Happy New Year

Worry not. I did see the New Year in at a party, and wrote this a couple of days ago so the show goes on.

There is one question I feel we need to ask again which is crucial to western success in the New Year. It is why does the west’s public sector find it so difficult to spend wisely, and to keep within sensible spending bounds? Why is the public sector so good at lobbying for more money, and so bad at delivering more with less?

In the great recession of 2007-8 many industrial companies experienced large falls in their income. Some saw their turnovers halve, as their customers decided to destock. With falling demand from their customers, it meant a period when they ordered nothing, as they worked their way through what they had already bought. Many companies adjusted rapidly to the new reality. They did not take it out on their customers, as they needed to win them back.

If the public sector in the west cut its spending by a little over 10% the current problems would be largely solved. Public borrowing would subside to affordable levels. It should be possible to do this without damaging the main services states feel they should provide. If that was all that private sector companies had had to do in 2007-8 most would have taken it in their stride,and would not have cut anything that mattered.

Instead of getting on with doing this, the public sector often enters a barrage of complaints, special pleading, and funny numbers. Rarely does anyone running a public service speak in terms of pounds or dollars spent. Budget numbers are put into so called real terms, and cuts are expressed as reductions in previously agreed growth plans, not as cuts in actual amounts of money being spent. Bonuses, pay awards, salary increments and pension improvements are often taken as unavoidable commitments, not something to manage in hard times. Public sector managers appear on the media to say they cannot do a good job because they are short of money. Private sector managers appear on the media to say they are doing a good job despite the shortage of cash.

I hope 2012 brings more commonsense to the public sectors of Europe and the USA. If more action is not taken voluntarily, the markets will press on and force worse medicine on the unwilling patient.


  1. Antisthenes
    January 1, 2012

    Happy new year Mr Redwood. Your question surprises me as the answer I would have thought is rather obvious. In the private sector there is a profit motive in the public sector there is not. Human nature is such that the primary concern is number one and unless there is an incentive to put others i.e. the customer first then they will not. Yes there are a few altruistic people in the public sector but not enough to make a difference. And yes the private sector will do everything to maximise profit at the expense of the customer but that is where competition comes in. If there is sufficient competition then the only recourse for the private sector to maximise profit is to be efficient, less wasteful and provide a good service or product at a competitive price. Surely that explanation is no more than teaching granny how to suck eggs.

    1. libertarian
      January 1, 2012

      You’ve clearly never owned and run a business if you believe the goal of business is to make at profit at the expense of customers. That would be short term insanity.

      1. Antisthenes
        January 2, 2012

        I have run a business quite a few in fact. I did not say making a profit at the expense of customers was a goal only that businesses will if the opportunity is there. After all most of us are opportunist (profiteers?-ed) take the banks as an example. Governments created the environment that lead to the first banking crisis wrongly the banks were blamed. The banks were not guilty for the cause they were guilty of milking and enriching themselves on the back of it.

    2. lifelogic
      January 1, 2012

      You say:- “In the private sector there is a profit motive in the public sector there is not”

      What is public sector pay and pensions if it is not “profit”. All public sector workers profit from their work. The only difference is that they do not need to actually deliver anything the “customer” wants as they can just squander tax revenue instead.

      1. Caterpillar
        January 2, 2012


        So how would motives be aligned?

        At a largescale I have previously pondered about tying public sector workers income tax rates to whether there is a deficit or surplus. If Govt runs a surplus then public sector pay lower rates the following year if Govt runs a deficit then public sector have higher tax rates the following year.

        1. lifelogic
          January 2, 2012

          It is difficult to align the interests of the public with those of the state sector. The state sector wants huge pay and pensions and to over regulate and tax everything in sight to pay them and to deliver little or nothing in return.

          The public however want good, value for money, “real” services that they actually want and need. Management needs to ensure this happens (some how) – democratic control is so weak it to be virtually non existent.

          Charging for the market rate for the NHS and most other services would be a very good start as it would indicate true level of demand for these services.

          1. Caterpillar
            January 2, 2012


            I agree that “charging a market rate” needs to be considered broadly & carefully. Two reasons I agree for this is to (i) see where competition occurs and whether this is where ‘one’ wants it and (ii) agreements with unions (on cost / performance) can become more real.

            Nonetheless, due to your first paragraph, I’d still like to see some kind of umbralla policy where public sector employees directly lose/gain as a function of Govt deficit/surplus.

  2. lifelogic
    January 1, 2012

    The state sector will not cut public expenditure unless it is forced to and the government is not even trying to cut as yet. Whole departments do nothing of any real use and should just be closed down. Many departments actually do real positive harm to the private sector. They could all be cut by 50% and still deliver what is actually needed from the state.

    Just look at Jeremy Hunt’s absurd waste on the Olympics, Chris Huhne’s on pointless house Bling and the Equality commission which mainly concerns itself with (finding thought crimes where none were intended? ed) and the police who think they are part of social services, the equality industry and the back door fines & taxation industry.

    I note that Huhne’s and Cameron’s alleged concern over “global warming” (warming which measurements show seems to have stopped in 1998 anyway) and government’s expenditure figures, did not restrict the vast tons of fireworks burnt off in just a few minutes last night.

    Just reduce job pay offs to say 3 months pay, close the pointless and damaging departments down and fire about one in two in the other departments – few would even notice. Those fired would be far happier doing something useful instead (after a small period of adjustment perhaps)

    1. BobE
      January 1, 2012

      No public sector or council worker can earn more than the PM. Starting Jan 2012. That would do a few wonders.

      1. lifelogic
        January 1, 2012

        Or BBC or Quango worker.

        1. zorro
          January 1, 2012

          ‘They could all be cut by 50% and still deliver what is actually needed from the state.’

          So would you cut the police, border control and army by 50%?

          They couldn’t all be cut by 50%. Some departments might not be needed depending on what legislation was in place. Legislation is the key as it needs people to enforce it. The reason that departments grow is because of legislation passed by politicians.


          1. zorro
            January 1, 2012

            To John and all other contributors, all the best for the New Year. This is a critical year economically for the UK, and our actions now will decide how well we can cope with any fallout from any Euro defaults.


          2. lifelogic
            January 2, 2012

            Just look at the farcical defence procurement arrangements and the Olympics for a start. I agree the legislation is often idiotic too. A 50% cut is perfectly possible there is a huge amount of fat to cut everywhere.

  3. Alan Hill
    January 1, 2012

    This is a depressing subject.
    Public servants really do believe that they are different and more deserving than their ‘colleagues’ in the private sector. Matters are further not helped by the genetic(?) disconnect in their minds between money and where it comes from.

  4. Pete the Bike
    January 1, 2012

    I agree in principle with most of your points, Mr Redwood. However I do take issue with “If the public sector in the west cut its spending by a little over 10% the current problems would be largely solved.”.
    10% might reduce the deficit by some amount but it would not even begin to start paying down the national debt nor would it allow large tax cuts which, with regulation reduction, would help the economy the most.
    We need a smaller state in just about every way, less rules, less tax, less useless make work jobs, less nannying and more private sector solutions to all our problems. In fact we need to return to a capitalist economy not the big government socialist stagnation we have suffered under for the last 60+ years.

  5. GJ Wyatt
    January 1, 2012

    All you say is true, but a large part of public sector “spending” is not on goods and services but on transfers to social welfare recipients. These are difficult to manage downwards because they are politically sensitive, and commitments and “priorities” have been set. It would be interesting to net those off and look at how the public sector is managing its exhaustive spending. That is more fairly comparable to business downsizing.

  6. Brian Tomkinson
    January 1, 2012

    Happy New Year
    Isn’t the problem that too many politicians have no direct experience of life in the private sector, other than as consumers, and think that they can buy popularity with the voters’ own money? The EU is intent on spending more, not less, on itself. Our own government failed to take the opportunity to really tackle its own overspending and decided that tax increases were preferable to less spending.
    Good to see that you are still offering “leadership and not followership”. I hope that your voice will be increasingly heard in 2012 and that you can exert some real influence on events.

  7. waramess
    January 1, 2012

    You, of course, know the answer to the question, and it is that the Civil Servce have taken over whilst Ministers simply accept their advice without question.

    Whether it be in the UK, Europe or the USA there is little difference. It spells the end of democracy and explains why there is so little difference between the parties.

    Strong leadership iis patently absent and whilst weak leadership is the order of the day the Civil Servants will continue with the spending spree and expect the politicians to make up the shortfall with additional borrowings or increased taxes.

    1. zorro
      January 1, 2012

      This says more about the quality of politicians than it does about civil servants…..


  8. English Pensioner
    January 1, 2012

    In the Civil Service, each departmental manager prepares a budget for the coming year which is always bigger than that of the previous year, and anything less than this figure is considered to be a cut. As status, prestige and promotion depend on the size of the budget there is every incentive to try to increase it and absolutely no incentive to reduce it.
    Perhaps managers and their staff should be offered a bonus for making a reduction on the previous year’s budget – even if the entire saving was given as a bonus to the staff concerned in the year the saving were made, it would be money saved in future years.

    1. uanime5
      January 2, 2012

      Due to inflation the budgets need to be bigger each year to ensure they remain the same in real terms.

      Reply: You cannot do that in the private sector. You have to achieve producivity and efficiency gains to allow lower prices.

  9. oldtimer
    January 1, 2012

    In essence (1) they are spending other peoples` money – not their own, and (2) unlike the private sector, they do not have to generate a top line ( ie sales) to earn the cash income to pay their way and earn a surplus at the bottom line (ie that dirty word “profit”) in order to survive. Their income is mandated by Acts of Parliament (principally the Finance Act) passed by politicians who, in order to get elected, make promises to reward the electorate with benefits paid by someone else (the “rich”, the “bankers” or other useful targets that present themselves for attack). So the public sector tactic is obvious – put the wind up the politicians that their promises will not be kept if spending is not increased. Usually the politicians cave in. Thus there is no incentive whatsoever for the public sector to improve efficiency and every incentive to retain monopoly supply and to avoid any semblance of competition.

    These political promises are, of course, illusory. The preferred method of attempting to maintain the fiction is, of course, inflation – a very British curse since WW2.

    There is no easy way out of this bind. There are two measures that should be pursued. The first is the introduction of competition into the provision of more public sector services. The second is an Act of Parliament that sets a limit to public spending as a proportion of GDP; that limit should be no higher than the demonstrable, long term tax raising capacity of the economy which history indicates is c38% of GDP. In years of strong growth, public spending should be lower than 38% of GDP. That is, in my opinion, the only way that a Western economy can hope to compete in the 21st C.

  10. Caterpillar
    January 1, 2012

    (1) “Budget numbers are put into so called real terms”

    Agreeing when to use “nominal” and when to use “real” does seem to be a key point that needs to be straightened out.

    In my naivety I would suggest the focus should be real terms for GDP and for BoE once it has achieved its inflation target. Real GDP is the measure of wealth and messing up on inflation knocks onto real GDP growth. I would suggest Govt departments and policy should stick with nominal, and link all plans to nominal growth – cut back to a balanced budget and then link any future spending increases to nominal growth. Sadly it seems that the BoE/MPC ignore the real and obsess about nominal growth, whilst Govt policy wishes to avoid the simplifying step of linking all policy to nominal e.g. why have a triple lock on pensions rather than have a policy that directly links to nominal growth (e.g. total state pension grows/shrinks with nominal growth and is divided between claimants- that’s it) ?

    (2) In the private sector I can (just about) grasp the ideas of revenue, profit and costs. Profit might be negative for a few years whilst both revenues and costs grow, but soon enough revenues have to get above costs – I do not easily grasp the three concepts in a ‘traditional’ public sector model, so perhaps the public sector managers also cannot delineate bewteen revenues and costs. So (at a guess) either a way of delineating the concepts needs to be made clear or all state funded provision needs to be on a competitive contract basis (…but given the NHS backtracking presumably that will be tough).

  11. John B
    January 1, 2012

    “There is one question I feel we need to ask again… why does the west’s public sector find it so difficult to spend wisely, and to keep within sensible spending bounds”

    I’ll answer that easily: in short, no intrinsic motivation to do so and intrinsic motivation to do the opposite.

    The Public Sector works outside the free market, price system. The price or value of its unit of output is actually unknown as it operates a monopoly and cannot be tested in the free market.

    If the end price cannot be determined, then the added value over the cost of producing it cannot be determined. It is then impossible to talk about efficiency as such, or by how much it is possible or desirable to reduce cost.

    Attempts to control this include targets and imaginary costings – like the ComEcon tractor factories.

    Throughout the Public Sector, reward and promotion are grade and length of service based, not merit or productivity based.

    In any group where all are receiving the same reward for their activity, the individual level of activity will gravitate towards the least energetic, least productive of the group. Why should A work harder than B, when B gets just as much for doing less?

    There is little point in A being more diligent or more skilful, because B has been in service longer and will take precedence for promotion irrespective of skill or diligence.

    Grading at senior levels, status, perks, remuneration is related to size of establishment. The more underlings and the bigger the budget, the higher the grade, the higher the reward and the converse is therefore true.

    The objective then is to increase establishment in order to increase status and reward. This is done by showing that the work load exceeds the ability of the current establishment to deal with it. This is done by slowing down work-rate – very easy to do – and then motivating for more staff and bigger budget.

    Future budgets are based on historical costs with inflation adjustments.

    If a Public Sector department increased productivity, did more work for less expenditure, this would reduce next budget amount and staffing levels. No empire builder wants this.

    MPs, and anyone on an expense account – that is unearned income to offset expenditure, which is basically how the Public Sector is funded – engages in what is called – or used to be called – fluffing up one’s expenses aka taking liberties by degree with the hope of not being noticed, to achieve year on year increase in expense allowance.

    There is then no intrinsic motivation, because there is no reward, for the Public Sector to increase productivity or to reduce costs or staff levels – in fact the opposite motivation is intrinsic and endemic.

    The only solution is to privatise to end monopoly. This is easily in some cases such as health and education, more difficult in things such as defence because there is no free market for the output.

    However zero budgeting could be introduced where no free market can exist.

    Instead of saying budget for a department is £x million, reduce it by 10%, say budget is zero, staffing level is zero, now clearly define aim of the department, what it is needed for, how it can meet its aims, what it needs – and a time limit to do it… 30 days to be submitted 60days prior to the new budget period.

    In other words, justify your existence.

    I’ll bet a whole euro, that less than 50% of the Public Sector will be able to justify its existence.

    For example what exactly does a Department for Climate Change and Energy actually do except wreck the economy, make heating their homes no longer an option for the low-pad and bankrupt the economy? Why DEFRA when all policy is made in Brussels? ETC.

    So two option: privatise where a free market can exist; otherwise zero budgeting.

    Unfortunately the level of competence, never mind the will, required to oversee this is clearly absent in the current political class, nor would the turkeys vote for Christmas.

    So it is going to be business as usual – but who cares anyway because the taxpayer has deep pockets, has no choice but to pay up and then there is always borrowing?

    Meanwhile nice town house accommodation, country retreat, nice silver, chauffeur-driven Jag, fist class travel, super pension, bags of prestige and status and then when “punishment” finally comes at the ballot box one will just have to make do with £4 or £5 million per year on boards of companies, lecture tours, royalties from the memoires – that sort of thing.

    Please do not think I am being cynical.

    1. uanime5
      January 2, 2012

      How do you explain all the lack of productivity, promotions based on the length of service, and empire building in the private sector?

      Reply: The private sector, especially industry, has been achieving good gains in productivity. Companies that fail to and expand their overhead too much go under.

  12. outsider
    January 1, 2012

    Mr Redwood, I wish you a happy new year: power to your pen and your challenging voice.

    A well-run company is always making economies, often by cutting out spending on things that used to be important but are no longer priorities. A badly-run company suddenly finds itself in a crisis and has to make big, painful cuts often euphemistically called “restructuring”. Much of the public sector is like a badly run company and now has to take painful measures in haste, which will often be the wrong ones. It is not a happy time but one hopes that lessons will be learned from well-run bits of the public sector, such as some local authorities and even one or two quangos I can think of, to avoid this sort of pain in the future.

    Meanwhile , I have one question to add to your list of December 30: why does the Government, and ultimately the Prime Minister and his entourage, decide who gets honours and what honours they are awarded? Aside from life peerages, there is no need for this additional patronage, which is a major source of political corruption or perceived corruption. Why not leave it to the Queen, with a wholly different set of advisers? If that were done, many regulations about influence peddling could be dropped and much public suspicion about politics allayed.

    Reply; There is now an independent committee that decides on recommendations to the Queen.

  13. alan jutson
    January 1, 2012

    John the solution is very simple.

    Simply reduce their budgets, tell them they are getting less money, and tell them to simply get on with it, but the proviso is that front line services must NOT BE REDUCED.

    Make sure they undertand that if the new budget is not met, then they will have to do first without wages, and this will apply to the top level of managers/earners first, before filtering down the the lower paid/front line sevice personel last.

    Then tell tham that the calculation will take place 6 months into the new financial year, and that is when wages/salaries will start to be affected.

    Then see if management can work with it.

    I think you may be surprised at how all of a sudden savings can be found, spending can be cut, and less expensive systems can be introduced.

    The problem of overspending is simpy the lack of government will and skill to manage properly.

    1. alan jutson
      January 1, 2012

      Benefits needs a complete rethink, IDS ideas whilst a start are simply not radical enough, in fact the last 5.2% rise has completely undermined his plans, and blown him and his ideas out of the water.

      I see from the newspapers this morning, that even ED Miliband is having second thoughts about lifers on Benefits.

      The government needs to wise up and wake up.

      1. uanime5
        January 2, 2012

        Unless the Government can suddenly create 2.64 million jobs expect the number of lifers on benefits to continue to increase.

        1. lifelogic
          January 2, 2012

          The government cannot create the jobs but could certainly stop preventing others, in the private, sector from doing so.

    2. uanime5
      January 2, 2012

      Expect front line services to be impeded if they’re not reduced. Less money always impedes front line services because the front line relies on everything else. For example a front line service in the army is tanks, so you could reduce costs by firing the majority of mechanics who are not front line. However with so few mechanics the number of operational tanks will be severely reduced.

  14. Jose
    January 1, 2012

    From my limited experience it is evident that they try and spend their total budget or possibly more rather than trying to come in under budget. So, come the end of the financial year they’re spending like crazy simply to ensure ‘next year’s budget’ is at least the same as their previous spend.

    Bonuses, pay awards, etc. should only happen if they come in under budget, we’re paying them for a service not to give them all jobs.

  15. Alan Wheatley
    January 1, 2012

    Leaving aside the validity of comparing public and private sectors, and taking it that a 10% reduction in the public sector spending is the right objective, then lets look at what affects its achievement.

    Clearly it is within the power of government to cut the public sector budget by 10% if it so chooses. So why does it not simply get on with it and do so? To find an answer we can look to a recent blog subject, that of leadership.

    First of all the 10% cut has to be adopted as the objective. Likely there are a number of objectives being promoted by their supports, so the leader (or leadership) has to pick the right one.

    Next the leader/leadership need to come up with a plan to get us from here to a public service that meets the needs of the nation but running on 90% of the current budget. One key planning decision will be to implement cuts selectively or impose 10% across the board. Across the board is easy, but I would reject it as indicating that the planners do not know what they are doing, and also because it penalised those areas already working efficiently.

    Then we come to selling the vision and the plan. Perhaps this is where Cameron’s reputed PR skills come to the fore. If the vision and plan are sound, then if effectively communicated the support will be there.

    There is an example of this process currently being worked through – the BBC. The BBC management have produced a vision and plan for the Corporation over the next few years that manages the reduction in funding that has been imposed on them. The BBC Trust are conducting a consultation on the Management’s proposals and are due to report soon. Could this exercise be used as a case study to show how the audience can be kept happy despite the lower budget?

  16. lojolondon
    January 1, 2012

    You are absolutely correct John. The government does need to cut. The easiest and best areas are the sections that Cameron ‘ring-fenced’.
    1. NHS. Over the last 13 years NHS spending has doubled with no improvement in treatment, making it an obvious area. Sue the consultants that took £13Bn from the taxpayer without delivering a working system, as would be the case in the private sector.
    2. Foreign Aid should ALL be halted immediately. Poor countries do not thank us for the money received and it as almost always spent by the rich. We do not have the money to waste on ‘influencing’ others.
    3. BBC. As recommended recently, the BBC should be cut back to Radio 4 and BBC1, all the rest should be sold off to the private sector.
    4. The EU. 50 Million Sterling every single day. Enough said.

    One note, in the public sector, central and local government, NOBODY on a low wage should be fired, but NO executive may earn more than £100kpa, including bonuses, perks and sneaky add-ons. Higher salaries will all be cut on 5 January 2012, nonwithstanding individual contracts.

    It is definitely easily achievable.

    Good luck, and I wish you a great 2012!

  17. Roger
    January 1, 2012

    Off message but many congratulations for topping the poll of Conservative Home
    backbencher of the year. Fully deserved but how I would have liked it to be government minister of the year.

    Reply: Thanks for telling me, and thanks for the support.

  18. David B
    January 1, 2012

    It is how we do our politics, only interested in the here and now. Over the last 60 or 70 years the idea that government spending is good has taken hold. Now when there is talk of spending cuts we hear stories of how it will affect us today. There is never talk of the long term benefit of reduced borrowing or long term costs if we go on borrowing.

    The private sector can make cuts because employees accept that short term gain often comes at the expense of long term security, so they will accept reduced wages and reduced employee numbers so that a companr will survive. Public sector employees do not understand that trade off as there is no consequence to them of failure ie they all lose their jobs. We need a buy in by these employees that they need to do more for less and that will require the de politication of the civil service and unions. But that is a whole new issue for you to consider.

  19. Bob
    January 1, 2012

    If more action is not taken voluntarily, the markets will press on and force worse medicine on the unwilling patient.
    The UK is borrowing money to pay interest on what it has already borrowed.

    And what they can’t borrow they’ll steal from us through tax and QE.
    In other words, anything but cut the gross overspending.

    A ten percent reduction in public spending could easily be achieved, but it will mean a departure from the socialist agenda and the nanny state.

  20. Nick
    January 1, 2012

    They are spending wisely in their view. They are spending on themselves, and if you are spending money, other people’s money, spending it on you is wise.

  21. Nick
    January 1, 2012

    The solution is simple.

    1. Tell the truth.
    2. Give everyone a personalized bill.

    ie. Publish the full cost of the debts. Pensions included. Make sure no fiddles such as assuming AA corporate bonds with no defaults (an asset) are used to discount a liability. (linked to CPI).

    Then send every taxpayer a pro rata share as a bill.

  22. Bernard Otway
    January 1, 2012

    I for one would cut the public sector which I call another name by leaving out one letter in the word public,by at least 25%,any of my friends who are still friends ,who are or were from this sector are the ones who agree with the fact that this body has been a GIANT PARASITE
    sucking money from hard working taxpayers.Our finances as you John say would come quickly to equilibrium and when released our private sector will employ those who were previously in the public sector,as the tax burden and especially regulatory burden will be much less,BUT BUT BUT we must at all costs be OUT of the EU.

  23. D K McGregor
    January 1, 2012

    And so say all of us! Have a Happy New Year in which we hope your view will begin to prevail more.

  24. Mike Fowle
    January 1, 2012

    Happy New Year, John. Perhaps more people will listen to the sage of Wokingham this year. When I worked in the civil service for a time, jobs were counted even if the positions were unfilled, and had been for several years. Thus talk of job losses were quite unrealistic in the sense that no actual person had to move or leave. Perhaps it’s different now?

  25. nicol sinclair
    January 1, 2012

    Dear Mr Redwood,

    How totally astute your comments are. I completely agree with all that you say above and with the vast majority of the contents of your blog since I started following you.

    A very Happy (and Prosperous) New Year to you and your family and a more prosperous and successful year for UK plc than last year.

  26. Denis Cooper
    January 1, 2012

    Obviously a private company can usually cut its costs more easily than a government, because:

    1. The company management is answerable to its owners, usually shareholders, not to MPs elected by voters who’ve been trained to expect constantly rising government spending and misled into believing that it’s OK for the government to partly fund that increased expenditure through borrowing money, and then when borrowing money reaches its limit through printing money.

    2. The company doesn’t have the same level of worry that efforts to cut its costs will be counteracted both by reduced revenues and by increased costs of maintaining unemployed workers and their families, dealing with the consequences of family and social breakdown, and containing potentially violent social unrest – for private businesses, those additional costs are “externalised”, largely offloaded onto the government.

    I offer 2. only as a point to be borne in mind when making comparisons between the private and public sectors.

    For the longer term the crucial problem is how to re-educate the broad mass of electors to spurn parliamentary candidates who offer to bribe them first with their own money, and then with borrowed money, and finally with newly printed money, and I see nobody in the present government who is well suited to that task.

  27. Mazz
    January 1, 2012

    Happy New Year, John and thank you for being one of the MP’s to reply to some of the comments.

    Jan 2012 ‘Public Servant Magazine’:

    Sir Gus O’Donnell talks … about his hopes for a trimmed, (how about a good slash & burn!), and invigorated civil service with leaders working ‘in the best interests of the country’ … (yes, being as they are actually servants of this Country and not rulers, as some of them think they are, I would expect them to serve ‘in the best interest of the Country’).

    In my opinion, we need a good slash & burn of policies on climate change, obesity/smoking/alcohol; slash foreign aid, immigration, public servants, etc. etc; and quango’s, whatever happened to that idea? That should save quite a bit. Let’s get back to traditional policies, in areas such as Education, the NHS and Defence. What a hope!

    Reply: Mr Maude promised a bonfire of the quangos, but a lot seem to pop again as part of a government department.

    1. zorro
      January 1, 2012

      To get rid of quangos, you have to get rid of the legislation. The government isn’t doing this as it stated that it would before the election. Does that surprise anyone?


  28. Sue Doughty
    January 1, 2012

    Public sector cutting spending for no rewards – dream on. They have no motivation to do that. The West needs to change their regimes one by one so the books can be opened and spending commitments edited – as Italy is cutting all newspaper subsidy put in place by that government’s predecessors. But spending commitments made by what is really corruption often have contractual agreements in place, like London’s bendy buses did. How can those contracts be terminated more quickly, that is the question.

  29. Timaction
    January 1, 2012

    I’m afraid the public services are a political football driven one way, then another, by successive Governments seeking a soundbite or policy initiative headline. There are many staff and functions considered “backroom” services that could be scrapped or reduced in scale. I’m afraid those in charge as either Chief Executives or Chief Officers do not have the “will” or desire to do so through fear of criticism by their own supervising authorities or Government. I watched in horror over 30 years as a now retired Police Officer as everything was counted, quantity and quality, by ever increasing, no nothing, “backroom” staff with a plethora of targets, yearly and internal and external strategic individual and partnership plans. Equality, diversity, Data Protection, Freedom of Information, HR and big brother was everywhere. Whole departments were created to accomodate the latest political whim of both Governing Parties, audit commission or HMI recommendations. It got so bad that HQ car parks were continually enlarged to accomodate these perceived needs. I know this is mirrored in all the other Emergency Services, Councils and Health Service throughout the Country. Specialist units and departments were created to deal with matters that were once generic. Vulnerable adults, children, sex offences, Authorities, Surveillance etc etc. The cuts when they came were always from the frontline and never in the newly created specialist units or backroom functions. The frontline staff getting ever more thin on the ground.
    So the question Mr Redwood is what legislation or functions will you as a Government remove/reduce to allow the public services to shrink? Repeal of Equalities legislation? RIPA? Data Protection? FOI? Partnership planning?
    I know I could get your 10% savings overnight by a simple walkthrough of the Police, Council, NHS HQ’s and then we could make a start on the useless quangos. Simples!

    Reply: there are many easy targets for savings which have been set out in previous posts on this site.

    1. zorro
      January 1, 2012

      Good post, you are correct. There has been an explosion of monitoring, chief of staff back room type jobs because of increased diversity type legislation.

      Big cuts could be made without enforcement staff being made redundant. Their job would be easier without so much unnecessary monitoring and counting by people who aren’t able to do the enforcement jobs.


    2. alan jutson
      January 2, 2012


      Agreed, most of us know what the problem is, and who caused it.

      But most politicians love control, and the idea that they know best, and whilst they do not have to pay for their mistakes, I am afraid it is likely to continue, or even get worse.

  30. Peter T
    January 1, 2012

    A very good question which needs answering, related to who actually carries responsibility in the Public Sector when a Major Cock Up occurs?

  31. Damien
    January 1, 2012

    Happy New Year John

    There appears to be a lack of resolve by relevant ministers to implement the tough decisions necessary to restore the public finances and reduce the deficit. Anrew Tyrie is to be congratulated on his tenacity in effective treasury committee scrutiny of a quango however we were promised a bonfire of Labour quangos when in fact three out of four now remain.

    Today the BBC report “Housing Minister Grant Shapps said: “For too long this country has turned a blind eye on the multi-billion pound problem of housing tenancy fraud and abuse” “He told the BBC a new criminal offence was needed because “if the sanctions themselves are so weak, the worst that happens is you get that council home taken away from you if you’re found out… We need to change that.

    Why not use the existing Fraud Act 2006 rather than wasting parliamentary time on introducing more legislation?

    1. Bob
      January 1, 2012

      There’s plenty of legislation to protect tenants from unscrupulous landlords, now we need some protection for landlords to protect them against unscrupulous tenants which probably outnumber unscrupulous landlords by a significant amount.

      1. Kenneth
        January 1, 2012

        Or we could repeal most of it and let them make their own private arrangements

    2. zorro
      January 1, 2012

      Their usual trick is to call for another law/offence when there are more than enough sanctions already on the statute book which could be used. He’s playing to the gallery.

      Yes, we need to sort out the nonsense we have about ‘squatting rights’ as well.


  32. Robin
    January 1, 2012

    Could it be that governments find it easier to increase taxes on the responsible working men and women, than to cut back on expenditure?

  33. badgerbill
    January 1, 2012

    A Happy New year to you.

    It is time that the government reduced tha salaries for those in public service that tax payers have to find the money for. It is unacceptable to ordinary folk that these people can be paid more than the position of prime minister. They are there to administer and therefore should not be enriching themselves at the expense of the poor. Bankers earn their money through private industry and have taken the flack when the public sector is kept behind closed doors. Things need to change!

  34. figurewizard
    January 1, 2012

    Many years ago Barbara Castle, when trying to defend the catastrophic mismanagement of yet another Labour government referred to the public sector as ‘the peoples’ social wage.’ Then as now the definition of a wage was not that anyone in employment should pay the employer for the privilege of earning one, only to receive considerably less in return. Yet this nonsensical comment went largely unchallenged at the time.

    This still sums up Labour’s philosophy. Without their addiction to public sector spending they have nothing to offer. Politically the ring fencing of the NHS and education in the absence of increasing national wealth may be desirable at present but it is high time that peoples’ eyes were opened to the fact that unaffordable commitments to ever increasing public expenditure, even if they were to produce results; which they most certainly did not in Labour’s thirteen years leads ultimately to economic failure.

    For that to happen though this country is going to need an untrammeled and genuinely radical Conservative government, just like we used to have once upon a time.

  35. Martyn
    January 1, 2012

    John, you say “Public sector managers appear on the media to say they cannot do a good job because they are short of money”. Perhaps that is because they are unaware that they can never be as efficient or effective as those who manage a commercial business upon which they and others depend for an income. What irks me is the fact that public sector managers do not suffer from, or bear the costs of, their management inefficiencies or mistakes.

    Public sector workers from lower down the food chain often comment on the dispiriting effects on them of endless bureaucracy, box ticking, form filling etc and, above all, having to work under poor management. Public sector workers are no different from any other group and I am sure that their talents range from outstandingly good to hopeless, but given proper leadership (there’s that word again!), better management systems and reduced bureaucracy they would probably happily work towards improving departmental performance and give us better value for our money.

    In a sense, public sector managers are isolated – disinterested is perhaps too strong a word – in the real world and if challenged to make real economies will always claim that this could only be done at the cost of reducing the services they provide. That frightens governments who, despite any claims to the contrary, are unwilling to go head-to-head with the public sector management, so nothing much is likely to change. On the other hand, these managers can always find the money for various trips abroad on useless ‘fact-finding’ missions, group bonding sessions and the like. A hopeless situation and one that needs a determined effort by seriously qualified outsiders to investigate and correct.
    A Happy New Year to one and all!

  36. Frank Salmon
    January 1, 2012

    Happy New Year John, and all your readers.
    My thought is this – whilst we had a baning crisis, the main culprit was borrowing and economic growth built on straw. The west, and Brown in particular, spent that growth and also spent projected further increases in growth. The new government was committed to those spending committments. Hence, a real need to reduce the spending committment in absolute terms.
    Only real cuts in public spending and welfare expenditure can save the day.

    1. zorro
      January 1, 2012

      Welfare spending on those who have never contributed must be cut. There are lots of charities and free/very reduced priced food available from our excellent supermarket chains.


      1. zorro
        January 1, 2012

        If I work and don’t mind buying reduced priced food so can others! They might be able to afford their trainers then rather than ‘going on a shopping trip to Oxford St’….


      2. uanime5
        January 2, 2012

        As minimum wage is much higher than benefits just because you can live on a low salary doesn’t mean people can live on less benefits. Especially not in high cost areas such as London.

        1. zorro
          January 3, 2012

          It isn’t high cost for people on benefits as their rents are paid. I work but couldn’t afford to live in similar accommodation in London.


  37. ian wragg
    January 1, 2012

    Did you see the 1 pm news bulletin. Questions from the public. Nearly all the time devoted to Climate Change propaganda. No in depth comment about how wrong the media was on the Euro 10 years ago.
    None of the great and good being wheeled before the cameras to be interogated on their spectaculr mistakes. Just endless propaganda on Cliomate Change and the fact that the sun warms 10 deg C every billion years.
    A tax should slow that down.

    1. Bob
      January 1, 2012

      Abolish the TV licence!

  38. William Cowburn
    January 1, 2012

    To me the reason for the inability of local government to cut spending is simple. We have too many laws governing our daily decision making. We have surrounded ourselves with untouchable shibboleths so those administering these laws gain nothing from administering them to save money. Their best option is to keep the system going and keep themselves out of trouble. Note the present fuss over the government’s proposed changes to the planning system to see the shibboleths being voiced to prevent rather sensible but moderate reductions in planning powers. Such things are throughout our society. Usually business is not constrained so much in this way band so can react more sensibly.

  39. William Cowburn
    January 1, 2012

    To me the reason for the inability of local government to cut spending is simple. We have too many laws governing our daily decision making. We have surrounded ourselves with untouchable shibboleths so those administering these laws gain nothing from administering them to save money. Their best option is to keep the system going and keep themselves out of trouble. Note the present fuss over the government’s proposed changes to the planning system to see the shibboleths being voiced to prevent rather sensible but moderate reductions in planning powers. Such things are throughout our society. Usually business is not constrained so much in this way and so can react more sensibly.

  40. Major Loophole
    January 1, 2012


    Your best post of the year!

    But seriously, full nail on the head.

  41. Mike Stallard
    January 1, 2012

    First and most important of all, thank you for a lovely year of thoughtful and surprisingly well informed commentary. I can certainly speak for myself when I say that it really does make my day when I read your thoughts at 6.30 a.m. every morning.

    Second, in answer to your question, I am myself going to put a large share of the blame on the people who surround the ministers. I have personal experience of the change in Michael Gove who has quite definitely been captured by the machine. I would also like to mention Andrew Lansley, and IDS who have also changed their tune quite significantly.
    Frank Field is an excellent example, under the Blair government, of someone who went out to reform the system and totally failed.Until the people surrounding the ministers – lobbyists, civil servants, journalists and so on are put back in their boxes, I honestly do not see this country coming out of the slough of despond. Meanwhile shroud wavers, nationalisers and the Vulnerable make their demands knowing that unless they do their incomes will be curtailed.

    And then there is the small matter of the EU gravy train…….

    1. zorro
      January 1, 2012

      Frank Field was stitched up by you know who because he threatened his spending plans and would steal the limelight.


  42. Gwyn
    January 1, 2012

    I recommend that everyone googles ‘systems thinking review’ and listen to Professor John Seddon talk about the application of systems thinking in the public sector. This approach is being used successfully in enlightened organisations and the improvements in some cases have been huge. Although systems thinkers do not approve of arbitrary targets such as John’s 10% – in practice this would be the very minimum that could be obtained along with improvements in customer service and staff morale.

    1. zorro
      January 1, 2012

      I saw that in Private Eye a while back and had a look. It is always important to know what you core objective is and ensure that your business activities support it. Too often public spending is concentrated in peripheral areas which do not impact enough on what your core objective should be. I would really love to talk more about this and will do when I have the time.


  43. Iain Gill
    January 1, 2012

    The problem with the public sector is that there is little or no feedback loop between the customers and the providers. In normal commerce if your building is dirty, noisy, or the staff rude, or the service is substandard or out of date or compares badly with those new competitors down the road what happens? Yes maybe you will get a few complaints but mostly the customers will vote with their feet and go to another provider. Individual customers taking their business elsewhere really do add up to a significant force for change to the providers giving real incentives for the providers to change and adapt and optimise to what the customers want.
    In the public sector none of this exists. It’s still impossible to move GP, it’s still impossible to take your business elsewhere when you are treated in a substandard way by the NHS. The consumer has no power, if they do move they have to take extreme measures like moving house and even if lots of people do this the providers do not feel any pain in their income. There are lots of complaints but mostly people see nothing ever changes and apathy sets in.
    Why do I have to move house or falsely claim some religious fervour to get my kid into a decent school? He who lies the most about his religion win the best education for their children, is this really what we want?
    The public sector is run top down, like Mao and Stalin tried with the whole economy, and just like for rice production in Mao’s China the statistics produced by the NHS and other public bodies look great. The reality with the end customers is somewhat different. Targets are put in place, regulators are put in place, complaints processes galore, guess what none of this is as effective as empowering the customers!
    Then we have the incestuous hiring of people within the public sector, the way people “get on” by not rocking the boat when often what’s needed is some boat rocking. The incentives and disincentives are all wrong.
    We need to understand that the people working in the public sector are human, they all suffer from human nature, and they all react to the incentives and disincentives in the system. The incentives and disincentives are setup to promote long queues for NHS treatment, the incentives are setup to reward mediocre care.
    We need better feedback loops between customer service and the providers down at the individual customer level.
    Even services like the police and borders agency could usefully have better feedback loops. The standards and quality of police in different parts of the country is notable for its wide variation, only some feedback from the legal decent honest citizens fed back and felt in the pay packets and job security of the management will ever change anything. I’ve come in through Dover next to my brother who came in with no passport, sure I could complain about the immigration staff, it would be much more effective if we had wide sampling of customer feedback.
    And so on. Lots of public sector staff work for vocational love of the job reasons sure, but that is no reason to defend the worst hospitals in the country from closure. We need slack capacity in provision so that customers can move around, and we need to use the private capacity to relieve the customers from the worst waits and none performance of the public sector forcing the public sector to raise its game.
    There are few public providers where competition is no benefit. Even the army runs very much with regiments in competition all the time, from shooting competitions to endurance exercises and so on, open competition between the regiments forces up standards throughout. Some similar stuff applied to other public providers wouldn’t be that hard to do, run some competitions between the passport offices for quality of passport applications processed – give some prizes – watch friendly competitive spirit take over and use the winners to spread their skills more widely. Why is this such a leap of imagination?
    I don’t see why I shouldn’t be able to choose which tax office I go to. The tax offices with the best customer service would attract more customers, and hey presto we have a virtuous circle.
    And then when money is tight why do public sector managers always cut front line staff and manage to protect their own numbers? Why are the rewards in the system all the way through to the new years honours so badly in favour of the sycophants and place men?
    These are the questions to address.

  44. Kenneth
    January 1, 2012

    “Why is the public sector so good at lobbying for more money, and so bad at delivering more with less?”

    In my view this can be illustrated by a news story that appeared on a slow news day (I always assumed there was an unwritten rule that political parties did not lobby in the media during the Christmas break).

    Anyway the Labour Party put out a story on 30th December 2011 telling us that council subsidies for elderly care provision was not keeping up with costs and that there was wide variation between councils.

    The BBC lapped this up and provided us with some vox pops to support the Labour story.

    The whole story was written from one point of view: that those with less subsidy should receive more.

    I would have preferred the BBC not to indulge in political campaigning. However, if the BBC decides that it should highlight cases of LOW subsidy, surely the needs of balanced reporting require it to highlight the cases of HIGH subsidy?

    In fact, if I was to complain to Ofcom about this omission and Ofcom directed the BBC to put the other side of the story, it would perhaps read something like:

    “Some pensioners are receiving limited financial help towards care bills while others are getting it completely free of charge causing higher costs to taxpayers.

    The BBC would then need to provide vox pops quotes from taxpayers who have high tax bills, savers/asset owners (including many pensioners ironically) who see inflation eating away at their assets, company directors who are struggling, unemployed people who are paying a terrible price and parents who see their offspring (and future generations) being saddled with much of the bill.

    The BBC often tries to wriggle out of accusations of bias. However when there is a financially-based story there is no wriggle room. For every credit there is an equal debit. As such, financial stories on the BBC should follow a naturally unbiased line.

    In this BBC campaign, we have heard from the recipients of this money but we have not heard from those who provide the money.

    That is bias – plain and simple. That is why the public sector has such good lobbying powers.

    1. Kenneth
      January 1, 2012

      Here is a link to this biased story:


  45. Barbara Stevens
    January 1, 2012

    Happy New Year to you Mr Redwood. I take note of your comments and agree with them whole heartly. The public sector have to come into the real world, whether they like it or not; its getting them to listen and understand that’s the problem we face. ‘Making them’ accept change is a road to contention, and all that it brings with it. They have far to much money thrown at them and keep demanding more and more. The private sector have to comply with market forces why shouldn’t they?
    However, I think there are far more serious things facing us with the developments with Iran, it appears they are flexing their muscles with missiles being fired to annoy the USA.
    Are we about to have more trouble in the Middle East? If they close the straits as they say they will oil supply could be disrupted severely. Will the USA allow this to happen? Will we be involved? I hope not. This is one foray we should keep out of. With the Eurozone facing its problems as well once the markets open again, we are really facing deep problems. We cannot, and should not rely on the EU to settle things for us, we must have our own diplomatic circles to deal with Iran, but will the EU try and over ride us? I have several questions I’d like answers to, many worries as well. Its time we all saw the dangers we face, and came together as a nation. Trade and companies will have to face these problems to and demands from their workers will only add to the problems. When the mud hits the fan we will all definately ‘be in it together’.

  46. Reaguns
    January 2, 2012

    The public sector will always spend the maximum amount possible, and the government will always give them the maximum amount possible.

    This is proven by the failure of even supposedly right wing or centre right governments failing to make any cuts even in the direst economic circumstances, or by David Cameron saying in a previous recession (when he worked for a more right wing government advising norman lamont) that spending cuts would be “inhumane”.

    Government will always use its full vote-buying-bribery potential. Vested interests will always lobby the government to help them at the expense of the people, be they public sector, the banking sector, whatever.

    The solution is limited government. Constitutionally enforce limits on government spending to perhaps a percentage of GDP, or a percentage of the tax take.

    If the economy does well, public sector gets more. If it does badly, public sector gets less. Ie if a department gets 20% of the total public spending in a year, but the gdp and tax shrink by 5%, then it gets 5% less money but retains its 20% share of the total. This would encourage everyone to adopt pro growth policies.

  47. peter
    January 2, 2012

    I’ve always said that most service provision provided by the public sector, i.e councils should be by rule of thumb carried out by private companies on behalf of the government.

    This way you increase commercial activity (companies force themselves to drive out waste plus) a chunk of government cash spent comes back in corporation tax and VAT.

    You will never change the nature of the public sector, they don’t do balance sheets so they don’t by nature need to think in terms of VFN when they make decisions.

    Another thing in their defence is the amount of red tape they have to put up with – this alone consumes a lot of resources.

    The message to government is mass privatisations of services to the scale of the Thatcher years so you move virtually all state workers (apart from frontline Police, Nurses, Doctors, Teachers etc) into the private sector. An added bonus is getting rid of the pension liability long term.

    Councils would then become service enablers who buy what they need, if contractors don’t seliver then replace them.

    I think providing you had contract enablers with the right commerical accumen (who can manage service contracts well) you would naturally save your 10% once things bed in. I’m not talking PFIs/PPPIs here, I dont think these represent VFM, facilities and buildings management does not mean this is the only route – you can employ FM companies to manage buildings in the way that most commercial organisations do whilst retaining ownership.

    This is the only way you will cure this problem – personal experience tells me that civil servants tend to be good at issuing orders but not so good at getting things done themselves.

    Happy New Year!

  48. David Price
    January 2, 2012

    Happy New Year and I hope it is prosperous for all of us.

    The markets may pressure for change but the public sector has been steadfast in its refusal to cooperate with reality so far if the debt and deficit is anything to go by. In the UK the public sector is now so huge that I suppose it can declare its own version of the economy but either way the net taxpayers and their children will still end up paying the mounting bill.

    The question is whether subtle, measured, organic change is even possible now with such large scale, institutionalised decadence.

  49. itexamstube
    January 2, 2012

    The sun has been rise of 2012 may this year full of happiness and prosperity for all humans.

  50. uanime5
    January 2, 2012

    It’s not really fair to single out the public sector for overspending and poor decisions when the private sector has some notable failures. For example movies that were box office bombs such as The Adventures of Pluto Nash and Delgo; vapourware such as Duke Nukem Forever (though it did get made after 14 years); boondoggles such as RCA “SelectaVision”.

    Comparing the private and public sector is like comparing apples and oranges. The private sector can cut or sell areas that are unprofitable in a way the public sector cannot. Closing down hospitals, police stations, libraries, and so forth will always be more controversial than closing down a branch of a company.

    Given that any reforms of a company have to come from the top if the Government wants they public sector to improve they are the ones who have to make the changes. The markets will not fix any problems for the Government.

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