure, etc.)

  2. Javelin
    Posted August 15, 2011 at 7:07 am | Permalink

    In a word “votes”.

    So politicians are acting irresponsibly. So we need to eliminate deficits. Keynesianism may have worked when the state was small and marginal spending was beneficial, but I would argue when state spending is above 33-40% of GDP then deficits will not provide growth.

    Make this law.

  3. Mick Anderson
    Posted August 15, 2011 at 7:08 am | Permalink

    7: Renewed commitment to the expensive vanity project that is HS2

  4. matthu
    Posted August 15, 2011 at 7:23 am | Permalink

    Why do governments find controlling spending so difficult?

    Too much self interest.

    Why is Cabinet Secretary Gus O’Donnell fighting so hard to disclose the scale of potential theft and fraud amongst those using the government procurement card?

    Too much self interest.

    Why have successive governments found it too difficult to control criminal activities in the media?

    Too much self interest.

    Why does the BBC consistently fail to challenge the government’s view on climate change?

    Too much self interest.

    Why have only 18 teachers in England ever been fired for incompetence over the whole of the last 40 years despite the ex-chief inspector of UK schools, Chris Woodhead, having estimated some 15,000 are not up to the job?

    Too much self interest.

    Why does the Conservative government oppose greater European integration while in opposition – and support it when in power?

    You guessed it.

    It’s really not difficult, is it?

    • APL
      Posted August 15, 2011 at 8:05 am | Permalink

      matthu: “Why is Cabinet Secretary Gus O’Donnell fighting so hard to disclose the scale of potential theft and fraud amongst those using the government procurement card?”

      To John Redwood

      It seems that on cards where spending does not exceed £1000 per month the account is simply settled without scrutinizing the transactions.

      What measures are taken to make sure the balance is recovered from the holder of the card?

      If none, to what extent should the Inland Revenue be interested in what on the face of it looks like untaxed benefit in kind?

      • Nick
        Posted August 15, 2011 at 8:49 am | Permalink

        Quite. It’s covering up fraud.

  5. lifelogic
    Posted August 15, 2011 at 7:30 am | Permalink

    Why do governments find controlling spending so difficult?

    Simple.

    Because it is not their money and almost no one in the state sector organisation really cares, one bit, how much is spent (or usually wasted). Indeed it is often spent on themselves so they rather like spending more on themselves.

    There are different types of money spending.

    Yours you spend on something for you.
    Yours you spend on something for someone else
    Some one else’s money you spend buying something you (perhaps) think might be good for someone else.

    The last (usually government spending) is surely at least 10 times less efficient than the first. Particularly as often the spend is directed at buying votes, propaganda or jobs for friends and contacts, or for some Green political fashion or similar and not even something the public really wants.

    It is for politicians to prevent this. Even the politicians who have tried have failed – time and again due to a total lack of determination or lack of a genuine wish to cut or the power of the state sector Labour funding trade unions.

    The first thing to do is get rid of the redundancy pay off (which are huge in the state sector) then fire half the state sector. It is quite possible to find 50% who do nothing useful or just inconvenience the private sector.

    Few would notice much difference if done well and I am sure they would all be happier if released to do something more useful with their lives.

    Also the main input to Ministers is from Civil Servants not from private industry or average working people so they get a hugely distorted view of what is best. Even if they start of with good intentions they end up swallowing the civil service line after a year or two.

    • lifelogic
      Posted August 15, 2011 at 7:44 am | Permalink

      There seems to be some talk of zero tolerance following the riots. I see we all ready have it in some big areas.

      £80 fines for doing 33 in a 30 mph area.
      £80 for going 30 seconds over your meter time because you child needed the loo. Or even not being close enough to the Kerb.
      £150 fines for straying one wheel into a totally empty bus lane.
      £200 – £1000 fines for late form submissions.

      Clearly in cash raising areas the state is rather good a zero tolerance. But if it is a shop lifter or a vandal – it is clearly a matter for private security – no real money for the state in that area.

      Best for the state to do nothing, a just give a ticket that will never be paid or just not bother to turn up for hours. After all the state is really a business run in the interests of the employees not a service for the tax paying public.

      • Mick Anderson
        Posted August 15, 2011 at 8:24 am | Permalink

        a shop lifter or a vandal – it is clearly a matter for private security – no real money for the state in that area

        I thought that shoplifting was now being dealt with by issuing tickets. So, there is money for the State, rather than justice for the victim.

  6. Ian Wragg
    Posted August 15, 2011 at 7:36 am | Permalink

    It’s other peoples money, stupid.

  7. stred
    Posted August 15, 2011 at 7:43 am | Permalink

    I heard recently that the Greeks are finding life very hard, as public service pensions have actually been cut. In Ireland public sector employees had to take large pay cuts, at least in academia, as the money was not there and salaries were higher than in the UK.

    Here real wages have gone down, while german real wages have risen. And taxes have risen. Meanwhile the public sector continues with generous final salary public pensions, bonuses for civil servants for self-set target fulfillment, retirement for police at 50 (as form filling is too strenuous), staggering public sector redudancy terms and re-employment, higher pay for LA professionals than equivalents in the private sector, use of expensive management consultants, wasteful computer systems, and PFI (hire purchase) for new schools.

    No wonder the government thinks that RBS management is meeting targets and deserves huge bonuses. Who is going to stop this looting when the looters are in charge?

    • Chris
      Posted August 15, 2011 at 8:32 am | Permalink

      I wouldnt say all public sector final salary pensions are “generous”. At the lower end of the pay- scale, workers get only one-eightieth (1/80) of their final pay, multiplied by the number of years they’ve done (at least that is what mine was based on twenty years ago). I know several private-sector companies who offer larger fractions such as 1/50 .
      Everyone continues to bash the public sector verbally, and yet there are many low-paid people in it.

  8. foundavoice
    Posted August 15, 2011 at 7:45 am | Permalink

    Q. “Why do governments find controlling spending so difficult?”

    A. Because they like to keep bribing us with our own money.

  9. Peter Campbell
    Posted August 15, 2011 at 7:59 am | Permalink

    A litany of failure. As your list highlights the coalition are not succeeding in any important areas. They have raised tax but raised spending more, they have managed to convince people there are cuts but there aren’t, they talk tough abroad but end up giving more of our money away, they wage unending wars to no benefit, they have increased education fees to steal yet more from the next generation. Cameron and Clegg are on course to lose the next election and put us back in the hands of the Labour party which will seal our fate. If the pound hasn’t been destroyed by then the next socialist chancellor will do it.

    • Mike Stallard
      Posted August 15, 2011 at 9:05 am | Permalink

      I thought they dealt with the riots really well.

    • APL
      Posted August 15, 2011 at 9:16 am | Permalink

      Peter Campbell: “they have managed to convince people there are cuts but there aren’t, ”

      This is interesting because it plays into the hands of the Unions who it seems can call their members out on the streets to oppose cuts that aren’t occurring.

      Does Cameron want to fail?

  10. Steve Cox
    Posted August 15, 2011 at 8:23 am | Permalink

    Looking ahead at the whole 5 year span of this Parliament, I would say that the wheels have already come off the Coalition train and it is bound to go off the tracks. The deficit reduction plan allowed for large public spending increases in the first two years, presumably as a Keynesian fop to try and stimulate economic growth while the private sector worked its export and investment magic and British business started booming once again. The real deficit reduction was planned to occur during the later years of this Parliament, presumably on the basis that the private sector had done its bit, the economy would now be growing at above-trend rate, tax revenues would be booming, and the economy could then weather real cuts in public spending much more easily than during the first two years. All of this was supported by the growth forecasts from the ‘independent’ OBR (in reality, of course, it’s about as independent as the Bank of England).

    Well, so far the private sector has refused to invest very much even on the back of a massively devalued currency. When there is much economic good news it usually comes from the services sector, which is generally much less sensitive to the value of Sterling than manufacturing. Unless something dramatic happens to the private sector in the next 10 months or so, the OBR’s forecasts will be about as much use as the Bank’s inflation forecasts, and the whole deficit reduction plan will have to be reworked so that there will, in fact, be no deficit reduction worth talking about during this Parliament. The Coalition will have failed abjectly in its stated primary objective. Given the parlous state of the European and American economies, and evidence of a slowdown in the BRIC’s as they try to tackle rampant inflation and overvalued currencies by applying fiscal squeezes of one form or another. Anyone can see that this is not exactly a global environment that will be conducive to our exporting industries expanding rapidly and saving the day. In fact, it seems clear to me already that the Coalition’s deficit reduction plan is doomed, and the Bank’s misguided efforts to stimulate industry by deliberately trashing our currency has completely failed and has only succeeded in importing high inflation which hurts the poorest members of society the most.

    I do not know what to do about this. Various commentators appear to think that rebalancing the global economy via a quick spurt of hyperinflation would provide an answer, but that is an immoral solution and one that would be impossible to control. Anybody silly enough to imagine that they can control the inflation genie once it has been let out of its bottle does not deserve to be listened to. As many people have said, the government is damned whatever it does, and perhaps it has privately admitted this and so is not making any real effort at deficit reduction because it knows that with 95% probability it will be forced to abandon it anyway in the coming year or so. A gloomy picture, I know, but that is how I see things.

    • cronshd
      Posted August 15, 2011 at 8:53 am | Permalink

      I agree with your first sentence. And that paints a sad picture of our future when the markets realise the real situation: the UK will be like Ireland on steroids.

  11. Mike Stallard
    Posted August 15, 2011 at 9:03 am | Permalink

    Good article (again!)
    Here is my own two penn’orth.

    First of all, money is no longer linked to gold. That means that you can go on printing it. That means that if you are in debt, need to reduce the welfare bill substantially without visible pain, you just keep printing and wait for inflation – which, of course, you detest, to do your work for you.

    Second, every politician loves to be patted on the back and admired. It goes down really well. That means that it is very hard for normal politicians to refuse people like lobbyists, like other ministers from other countries or for your friends in the civil Service to be refused when they ask in very reasonable tones for a lot of money.

    Finally it isn’t your money anyway and who cares what happens after you have been re elected?

  12. alan jutson
    Posted August 15, 2011 at 9:14 am | Permalink

    “Why do governments find controlling spending so difficult”

    Because there is no real control systems which have been set in place to follow.

    Because there is no real knowledge of how to control.

    Because there is a lack of ability to know what to put in place to control.

    Because no one has a real grip on the situation, and thus is not even aware of what is really being spent in the first place until it is published (after the event).

  13. Alex
    Posted August 15, 2011 at 9:15 am | Permalink

    Why is controlling spending so difficult? Because, at heart, this is a big-government government. There is a groundswell of opinion in this country against big government, excessive regulation, high taxes, a torrent of new laws and the nanny/bully state. This should be heaven for a conservative led coalition. However, while the coalition has paid lip service to correcting this, it has done nothing. Where is the deregulation? Where are the proposals to reverse the torrent of legislation under New Labour? We wanted the state rolled back. We got New Labour lite.

  14. Oldrightie
    Posted August 15, 2011 at 9:34 am | Permalink

    A collection of excellent replies. All respondents, including this one, are helpless. The grip on our lives by The EU and home grown bureaucracy is too entrenched and all powerful. Only a Cromwellian type figure can save us. I see no sign of such a “wunderkind”. Well, unless Mr Redwood changes his name!

  15. Robert Eve
    Posted August 15, 2011 at 9:45 am | Permalink

    I couldn’t agree more.

  16. Anthony Harrison
    Posted August 15, 2011 at 9:58 am | Permalink

    Because it’s not in their interest to do so, and they don’t care. Career politicians – or most of them – spend much of their time arguing about whether too much money is being spent, or not enough. If there was a simple commonsense consensus on good housekeeping, so that spending was controlled in the rational, prudent way most here would consider desirable, politicians would have far less to do. And much of their perceived status derives from how much money they shuffle around: announcing so many billions to be spent on rest homes for retired Spanish donkeys, or whatever, gets them column inches.
    It’s a corrupt setup, but so many of the electorate are either happy to go along with it (because they are net consumers of State largesse) or too stupid/apathetic to protest, that it looks set to continue for the forseeable – pace national bankruptcy, violent civil unrest, and so on.

  17. Matt
    Posted August 15, 2011 at 10:13 am | Permalink

    I’m disappointed in that I think the government should have made a bolder debt reduction plan.

    They seem to be losing on both fronts – spending has gone up, but all the media talk is of cuts.

    I suppose cutting government spending is very difficult as – you’ve often pointed out – people usually view public spending as good, there is no other side to the equation. Governments of all persuasions, perpetuate this myth, by borrowing more to sustain spending.

    Foreign aid – some of it to alleviate hunger fine – India though is due to launch another Moon shot and a Mars shot in the next couple of years.

    To level with the people is to invite electoral wrath – it’s like the NHS to sacred to be tampered with.

    I’m sure that Mr Cameron is holding out for growth kicking in later in this parliament and I hope he’s right, but if it does happen I don’t think it will be down to anything that the government is doing…unless we have a real “Go for growth budget” coming up.

  18. StronholdBarricades
    Posted August 15, 2011 at 10:24 am | Permalink

    In answer to the topic question posed:

    Maybe there are too many vested interests, and popularity contests.

    I look forward to the implementation of “Small is Beautiful”

  19. Richard
    Posted August 15, 2011 at 10:35 am | Permalink

    In a private company the business has to respond to the requirements of its customers better than any of its competitors, or it will fail, sooner or later.
    The Government do see us, the voters, as their customers, but we have limited powers, ie one vote every 4 or 5 years and we seem quite happy to be bribed with our own money.
    We have voted in the party who promised us the most goodies at nearly every election post war.

    Goverments also have two other flaws: staff empire build to secure their position and politicians have a natural deisre to be popular and to be seen as “doing something” and the easiest way to demonstrate this is by spending loads of money.

    An increasing number of people who vote, either do not pay any tax or work for the state or depend on Govenment spending for their personal survival, (and this applies to business owners too) and so will not vote for a party promising to spend less.
    If “no taxation without representation” is fair, then is “no representation without taxation” fair ? (my own little Prof Starkey moment!)

    I thing Western Goverments are quietly moving to a position where they will try to deflect the blame for running out of money onto the bankers.

    Reply: During the last election I attended a meeting where most of the questions invited me to promise more money for voters’ favourite causes, including causes I strongly believe in. Each time I answered that I could make no such promise as the state of the public accounts was very weak. I went on to outline the need for tough measures to curb the debts and deficit. I guessed the meeting was going badly, so I asked them a question – What do you want in an MP? To my pleasant surprise someone answered to general approbation they wanted “someone who would tell them the truth”.

    • lifelogic
      Posted August 15, 2011 at 12:01 pm | Permalink

      The may say that they want “someone who would tell them the truth” but they will often just vote for the mirage.

      Like a large woman asking “does this dress make me look fat” they do not really like to hear the truth.

      This explains the huge success of religion through out the ages and the green religion now. The believe what they would like to hear and believe in.

  20. John B
    Posted August 15, 2011 at 10:47 am | Permalink

    Why they find it difficult to control spending? Reasons?

    They have no need or incentive to do so.

    No experience or skill in management.

    There is no sanction for failure.

    If directors ran a company like Ministers run Government, they would go to gaol.

    Ministers are instead ‘punished’ with seven figure salaries on company boards, millions from lecture tours and tedious memoires.

    When anything is abundant, free and constantly replenished, it has no intrinsic value to the user and there is no motivation to conserve it.

    Tax receipts – then there is always borrowing – is guaranteed, the tax payer has no choice the markets will lend, the borrower pays no interest, the tax payer picks up the bill.

    Politicians see tax receipts as play money for them to indulge their ideological fantasies and meet their political needs and desires, not meet the needs and wishes of the tax payer.

    Mr Redwood you might like to conduct a small experiment in Westminster. Next time in the company ask Government ministers to define efficiency.

    I have bet myself One German Euro, none of them will actually know and their answers will be something like ‘getting things done’.

    • Caterpillar
      Posted August 15, 2011 at 7:26 pm | Permalink

      I totally agree with ‘no incentive’ and ‘no sanction’. I, again, would suggest:

      1. If country has more than 60% debt when heading into election then the votes cast for incumbent parties in office should be automatically cut by >10%.
      2. Public sector workers’ pay needs to be aligned with deficit. Public sector pay should go up if UK is in surplus but should go down if UK is in deficit.

  21. Nick
    Posted August 15, 2011 at 11:40 am | Permalink

    And what’s the first thing you need to do if you want to control something?

    Measure it. With no measure in place, you can’t control it.

    That’s why the debt issue is important. If the true extent of government debt is known, and people get told as individuals what their share is, the first part of control has been put in place.

    The second part is allowing the public to control the levers.

    You only need to control two out of three things. Debt, spending and taxation. In practice, all three need to be controlled.

    So once a year, a referenda on the level of borrowing the government is allowed to make, and a referenda on the level of taxation. Spending then has to conform.

    Tell the truth, let the electorate decide. Spending will follow.

    • alan jutson
      Posted August 15, 2011 at 3:04 pm | Permalink

      Nick

      Whilst I agree with many of your points, and certainly about the true level of debt being publicised. Something I have been encouraging for the last 2 years

      The fact is, that if you put restraint and repayment of debt to a referendum, most of those who live off of the state do not seem to care how, or where the money comes from, they would vote for all of the handouts to continue, thus Mr Brown has perminently bribed a huge percentage of the country to vote for the status quo.

      The fact that millions now rely upon tax credits, child benefit, housing benefit, and a huge range of other benefits, is symptom that the problem will be even more difficult to resolve by simple democratic means under the present voting system.

      We are in a huge mess and only the strongest of leadership and statesmanship will get us out of it.

      Do we have it ?

      • uanime5
        Posted August 16, 2011 at 4:24 pm | Permalink

        So many people rely on benefits because minimum wage is no longer a living wage. Minimum wage would have to rise to at least £8 per hour for the majority of people in work to come off benefits (more if they live in London due to high property prices).

        • alan jutson
          Posted August 17, 2011 at 5:06 pm | Permalink

          Agreed, the minimum wage in London is too little to live on if only one member of the family is employed. Problem is with the paying of tax credits you are subsidising a business and helping it continue in business when government subsidises (adds to) the wages.

          This in effect is a subsidy for that company who py low wages, against a competitor who pays higher wages, whos workers get no such government support.

          The solution, in part, make the personal tax allowance £15,000 so that everyone can have more of their own money to pay bills.

          Its a farce that people who earn he absolute minimum wage have to pay tax at all when benefits are taxfree !

          The higher the minimum wage the more people who will be used in the black market.

    • Mike Stallard
      Posted August 15, 2011 at 7:44 pm | Permalink

      …..or inflation will get us out of it.
      All the people who live off the State will fund prices rising slightly faster than their income. They won’t riot, because it will be a slow process. They will, of course, grumble. But who cares? They cannot go on strike after all! Meanwhile the bureaucrats will still be in post, so that is OK.

    • lifelogic
      Posted August 16, 2011 at 4:45 am | Permalink

      “let the electorate decide” this only happens when the electorate can be relied upon to give the answer politicians are seeking. Rather like the EU question.

  22. Denis Cooper
    Posted August 15, 2011 at 11:55 am | Permalink

    “Why do governments find controlling spending so difficult?”

    Because a large majority of the population believe that they benefit from government spending.

    And given the great inequalities in pre-tax incomes and accumulated wealth, on the face of it that large majority are actually correct in their assumption that they are net beneficiaries from government tax-and-spend policies.

    It’s only a small minority who are convinced that they would personally benefit if the government stopped redistributing resources from the better-off to the less well-off, and even some of that minority have got it wrong.

    Of course it can be argued that everyone would eventually be better off if taxation was lower and that stimulated economic growth, but that’s only a theory which doesn’t relate to people’s everyday lives.

    Indeed for many it seems to be merely theoretical that the government is still having to borrow nearly a quarter of all the money it’s spending, even if they’re aware of that fact.

    • lifelogic
      Posted August 16, 2011 at 4:59 am | Permalink

      “Because a large majority of the population believe that they benefit from government spending.”

      Indeed and the arms of government and the BBC do their best to hammer this, largely wrong, message home every day.

      At the same time a large majority think, correctly, that they suffer from high taxation. Despite that fact the much of the taxation like fuel duty, employers NI and high green energy prices is largely hidden from them anyway or taken at source.

      The key is to get across the message that paying high taxes, then having well over half wasted in admin, collection and distribution costs, and a small amount thrown back at you in the form of a doctors appointment, a biweekly rubbish collection, the odd library book and a pointless war or two is really not much of a good deal for the majority.

  23. Tedgo
    Posted August 15, 2011 at 12:02 pm | Permalink

    Nothing is changing because the civil services is resisting change. They do not wish to see themselves or their colleagues loose their jobs.

    The first thing Cameron should have done was to give Gus O’Donnell his P45. Gus enthusiastically got on with Blair Browns destructive labour policies. Its unrealistic to expect him to now enthusiastically reverse those policies.

    My view is when you have a change of government you also need a change in the top ranks of the civil services. Senior civil servants should have to apply or reapply for the top posts and attend interviews and other selection procedures. External people could also apply.

  24. English Pensioner
    Posted August 15, 2011 at 12:22 pm | Permalink

    Few of our MPs or even ministers have any real qualifications and the Civil Servants simply run circles around them.
    Simply ask the question, if they hadn’t entered politics, would any major public company take on our Prime Minister or Chancellor as the CEO or Finance Director of their company?
    And those who have qualifications seem to be in the wrong posts, for example Liam Fox is a qualified doctor, so he is put in charge of defence rather than the NHS where he at least would have some knowledge of what is being discussed. We have MPs with military experience, why not one of these at Defence. And indeed why not yourself somewhere in the treasury, at least you have experience in the field.

    That is why America generally manages better. The President appoints outside experts who know what they are doing and actually take charge of the appropriate departments keeping the permanent officials under control. Perhaps we should consider this approach.

    • Caterpillar
      Posted August 15, 2011 at 5:16 pm | Permalink

      MoD always seems to overspend, so why would you put someone from that background in charge of it?

  25. David John Wilson
    Posted August 15, 2011 at 1:15 pm | Permalink

    Why do civil servants fail to implement cuts that the government has required? As someone else said self-interest. I moved from private industry to a quago ten years before I retired. In addition to the waste and ineficiency which I encountered the one thing that hit me was my anual appraisal. In private industry this was an encounter in which my annual salary review and a small bonus were examined and negotiated in detail. In the quango I was presented with my manager’s view and asked to sign it. This proved an interesting exercise with some consequences which my manager had not predicted. After this stage of the appraisal I was presented with my salary review which was small based on me being rated as average.
    This was the point when I objected on the grounds that I had just signed an appraisal in which I had been deemed to have achieved all my objectives and over achieved in most. ( I was probably only just above average but I doubled my rise)
    The point is that unless all levels of management in the civil service are given objectives to achieve the required levels of savings and staff number reductions AND ARE THEN HELD TO ACCOUNT FOR MEETING THOSE OBJECTIVES, it is not in their self interest meet them.

  26. AndyC71
    Posted August 15, 2011 at 1:16 pm | Permalink

    I’m reminded of the Alexander Tytler quote (or misquote):

    “A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury.”

    Whoever said it and when, I fear there’s a lot of truth in that.

    There’s been a bit of talk online recently about fiat money and the folly of abandoning gold (in 1971, not 1931), which has allowed politicians everywhere to promise ever greater largess. It would be interesting to hear what you think about those arguments, Mr Redwood!

    Ultimately, I think government should be directly and meaningfully responsible to the taxpayers who fund its spending. No taxation without representation, and all that.

  27. Elliot Kane
    Posted August 15, 2011 at 1:24 pm | Permalink

    The nature of democracy encourages it, unfortunately.

    Every democratic govt wants to make as big and bright a show as it can, in order to convince the voters it is doing a good job. That means prestige events, large scale projects and throwing their weight around on the world stage in order to look ‘impressive’.

    All of this costs money, and raising taxes is horribly unpopular. Thus, borrowing, which leads in time to greater outlays, more debt, more need for money, etc.

    If govts could control their near-pathological need to be loved, control of the budgets would follow in pretty short order, I have no doubt.

  28. Derek Buxton
    Posted August 15, 2011 at 1:38 pm | Permalink

    “Why do governments not stop spending”? Because it is not their money!

  29. Mactheknife
    Posted August 15, 2011 at 2:51 pm | Permalink

    Whilst you focus on the continued spending and delays in implementing cuts and reforms, the government has introduced one of the most costly pieces of legislation in the Climate Change Act, which will effectively impose huge finacial burdens on families, businesses and the country as a whole. Why has this been allowed to happen? I have spoken to several Conservative MP’s and they are absolutely against this folly which is expected to cost the taxpayer £18 billion per year. Is this the price of keeping Clegg, Cable, Huhne etc on side?

    Reply: The Climate Change Act went through in the last Parliament, proposed by a Labour governemnt and supported by the official Conservative and Lib Dem oppositions. I did not myself vote for it.

    • Mactheknife
      Posted August 15, 2011 at 9:46 pm | Permalink

      @ reply..

      Reply: The Climate Change Act went through in the last Parliament, proposed by a Labour governemnt and supported by the official Conservative and Lib Dem oppositions. I did not myself vote for it

      I stand corrected Mr Redwood. However as you point out this legislation has been enthusiastically endorsed by the Prime Minister himself, which when he is calling for cuts and restraint in society as a whole is a bit hypocritical. Next up we have the Green Investment Bank (GIB). I have already let Sir Adrain have my views on this on his BIS Blog – slush fund for non viable “green” projects i.e. Wind Turbines. We are already seeing family fuel bills rise drastically as the energy companies pass on the cost of these inefficient follies on to the public. I have written to the PM and received a reply from Gregory Barker (Minister at DECC) which quite frankly is laughable and so scientifically wrong I dont know where to begin. I voted Conservative after being a lifelong labour voter because of this “green” nonsense in the vain hope that some common sense and scientific rigor would prevail, but alas not. I can only hope that those Conservative MP’s who I have spoken to at least try to do something to rectify the situation, otherwise it will be ever more public money wasted.

      • lifelogic
        Posted August 16, 2011 at 5:09 am | Permalink

        As an physicist/engineer I am fully convinced the green agenda on energy and the house bling subsidies are completely absurd. Even if you accept the highly questionable and endlessly BBC claimed “proven science” of global warming (non in fact since 1998 the record show).

        These “solutions” do not even work on that CO2 basis as can clearly be shown. Even if they did work they just export the C02 emissions and the jobs with them anyway.

      • oldtimer
        Posted August 16, 2011 at 8:58 am | Permalink

        The Coalition has nailed its clolours to the Climate Change Act via the Carbon Plan. Taken together these must be the most economically and scientifically illiterate measures ever passed by Parliament. They do not work or save the carbon its advocates say they desire. Nor has science established that these measures are relevant to the larger problem they claim threatens us all, namely man-made CO2 causing climate change. Even the Met Office admits it hasn`t got a clue whether the totality of CO2 actually is relevant to climate change (let alone the man-made component). It is all based on a just in case theory pushed by Friends of the Earth and Greenpeace.

        The Climate Change Act should be repealed. The question is this. Who among MPs will have the gumption to initiate this? It will have to be a backbench MP ready to stick his or her head above the parapet.

        Reply: There are climate change critics in the Commons, but the climate change believers are in the strogn majority, so the Act is not about to be repealed.

    • Geoff MM
      Posted August 15, 2011 at 10:10 pm | Permalink

      JR,

      What is the proceedure to repeal an Act

      Reply: Same as for passing an Act – with a Repeal Bill.

      • Geoff MM
        Posted August 15, 2011 at 10:36 pm | Permalink

        Great John lets do it!!!!

  30. Jer
    Posted August 15, 2011 at 3:36 pm | Permalink

    “Why do governments find controlling spending so difficult”

    Because someone is willing to lend them money, so they don’t have to.
    Of course in the long term it damages to economy, but in the long term someone else will have been elected…

  31. matthu
    Posted August 15, 2011 at 7:01 pm | Permalink

    Why do governments find controlling spending so difficult?

    One other reason is that both governments and the EU assume that tax revenues will come in, and plan expenditure accordingly.

    Then we read e.g. about a five billion Euro tax fraud:

    * In an activity which peaked in May 2009, traders bought carbon emissions permits in one country and sold them in another, charging for and then keeping the value-added tax (VAT) which they should have handed to tax authorities

    * The total value of the fraud was at least 5 billion euros ($7.1 bln) in lost tax receipts, according to Europol

    Now the Eu is 5 billion Euros short. What to do? You guessed it: raise additional taxes from the member governments which mostly get waved through (because the EU is doing such sterling work).

    So after so much effort goes into devising politically acceptable ways of reducing government expenditure, we then allow the Eu to overspend? And how much scrutiny did we give the the Eu budget?

    Why do we allow them to continue to operate year after year without audited expenses?

    Time to smell the coffee, Mr Cameron.

  32. wab
    Posted August 15, 2011 at 8:17 pm | Permalink

    “Why do governments find controlling spending so difficult?”

    As others have pointed out, the main problem is that governments are spending other people’s money. And many of the services that government provides are popular, and the bureaucrats are clever enough to cut those first, when the budget is restricted, so that there is a public outcry.

    But the media also plays a big role. If the NHS has to ration health care (and it does) then the media (aided and abetted by big pharma) will find a relative to cry on national TV when their husband/wife cannot get a hugely expensive miracle cancer drug, and suddenly the government will find reasons to throw money at the problem. Cameron has shown over and over again that he is susceptible to this kind of media pressure. (He really is Blair Mark II.)

    If you listen to Radio 4, in particular Today, there are endless requests for more money to be spent on X,Y,Z. None (or very few) of the reporters ever asks whether or how this money can be found (the implicit assumption being higher tax). It would be interesting to see how big the UK budget would be if every special interest pressure group that appeared on Radio 4 got its way with funding.

    (It is not just Radio 4. Most national newspapers are no better, the Guardian being the obvious example.)

  33. matthu
    Posted August 15, 2011 at 8:45 pm | Permalink
    • rose
      Posted August 15, 2011 at 10:41 pm | Permalink

      It seems the politicians have got it here at last: the concerted media fightback against the fightback which we are witnessing at the moment, tells us that the left is really scared the PM may now be leading a movement that will put them out of power for a very long time.

  34. Julian
    Posted August 15, 2011 at 9:30 pm | Permalink

    Just a suggestion:
    1. List all items of public spending.
    2. Put the list in priority order.
    3. Determine total annual budget.
    4. Assign budget to list until money has run out.

  35. electro-kevin
    Posted August 15, 2011 at 9:57 pm | Permalink

    “Why do governments find controlling spending so difficult ?”

    They’ll set up a department to look into a particular problem. That department will declare the problem “complex” – curing the problem becomes self-defeating for the department so the problem gets worse and the department requires more money.

    For example great swathes of our criminal justice system could be cut back if the incredibly simple and cheap birch were brought back. Ditto the education system could become vastly more improved with rows of desks facing forward, the tried and tested methods of learning by rote – all backed up with the cane.

    Virtually cost free. Massively effective. And all far less cruel than doping kids with Ritalin and denying them the ability to read and write.

    But government doesn’t seem to like ideas such as this – I suspect it’s because it would mean we’d need a lot less government.

    • A David H
      Posted August 15, 2011 at 11:38 pm | Permalink

      Yes, the stocks were a good idea too. A couple of weeks locked into a modified railway sleeper on the village green would be massively cheaper than prison. Reoffending rates would possibly fall as well.

    • electro-kevin
      Posted August 16, 2011 at 6:47 am | Permalink

      Government seems to exist in order to serve itself, strengthen itself , enlarge itself and protect itself.

      Cheap government is small government. Expensive government is big government. Quangos are every bit as self-serving and self-interested as the unions of the ’70s.

      Government is the problem – not the solution.

      It is not interested in simplicity or economy.

  36. rose
    Posted August 15, 2011 at 10:06 pm | Permalink

    Why do governments find controlling spending so difficult?
    In just 3 letters: BBC.

    • Kenneth
      Posted August 15, 2011 at 10:40 pm | Permalink

      Quite. And in most of the rest of Europe they also suffer the same problem with Left leaning broadcasters.

  37. Man in a Shed
    Posted August 15, 2011 at 10:14 pm | Permalink

    The problem is the interests of the politicians and senior civil servants are not aligned with the long term future of the country.

    Everyone knows things are going wrong, and cannot be sustained, but the balance of their personal interests is very strongly in continuing with the pretence.

    A fine example of this is the Nimrod AEW project – basic flaws with the design meant the project was doomed from very early on, but it was never in the personal interests of the civil servants seconded to the project on short rotation or the company carrying it out to push the issue. Hence it went on for years.

    There is a lack of basic morality in the civil service, which allows the national and public interest to be sold out to private and short term interests.

    • rose
      Posted August 15, 2011 at 10:32 pm | Permalink

      Mr R’s spoof letters have illustrated this.

    • lifelogic
      Posted August 16, 2011 at 5:18 am | Permalink

      Indeed endless examples of pointless expenditure for political reasons: Mr Tony Benn’s economically absurd Concord for an example. Vast government expenditure all to subsidise a few rich passengers and save them three hours of sitting on a plane eating, reading a book or a magazine.

      Endless example in defence, British Leyland type “investments”, the green agenda, the aircraft carriers with no aircraft.

      • lifelogic
        Posted August 16, 2011 at 5:22 am | Permalink

        A bit like RBS and HS2 perhaps.

  38. Kenneth
    Posted August 15, 2011 at 10:34 pm | Permalink

    Your post gives an excellent summary.

    If the inability to tackle our debt and our maintenance of high public spending can be summed up in a few lines how did we end up with a situation where many people think we have already endured public spending cuts initiated by a ‘Tory led’ government?

    Surely the only way a myth of such proportions can be maintained in this way is through an expensive propaganda machine that has the lion’s share of broadcast and on-line news.

    How does the Conservative part of the government tackle this without being accused of interfering and without the full weight of the BBC backlash? How could anyone in public life risk their potential income whether this is from public speaking or from selling books or from having a platform, by attacking the BBC?

    Until this boil is lanced and until someone has the courage to speak out and risk oblivion, the government will always find it hard to control public spending. Even other media outlets are muted (with some exceptions) as the BBC is the only credible employer if a journalist is out of a job.

    I find it scary that a democratic government is at the mercy of a political force as powerful as the BBC now is.

    Something needs to be done but I do not have a clue what, how or by whom.

  39. Geoff MM
    Posted August 15, 2011 at 10:34 pm | Permalink

    I have been reading this blog for several years now and today’s report has to be one of the most depressing on offer from the host, we all know what is wrong and yet the sad MPs we vote into office appear (with a few exceptions) not to be listening.
    I am absolutly fed up with writing to my MP and getting in reply to my questions and comments etc a pathetic missive thats been regurgetated from Tory HQ can these first timers not think for themselves and come up with an original thought.
    In a quest to get even more depressed I’m of to read Shaun Richards on Mind full of Money, at least he has been around the coal face.

  40. Martin
    Posted August 15, 2011 at 10:44 pm | Permalink

    Please see the statements of Sir H Appleby to the Rt Hon. J Hacker Secretary of State at the DAA.

    “In the fullness of time”, “At the appropriate juncture”, “When the necessary pre-conditions have been met”.

  41. Epigenes
    Posted August 16, 2011 at 5:09 am | Permalink

    What chance is there that a government will be brave enough to outlaw deficit financing, to include off balance sheet spending such as PFI?

    Messrs Cameron and Osborne made a mention of this when in opposition.

    Governments should only spend up to what is collected in taxes

  42. BlueLantern
    Posted August 16, 2011 at 5:17 am | Permalink

    Absolutely right – no knowledge of how to control. Too few in the Government (and the Civil Service) have any appropriate outside experience.

    I am not all satisfied with the Government’s approach in that I get no sense that they have the systems to allow them to cut and slice information to the degree they need (e.g. by cost categories but also by cost units, and programmes). This is just a suspicion as is my feeling that they haven’t gone through each line and categorised everything into say, vital, nice-to-have, neutral, not necessary etc and then start cutting by going up the list.

    As a finance director I would love to get my hands on all this! I’d also ensure that absolutely every bill would be scrutinised to ensure it was within Departmental procedures (which I would rewrite, reissue and have online to all employees, all reflecting the need for greater control). Inappropriate incursion or authorisation would be clearly stated to be disciplinary offences.

    I would also analyse how spending increased under Labour, cost-by-cost, and then go back to the point in time that had more acceptable spending levels, and consider cutting the differences with exceptions where absolutely necessary.

    I just don’t get the sense that the Government has done these sorts of things to the degree they are necessary. Perhaps I am wrong? None of it is rocket science but just jolly hard work to get it under control.

  43. backofanenvelope
    Posted August 16, 2011 at 7:10 am | Permalink

    I think I am repeating myself! The only way to cut government spending is to stop doing things. The earlier comment about Free Schools says it all. If they are FREE what is the DfE involved for?

    Our problem is that a very large section of the population believe money grows on trees.

  44. Andrew Shakespeare
    Posted August 16, 2011 at 10:24 am | Permalink

    Here’s a simple suggestion for Cameron, Osborne and the other economic incompetents. Why not approach the government budget like a business would do? Start by saying, “We have £X available to us this year. Now, what are we going to do with it?” rather than the government’s approach, which is, “This is what we want to do. Now, where are we going to find the money for it?”

    To which the answer is, invariably, “Let’s shove our hands even deeper into the pockets of those milch cows we call taxpayers.”

    • alan jutson
      Posted August 16, 2011 at 11:46 am | Permalink

      Andrew

      Agree with your point exactly

      Spending should be worked out on a maximum of LAST YEARS INCOME FIGURES as a maximum, not some pie in the sky prediction.

  45. Mark
    Posted August 16, 2011 at 11:21 am | Permalink

    They are unable to stop spending such as this:

    http://www.dailymail.co.uk/news/article-2026409/Saeed-Khaliif-Ingratitude-Somali-refugee-family-given-2m-London-home.html

    The equivalent grossed up earnings of this family’s benefits must be in the order of £250,000. So much for rent caps and benefit caps – policy backtrack to the worst of Labour’s excesses is the order of the day. Spending like this is like an addict gaining nothing from a spell in rehab.

  46. Gary
    Posted August 16, 2011 at 8:54 pm | Permalink

    There is austerity, but you do not seem to have spotted it. t is called inflation and it is decimating the prudent. It is a dishonest and deliberate policy that will ruin the currency and the country.

  47. DiscoveredJoys
    Posted August 17, 2011 at 5:07 pm | Permalink

    I’m always wary of simple answers to complicated questions, but I suspect that, as in many large business, the direction of the ‘board members’ gets diluted as the general orders get passed down the management chain to those who must carry out specific tasks.

    The order ‘no more recruitment’ passes down as ‘no more recruitment unless it is vital’ and down again to ‘if you must recruit you must make a special case’ and down again to ‘don’t make recruitment obvious because you will need to produce a load of paperwork’.

    For every top level desired reduction there are layer upon layer of managers softening the impact until it is just frittered away and vanishes. The dilution is not even malicious, it is just people trying to do their job as they perceive it.

    I suspect that if you want successful cuts you must charge a cabinet level minister with personally making them happen – with the full backing of the rest of the cabinet and the power to discipline those who fail. A sort of Wastefinder General.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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