Why does the public sector find it so difficult to cut spending?

 

       When I walked into one Ministry to take over as the Minister in a previous government, one of the first questions I was asked by my officials was what additional magazines I wanted to see. There on a large side table were set out an impressive range of glossy publications. They must have reflected the interests and passions of previous Ministers. It was a cameo of how the government traditionally does business.

        The question was what extra ones did I want? No-one mentioned the budget for newspapers and periodicals. No-one suggested I might like to cut out ones that previous Ministers valued but I did not. The public sector proceeds by base budgets plus growth. It accepts that all previous magazines ordered for good or bad reason need to be taken permanently thereafter. Any Minister who queries the base is upsetting the applecart, giving ground to the Treasury, taking money away from the Department. It assumes it is good to add some more. It seeks to take the decision without informing the decison taker of the relevant financial information.

              As a businessman joining government I just saw a cost. I wanted to know how much the bill was. As a politician I saw a potential bad story. Say a journalist found out  the names of the publications the Department was buying for the Ministerial office? Wouldn’t they unkindly have suggested some were a little off the mainstream of the Department’s duties? I pruned  the magazine budget. I looked at the budget for the department as a whole, not just for the Ministerial office. I asked them to review  how many copies of needed periodicals the whole Department required. If I had a personal interest and wanted a magazine about it, I had a salary and could buy it from that. It was a small drop in a large ocean, but it was meant to illustrate a more business like way of approaching spending.

              Too many proponents of more public spending are like children in a sweet shop with a rich and friendly uncle. He takes care of the bills. There is no need to ask how much each item costs. The child is spared the bitter sweet task of having to weigh up the delights of each sweet against the dent it makes in the pocket money. Public spending to some in government  is not about choices, and seeking value. It is about finding the rich uncle, and then just ordering what you think you will like, even at the risk of too many sweets making you sick. The big difference of course is when the state finds the rich uncle it does not presume on his voluntary generosity, but threatens him with prison if he does not pay up. This can make a lot of rich uncles go missing, or hide offshore. It has even been known that  leading proponents of more state spending  find ingenious ways of avoiding tax for themselves.

               Any government or Council that wants to cut spending without damaging services has to change this approach to buying and budgets. The base budget has to be reviewed at least annually, as well as the incremental items that officials and lobby groups say need to be added. The Treasury’s public spending division should constantly be challenging the cost and delivery of all programmes, as well as the need for the more marginal ones at all.

 

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140 Comments

  1. Zorro
    Posted February 13, 2012 at 6:44 am | Permalink

    One of the problems is the year end spend on items for the sake of it, rather than losing it. That should be profiled for investment in the next year or savings as appropriate. The main trouble is that the people in charge would struggle to run a sweet shop in real life. They are all very good at talking the talk….diversity….equality…..promoting this group or that group. For example, one of the top priorities in the Civil Service is race equality. I am not sure where the efficient delivery of services comes in the pecking order….that is of course if they are sure of what is the core purpose of each department.

    Zorro

    • Disaffected
      Posted February 13, 2012 at 9:23 am | Permalink

      Spot on. They also do not consider what should be cut or got rid of to finance new ideas or departments. hey are always seen as add ons and that nothing can be got rid of. The most damaging is the way budgets are managed. The notion to spend everything each year in case the budget is reduced still pervaders all public sector bodies.

      • nicol sinclair
        Posted February 13, 2012 at 2:02 pm | Permalink

        That’s because of the culture in government of “use it or lose it” by fiscal year end. Crazy in my view. I recall that, while I was still a serving soldier in the MoD, at the end of the financial year, in order to spend the budget, the Ministry went out and bought numerous Ford Escort Estate cars and thousands of vacuum cleaners none of which could be considered as necessary for the defence of the Realm!

      • nicol sinclair
        Posted February 13, 2012 at 2:05 pm | Permalink

        I should have added that the practice of clawing back the unspent budget(s) at the end of the year has always left me puzzled. Perhaps some bright spark out there could convince me of the need of this principle.

        Come on, JR. Give me a clue…

      • outsider
        Posted February 13, 2012 at 3:03 pm | Permalink

        Sticking to the “look after the pennies” theme, Mr Redwood might be able to find out how many subscriptions the public sector has taken out to Sky TV, Sky Sports and the FT and Times websites.

      • uanime5
        Posted February 13, 2012 at 4:27 pm | Permalink

        That’s because the Government usually does cut budgets if all the money isn’t spent as not spending all the money is proof that your budget is too large. Especially the current Government which is trying to reduce Government spending to reduce the deficit.

        This problem will continue unless public sector bodies feel that the Government will not reduce their budget because they haven’t spent all of it.

    • James Matthews
      Posted February 13, 2012 at 3:26 pm | Permalink

      Exactly, The system is full of perverse incentives and of people woking very hard making more work for one another.Question that from within though, and you’re toast.

      • lifelogic
        Posted February 14, 2012 at 7:53 am | Permalink

        Indeed.

    • cosmic
      Posted February 13, 2012 at 7:28 pm | Permalink

      That’s also true in large companies where there’s often a scramble at the year end to use up the budget by buying new computers etc, because not spending the whole budget is a black mark for the manager of the department and means next year’s budget will be reduced.

      The difference is that there’s an over all discipline imposed by the company’s profitability and the company can go bust or be bought out. It doesn’t have the bottomless pit of present and future taxpayers to cushion it and it can’t print money.

  2. norman
    Posted February 13, 2012 at 7:03 am | Permalink

    Some so-called services not only should be damaged, they should be abolished.

    It seems obvious to say it but the only way to control government spending is to curtail government activity. Until we get away from the idea of a beneficent state that government, and only government, can provide an utopian ideal for all citizenry we won’t make an inch of progress regardless of how loud politicians shout about the progressiveness of their latest big spending policy.

    As much as possible should be left to individuals and we should have the liberty to choose what services we need and who should provide it. Not because every private company is a paradigm of efficiency but because – without question – every government department is an example of profligate waste.

    Small state conservatism in this country is on life support so I don’t hold out much hope things will get better any time soon.

  3. Alan Radfield
    Posted February 13, 2012 at 7:15 am | Permalink

    Anyone who sets off down the road of ‘public service’ is essentially seeking to be served rather well by the public. The sense of etitlement to other people’s money is nowhere sronger than amongst those who seek to confiscate it and distribute the untrousered remainder as they see fit. Once your brain is ‘socialist positive’ there is almost no hope of any cure.

    • lifelogic
      Posted February 14, 2012 at 7:59 am | Permalink

      Are people’s brains “socialist positive” at birth due to their genetic make up I wonder? Or just infected later by nurture, schooling and the BBC?

      • cosmic
        Posted February 14, 2012 at 8:01 pm | Permalink

        I think some people are natural helpers who come with their firmware blown that way. They get very angry with those who don’t want their help and are much more tolerant of those who play them for fools.

        Some people are naturally cold and analytical, some people only care about the perceptions of others, some want to be the boss, some want to be seen as successful, and so on.

        There’s a basic humanity about helping others, particularly people of your own tribe, and particularly people in distress, which is ever mutable and which you might regret in retrospect.

        The problems come when we try to institute our basic humanity in a detailed way.

  4. lifelogic
    Posted February 13, 2012 at 7:22 am | Permalink

    Why does the public sector find it so difficult to cut spending? Because most of the spending goes on them so they have every incentive not to. Ministers seem usually to be just actors reading out lines, prepared for them, so no one actually is in control them. Stage one, get rig of pay offs over about 3 months, stage two fire one in two. Get rid of team building nonsense jollies and virtually all travel overseas (certainly above economy), mobile phones and company credit cards go. All office furniture to be bought from other departments that are being closed down. Do not change the names of department every other year to “climate change” or “skills learning and plasticine modelling” and the like. Place the offices when staff and offices are cheap not central London or as is often the case where it suits the decision makers for easy commuting.
    Close many departments down, most do no good anyway. Do not duplicate departments at parish, local, regional, Westminster and EU levels and let them all argue. Do not give money to encourage the feckless.

    The fish rots from the head Cameron and Clegg.

    • Zorro
      Posted February 13, 2012 at 9:08 am | Permalink

      I am afraid that a lot of the spending/legislation is PC inspired and comes from Marxist/Frankfurt school type thinking where society is constructed in it’s image rather than evolving naturally hence all the legislation. There are other groups like Common Purpose which promote these types of ideas in civil service management training.

      Zorro

      • lifelogic
        Posted February 13, 2012 at 9:37 am | Permalink

        Indeed policies to have equal men women old/young disabled and able bodied equal pay everywhere are clearly insane. They deny clear differences in the choices and balances people make in their lives and their genetic make up. I see the BBC is to have more elderly woman but what if the viewer just turn over to watch the young pretty one on Sky?

        Still it is great as an excuse for pointless jobs and interference for many parasites.

        • Damien
          Posted February 13, 2012 at 1:03 pm | Permalink

          What choices do disabled or older people have over their age and genetic makeup? Surely it is better to have equal pay so that those who wish to work are encouraged to do so.

          • lifelogic
            Posted February 14, 2012 at 8:21 am | Permalink

            Well I agree they have no choice. Life is not fair, never has been and never will be. People make choices over what they are able to do and are prepared to do for the wages available. If you legislate to improve the lot of one group you clearly must discriminate against others.

            Worse you create lots of expensive & pointless jobs in the law or the state sector which makes us all poorer.

      • forthurst
        Posted February 13, 2012 at 1:53 pm | Permalink

        It’s strange isn’t how self-destructive policies such as Cultural Marxism, unlimited immigration, carbon credits and windmills to close down our industries with overburdensome costs etc only apply to Western states, isn’t it? Do China, India have these policies? No. I wonder who the vectors of these policies are? Maybe, our armed forces, without any parliamentary oversight, troublemaking in Syria, should be focused more on routing out the enemy within? The payback could be much higher.

        • Bob
          Posted February 13, 2012 at 7:25 pm | Permalink

          Hear hear!

    • Disaffected
      Posted February 13, 2012 at 10:21 am | Permalink

      Spot on. If the politicians understood their business or department the problem could be solved. They do not. So the civil servants steer them to their way of thinking because of their lack of knowledge, inability to have courage to confront their stupid ideas and lack of leadership to provide a better idea or way of doing things. Adolescents without experience of the real world.

      Ambrose Pritchard wrote a good article in the DT today.

      The Uk and other nations stand idly by as Germany takes over Greece using economics instead of artillary. Germany were given far better terms for their financial mess in 1953 than Greece, even though the Germans had no moral right after the way they caused the debt by the world war in the first place.

      • Disaffected
        Posted February 13, 2012 at 10:26 am | Permalink

        And it took the UK years to pay off the war debts.

      • Zorro
        Posted February 13, 2012 at 2:16 pm | Permalink

        In fact, the 1953 International Settlements agreement postponed Germany’s payment until after reunification….guess what….in 1990, Helmut Kohl decided that Germany wouldn’t pay at that time. Since then, they have only paid some individual settlements, but no payments to victim countries. Germany needs to be called out on this subject.

        Zorro

      • uanime5
        Posted February 13, 2012 at 4:32 pm | Permalink

        Why would Germany want to take over the a country that requires repeated large cash injections to avoid bankruptcy? Wouldn’t it make more sense to take over a country with a strong economy?

        • Bob
          Posted February 13, 2012 at 7:30 pm | Permalink

          That’s not how it works uanime5.
          It’s all about gaining control.
          Like the British did all those years ago.
          Except, this empire may be tougher to shake off.

        • Zorro
          Posted February 14, 2012 at 9:42 am | Permalink

          Hmmm……why would they target a weak economy rather than a strong one?…….answer- because it is easier to do so, especially when it has a large debt and you will be asking a price for your support.

          Zorro

    • Posted February 13, 2012 at 11:58 am | Permalink

      Well said.

      It seems to me that whatever party/minister gets in, the replies from them, dictated by the mandarins, are exactly the same. So little changes. Yes Minister was spot on.

      I have now taken to reminding ministers they are MPs and their constituents will be told of their responses via local media. Perhaps more of us should do that.

      A recent example is Nick Herbert supporting the use of spy cameras by any member of the public, in public, of people innocently going about their business in case they do something wrong. Let him explain that to his constituents!

    • David John Wilson
      Posted February 13, 2012 at 1:39 pm | Permalink

      I agree that the expensive name changes and image upgrades that take place in government departments and agencies approximately every three years must be stopped. It is absolute nonsense that any agency should spend around a million pounds on a new logo and all the changes to signs, stationery, vehicles etc. that this involves particularly when there is virtually no change in function.

      • Bob
        Posted February 13, 2012 at 7:34 pm | Permalink

        @DJW
        You wouldn’t say that if it was one of your close friends or relatives who stood to get the contract every three years!

    • uanime5
      Posted February 13, 2012 at 4:35 pm | Permalink

      The same problem occurs in large companies where senior executives are loathed to cut their budgets because it makes them less important.

      Though I do have some good news for you lifelogic, the HS2 you so hate is facing a legal challenge for violating EU environmental law.

      http://www.independent.co.uk/news/uk/politics/hs2-rail-link-may-face-legal-challenge-6862590.html

      • Bob
        Posted February 13, 2012 at 7:35 pm | Permalink

        @uanime5

        Smoke and mirrors.

      • lifelogic
        Posted February 13, 2012 at 8:19 pm | Permalink

        Good but it is absurd and typical that, in order to take legal action, they cannot just show the scheme is mad as it clearly is, they have to show it does not comply with the “Environmental Assessment (SEA) Regulations 2004 and the Conservation of Habitats and Species Regulations 2010”.

  5. Steve Cox
    Posted February 13, 2012 at 7:24 am | Permalink

    In the end it all comes down to encouraging employees to treat the money they are empowered to spend as if it was their own. One way of doing that is to provide a monetary incentive. If an employee – any employee – comes up with a money-saving idea that works, then they should be given either a standard award (one company I worked for used to pay for a dinner for two up to the value of £75, for example) or else, more controversially but perhaps more fairly, as a fixed percentage of the annual savings. One major oil company I worked for adopted this latter approach, and gave 1% as a prize. This was very popular with the staff, even though the prize for making savings on such things as periodicals was rather small. Then one day a guy working on the refining process (this was in an oil refinery) came up with a smart idea to improve the efficiency. There was a major engineering effort to evaluate and test his idea, and it was adopted, resulting in savings of some £10 million a year (I am going back to the 1980’s, so that was a lot of money). The award for the bright guy should have been £100,000, but the oil company management in their wisdom (ha!) felt that this was a ridiculously large amount and so invented a retrospective ‘cap’ to the awards of £1,000, no matter how much the savings were. This caused a great deal of resentment and anger among the staff (not least to the guy who should have won all that cash I suspect) and soon the whole incentive scheme was dropped. Sad, but the myopic and miserly attitude of senior management had wrecked what was really a great scheme.

    The major impediment to adopting the spend-it-like-its-your-own attitude is, of course, empire building and turf protection. If someone has a budget, they are usually expected to spend it or else see it trimmed next year with the resulting loss of status and prestige. On top of which, to enhance these attributes, many people actively seek to increase their annual budgets each year, so they often deliberately overspend, and usually on poor investments. This attitude is embedded in may organisations and needs to be rooted out like the weed that it is. Of course, if the government were actually serious about cutting spending, this would be a perfect time to tackle these wasteful attitudes, but apart from wrecking our military machine in favour of deskbound civil servants and handing a significant part of our defence to the French (mon Dieu!), they don’t seem terribly enthusiastic about real cuts at all.

    • Zorro
      Posted February 13, 2012 at 9:12 am | Permalink

      We can always rely on our EU partners, the French. They have their own unique way of assisting….as in the Falklands.

      Zorro

      • Sebastian Weetabix
        Posted February 13, 2012 at 11:59 am | Permalink

        The French actually were great allies during the Falklands War. Not one additional exocet missile, or even a single spare part, reached Argentina, and they gave us all the assistance we needed on countermeasures and the combat weaknesses of the Mirage III. They have their faults but they cannot fairly be criticised over their behaviour in 1982.

        • Bazman
          Posted February 13, 2012 at 7:34 pm | Permalink

          If the Exocet missiles where fired at French ships than apparently they had codes to disable them in the air. They did not share this information. There you go. I did not have to look far to smear the name of our traditional enemy.

        • lojolondon
          Posted February 13, 2012 at 11:59 pm | Permalink

          You totally missed the point, Sebastian. Mitternad REFUSED to supply the codes, Thatcher threatened to use nuclear power unless Mitterand gave her the codes. Google for it, but I like this version which clearly demonstrates how the French are always trying to sabotage Britain.
          http://www.guardian.co.uk/world/2005/nov/22/books.france

    • stred
      Posted February 13, 2012 at 9:25 am | Permalink

      The best source of information about wasteful activity in the Civil Service or Local Government is the lower or middle ranking staff. As you say, a fixed small percentage for suggestions leading to savings would work wonders. However, it would also lead to the rapid end of a career.

      I would suggest setting up an agency to protect anyone with information about waste. This would be supreme and strike terror into the hearts of the empire builders and bunglers. If a department was found to be mis-managed the top jobs could be automatically advertised and the informative lower ranks allowed to apply for the jobs. Theer is a whistleblowers protection agency in the US which works, unlike our weak code for the NHS, which is ignored.

      Similary, it would be interesting if shareholders were allowed to advertise the jobs of their overpaid board and non execs. An alternative board of qualified persons willing to do the job for a third of the money could then be presented and voted on.

      Also, regarding knighthoods for the wasters, the system devalues awards for genuine industrialists or professionals who create something from nothing.
      Perhaps a separate order for Buggins should be created- The Grand Order of Bunglers or something similar.

      • Posted February 13, 2012 at 1:47 pm | Permalink

        suggestions leading to savings would work wonders. However, it would also lead to the rapid end of a career

        That’s not how it works at all. Senior management requests are always cascading down councils asking for such suggestions. The same suggestions always come back – procurement of train tickets, IT, stationary etc – and senior managers always nod and say ‘well done that man’.

        But nothing changes because of a combination of the procument rules and protectionist structures within the organisation that insist travel, IT and stationary are only purchased through them.

      • uanime5
        Posted February 13, 2012 at 4:44 pm | Permalink

        Even in the US whistleblowers usually have to leave the industry they work in as no company wants to hire someone who may report them to the Government. Your agency is unlikely to be any better and won’t scare anyone, just like the US whistleblowers law doesn’t scare US empire builders and bunglers.

        Also being a whistleblower doesn’t mean you’re capable of performing the top job.

        • stred
          Posted February 14, 2012 at 8:46 am | Permalink

          I have worked for Local Authorities 3 times and in every case the chief officer was probably a good committee man but incompetent in their own profession. The only way that the department functioned was through the work of competent deputies and other middle ranking officers. These people were not as motivated to get to the top and lacked arrogance. However, the department would have functioned at less expense and been a happier place to work is they had done the work of the chief.

          As regards whisleblowers, no one would dare to suggest savings such as this, which would be greater than minor savings such as paper purchase. A strong law to protect them and punish any victimisation with the threat of loss of the top position would also encourage thrift in the first place. The arrogance and mis management in the worst scandals in the NHS have usually been followed by promotion to the highest levels in the ministry.

    • lifelogic
      Posted February 13, 2012 at 3:02 pm | Permalink

      Since almost everyone working in the state sector, or indeed anyone who spent an hour or two in it, could find many ways to save thousands they would all be getting dinner for two or a % bonus in no time at all.

      • Bob
        Posted February 13, 2012 at 7:45 pm | Permalink

        Bonanza for the restaurant trade!

  6. Kevin Ronald Lohse
    Posted February 13, 2012 at 8:03 am | Permalink

    Just as the country starts to thaw, an icy blast of reality emits from the pen of Mr. Redwood.
    Common sense is not a core value of bureaucracy, John, you will make yourself unpopular again. Well done.

  7. alan jutson
    Posted February 13, 2012 at 8:29 am | Permalink

    John.

    Your point about budgets being completely revised from Zero each year is the way forward, that and the need to offer some incentive NOT TO SPEND TO THE LIMIT at the end of each financial year would make a good deal of difference if implemented and overseen by an experienced businessman/woman, with real life commercial expertise.

    Instead we seem to get “What did we get last year” being used as the starting point.
    With the expectation that an increase is absolutely normal.

    Agree with Steve Cox, many Company suggestion schemes produce lots of small savings, but occassionally you strike gold.

    As any management consultant will tell you, the answers are always in house, and are usually known by the people on the front line, but management never talk to such people, who often feel completely disconnected from those “above”.

    • Liz
      Posted February 13, 2012 at 10:22 am | Permalink

      Yes zero budgets are the only way to stop the frenzy of completely useless spending that is now taking place across councils and Government Departmnents now to “use up the budget” before the end of March. Setting a budget in itself is wasteful as the urge to spend it all is overwhelming. Showing how many taxpayers it takes to fund any particular spend would also be a reality check to the civil servants and the Simon Hughs and the Lords Bishops of this world . At the moment there seems to be very little will within the Government to really get down to serious cost cutting as they are being forced to do in Greece. As a result we are getting more in debt by the day.

    • David John Wilson
      Posted February 13, 2012 at 1:44 pm | Permalink

      Perhaps we have found a genuine reason for bonuses. Any head of department who comes in under budget should get a bonus of 1% of the savings. Similarly any head of department who spend over budget should have 1% of the overspend deducted from his salary.

    • uanime5
      Posted February 13, 2012 at 4:48 pm | Permalink

      Zero budgets would be much the same as “What did we get last year” because Government departments will determine how much they need by looking at how much they spent last year.

      • alan jutson
        Posted February 14, 2012 at 8:02 am | Permalink

        Unamine5

        You really do not understand how a commercial business works do you.

  8. Antisthenes
    Posted February 13, 2012 at 8:29 am | Permalink

    When it comes to inefficiency, waste and over spending then government departments and the public sector will be very good at it. It is an intractable problem because the lack of incentive to do otherwise is always going to be there. A few people like yourself will come along and attempt to reform but will never be able to make major or lasting improvements. Governments have to take on some rolls and the cost of doing them is going to be higher than if done by the private sector. That is the price to be paid in having a government. However that price can be kept to manageable and acceptable levels if government takes on those roles that only government can perform. Not as it is currently when there are so many things that government does which they should not and which they do very badly.

  9. Posted February 13, 2012 at 8:34 am | Permalink

    On that subject, this is an interesting study from Switzerland. It seems that when people can vote on public spending increases, they tend to reject them: they are made aware of the cost.

    http://www.voxeu.org/index.php?q=node/7608

  10. A.Sedgwick
    Posted February 13, 2012 at 8:35 am | Permalink

    The simple solution is an Act to prohibit Government from borrowing, this would concentrate the minds of all paid by the taxpayer. Should you be selected by the quaint and condescending private members’ bill process can I suggest you give it a go, the reaction would be revealing.

  11. Jose
    Posted February 13, 2012 at 8:55 am | Permalink

    My own experience with a government department was one of undoubted waste. Whenever they wanted a personal computer their ‘contract’ stated that they use a 3rd party for the purchase. The department was quoted one thousand 500 pounds, we acquired one for them for the princely sum of 400 pounds. These contracts had probably been signed by individuals with no knowledge of the real world, they probably thought they were getting a ‘good deal’ when compared with the alternative one of 2 thousand pounds.

    The government should reduce the headcount by 10% per annum until 2015 when it will review it again; we have far too many civil servants wasting our money on their little empires.

    • Zorro
      Posted February 13, 2012 at 9:24 am | Permalink

      IT is the big joke. The official supplier to a department or several departments seems to charge ridiculous amounts for service agreements or programmed freely available from open sources. Security concerns might be quoted but will usually be exaggerated. IT contracts always go over budget, projects are over-complicated and do not deliver.

      Zorro

      • Tedgo
        Posted February 13, 2012 at 12:22 pm | Permalink

        The MOD pays the IT Consultants (name remoived-ed), £3000 PER YEAR to keep a bog standard computer on a Civil servants deck.

        Even worse, the MOD never get to own the computers so at the end of the 10 year contract and faced with all the computers being taken away, they have to sign up for another 10 years.

      • Jose
        Posted February 13, 2012 at 1:00 pm | Permalink

        It’s (sorry for the pun) probably because they haven’t a clue about IT or it seems lots of things. They might have reduced the headcount by outsourcing but they’re (we’re) getting royally screwed for the privilege. I agree, the projects are overly complicated and it seems like the MoD contracts when specifying a new weapon; they keep on changing the spec and consequently the price reflects their failure to identify what it is they need as opposed to want.

      • uanime5
        Posted February 13, 2012 at 4:55 pm | Permalink

        The Government also believe that because IT can be recoded that they can make any change they want without causing any problems. So they constantly change there mind about everything, delaying the project and increasing its cost. Less Government interference would make IT projects much quicker and cheaper.

        Here’s a list of what usually goes wrong in Government IT Projects:
        http://blogs.hbr.org/hbr/mcgrath/2008/10/six-problems-facing-large-gove.html

  12. ian wragg
    Posted February 13, 2012 at 9:10 am | Permalink

    As we reach the end of the financial year, our local council has started its usual overtime blitz.
    Trees are being pruned, mini islands are being created and additional speed awareness signs erected.
    Most council workers are out and about on Saturdays and Sundays working for premium time when the work should have been done during the week.
    My wife has dealings with social services which seems to be staffed by illiterate school leavers who cannot compose a simple letter requesting a food parcel.

    • uanime5
      Posted February 13, 2012 at 4:57 pm | Permalink

      The reason for this is simple; if the Council runs out of money they get in trouble and if they have any budget left over at the end of the year they get their budget cut. So they hang on to as much of their budget as possible, then spend it all at the last minute.

  13. NickW
    Posted February 13, 2012 at 9:11 am | Permalink

    The only way to cut Government spending is for the Government to do less.

    Parliament devotes its time to increasing the Civil Service workload by acting as a factory which produces legislation.

    The civil service cannot do more and more work with less and less people.

    Either whole areas of work need to be axed by de-regulation, or else radical steps need to be taken to reduce the complexity that costs so many more man hours.

    A tax code with 7000 pages takes a lot of man hours to enforce and administer; Simplification and rationalisation could save a lot of money, but expecting the Inland Revenue to administer the same tax code without mistakes and half as many people is unreasonable.

    Before Parliament even passes Legislation it needs to ask; “Can we afford to do this?”
    Steps should be taken to cost both new and existing legislation to enable intelligent economies.

    • Antisthenes
      Posted February 13, 2012 at 10:20 am | Permalink

      The left and vested interests of course would never countenance that approach as their attitude is that it does not matter what it costs it must be done because it is morally right to do so. Of course they conveniently forget that it is immediately only morally right for one section of society at the expense other sections and in the longer term benefits no one.

    • stred
      Posted February 13, 2012 at 10:24 am | Permalink

      A good example of regulation/legislation spread is the new licencing of privately rented shared houses. In my area there are areas which have become used for student accommodation. This is because HMG has increased the number of students. Many have become increasingly badly behaved and cannabis addled over the years and a proportion are on Mickey Mouse courses requiring little intelligence.

      Houses are often bought and let by professional people who have realised that it is pointless saving through their pensions. These landlords are unable legally to control the behaviour of their tenants and find that the Local Authority and police will not turn out when the noise, rowdy behaviour and litter is being created. They could do so under existing legislation, but can’t be bothered.

      So, the answer has been to put the responsibility and blame onto the landlords and produce more legislation, allowing the LA to licence them and charge for it. Unsurprisingly, many LAs have started to set up licencing departments and create more public jobs. In my area, almost the whole of the town centre to the outskirts is affected. And the students will still cause problems despite all the paperwork and costs. As one of them said to my night working tenant before she had to leave,”What are you going to do about it?”

      • stred
        Posted February 13, 2012 at 2:28 pm | Permalink

        First ‘area’ should read ‘town’.

  14. Posted February 13, 2012 at 9:17 am | Permalink

    John,

    Ask PICT (Parliament’s IT dept), about changing the print quality settings on your HoC office printer.

    You may find that the lower quality settings – useful for drafts, or internal notes which do not require high-quality printing etc – are not available. You see, the software loaded on the printers supplied to PICT is different from that you would get if you bought the printer commercially.

    The result of this may have been a slightly lower capital cost of the printers, but a faster turnover of toner cartridges. HP of course is a company which sells printer ink for a profit, with a sideline in making printers.

    Parallel this with the MoD and others never sorting the initial specification and burdening us all with future costs for adaptations and servicing and upgrades…..

  15. Florence Ellis
    Posted February 13, 2012 at 9:23 am | Permalink

    Self preservation plays a big part in the extravagance of civil servants and local government employees.

    Not knowing any better – they have been working in this type of organisation for so long and in many instances have no other working experience. The cost of staff never seems to be calculated when costing projects within the organisation.

    Managers have no other experience of work or management.

    Non-Jobs have been created and they have got used to drifting along hoping nobody notices.

    When asked to look at saving money they are able to find savings every time without realising there has been bad management all along and that it is a reflection on them.

  16. Brian A
    Posted February 13, 2012 at 9:37 am | Permalink

    As I pointed out in a post on a previous article, public spending is largely about spending somebody else’s money on somebody else. There is, therefore, no meaningful incentive to spend wisely and waste generally ensues. The situation is made worse by the fact that failing to fully spend a departmental budget is discouraged – it makes the spendthrifts in other departments look bad – and tends to produce a lower settlement the following year. No business looking to survive in the longer term could operate this way.

    Your suggestion of rigorously reviewing budgets each year is sensible, but those making the big spending decisions must, in addition, be subject to much closer public scrutiny. The introduction of more accountability with, say, bonuses for reducing expenditure and public censure, and in extreme cases dismissal, for overspending may help concentrate minds. However, effective action to address these issues requires political will and determination. At present most ministers appear to favour vested interests rather than those of taxpayers and consumers of public services. I believe that the government could gain some useful popularity by championing the interests of taxpayers and consumers at every opportunity.

    • uanime5
      Posted February 13, 2012 at 5:03 pm | Permalink

      The problem with rewarding underspending is that it will lead to Councils cutting services so that they need to spend less money, rather than spending more efficiently.

  17. backofanenvelope
    Posted February 13, 2012 at 9:38 am | Permalink

    The best way to look at the Civil Service is to view them as 20 or so tribes or clans. They are not interested in the national interest or in working together. They are interested in empire building. The only way to control them is to cut their income. No arguments, just cut it. It is a bit late for this government though.

  18. Roger Farmer
    Posted February 13, 2012 at 9:42 am | Permalink

    In answer to your title; because they have a vested interest in not doing so, and because ministers are fool enough to allow the department to arrange it’s own de-maning and cost reduction. All too often because the minister in question could not run a fruit barrow.
    Left to the administrators you will find that cost reductions in the NHS for instance will be felt at the point of delivery rather than in their own departments. Departments which no doubt they have grown to enhance their status and reward.
    Get beyond the magazines in the front lobby. Analyse what the department does that is necessary and what is just a drag on the populous. Get rid of the latter along with those that run it and you have possibly halved the department budget. The same problem occurs in the private sector but usually gets spotted and dealt with much earlier. If not the enterprise goes bust, and a more efficient company takes it’s place in the market. It is not rocket science, you just need the guts to do it and the support of a like minded prime minister.

  19. Ferdinand
    Posted February 13, 2012 at 9:45 am | Permalink

    How right you are. The only proper way to budget is from a zero base. i.e. all costs have to be justified in full. No previous assumptions will be valid unless contracted. Even the the contract should be re-visted to see if it is still appropriate.

  20. Posted February 13, 2012 at 9:53 am | Permalink

    I understand that bonuses in the public sector are being investigated. Unlike some, who might consider that should be abolished altogether, I think they should continue and perhaps even expand in proportion for bringing the department”s operations in under budget.

  21. GJ Wyatt
    Posted February 13, 2012 at 9:58 am | Permalink

    Your magazine vignette is a lovely example of the ratchet effect in public spending which, writ large, is known as “Wagner’s Law”. For the UK this was already well documented fifty years ago by Alan Peacock and Jack Wiseman in The Growth of Public Expenditure in
    the United Kingdom
    .
    We all know of the tendency to spend a budget right up to the limit, if necessary inventing reasons for new spending as the financial period draws to a close. Perhaps the cliff-edge nature of the accounts has something to do with it. But what if the now voguishly despised “bonus culture” were turned to advantage by allocating a proportion of budget shortfalls in expenditure to a bonus pot for the spending department? Wouldn’t that provide an incentive to be more careful with taxpayer funds?

  22. James Reade
    Posted February 13, 2012 at 10:10 am | Permalink

    It’s quite simple bargaining – there’s a pie, and you want to get your share of it, and increase it if possible. If you start giving back stuff, you fear you’ll never see it again, you fear the consequences moving forward of that decision (you may be seen as a soft touch in future bargaining and get worse shares, etc).

    I’m not defending it, just point that out.

    I’m glad most of all though that you haven’t wrote any more in this article about how apparently there haven’t been any cuts at all so far based solely on the figures for the actual government deficit rather.

    • APL
      Posted February 17, 2012 at 8:35 am | Permalink

      James Reade: “I’m glad most of all though that you haven’t wrote any more in this article about how apparently there haven’t been any cuts at all so far based solely on the figures for the actual government deficit rather.”

      It is irrevelant that individual areas of government spending have or have not been cut. What counts is, is government spending overall going down?

      Since the deficit is increasing, the answer to that question is no.

      The fact is James, cut now voluntarily or be forced to cut later like Greece. You choose!

  23. DiscoveredJoys
    Posted February 13, 2012 at 10:10 am | Permalink

    In the business I used to work for, the expectation of annual budget cuts became the norm. Probably because the Division I was in was a ‘support’ function, and support costs are always under pressure. You could make a case for spending more money – but only if the long term savings justified it.

    I used to tell my people that every £1 they wanted to spend was a £1 on some little old lady’s bill.

    • oldtimer
      Posted February 13, 2012 at 12:56 pm | Permalink

      You make a good point. Any business in a very competitive environment, that wants to survive, needs to budget for efficiency, to reduce operating costs, in order to nullify inflation which will increase them.

      The fact is that spending other peoples money induces a very different mindset to spending your own. In business as in government, attitude of mind is paramount. That attitude is set by and is reinforced by the necessary controls – personal and bureaucratic. Without those controls the squanderbug mentality takes over.

  24. Francis
    Posted February 13, 2012 at 10:12 am | Permalink

    Nobody likes making loyal staff redundant-but the truth is that local & national government are overstaffed with highly trained professionals often doing admin. work and they could be working much more effectively. District councils sharing services saves a lot of cost.

    In Worcester we have reduced the budget from £14.3 to £10.5 million without any noticeable difference to local services. We are making savings in advance of our targets and of course according to the local Labour Party this is a failing, not a success.

  25. Martin
    Posted February 13, 2012 at 10:19 am | Permalink

    I think the two problems in much of the public sector are

    1) The taxpayer or fee payer will provide the cash – if they don’t they can go to jail or face substantial problems.

    2) A tendency to keep fellow public sector workers in a job – the same old job.

  26. Atlas
    Posted February 13, 2012 at 10:30 am | Permalink

    If you are working in an area where the yearly costs fluctuate then you require a budgeting process that can accomodate that reality, if you are to survive. The present Treasury approach of “if you don’t spend it, you not only loose it but you loose some of next year’s as well” does not fit the bill. So before complaining about ‘wasteful’ civil -servants as if they were the sole cause of the problem, consider that the problem is a result of Treasury policy.

    And who sets the Treasury Policy? Why it is the Chancellor.

  27. Posted February 13, 2012 at 10:31 am | Permalink

    The other favourite trick is to “underestimate” the cost of a project in order to get approval, knowing that no one will cancel the project when it overruns for fear of the adverse publicity that such cancellation would attract. Long term contracts like PFI are also favourites, because once the contract has been signed, it could cost more to cancel than to go ahead.
    I think that the Mandarins will always win under the present system, particularly as few ministers have experience of either staff or financial management.
    The bit in the news today about Civil Service bonuses are to only be given for real excellence will be got round somehow, bonuses will continue as normal. The only bonus I would give would be to those who cut the cost of whatever they are doing without loss of efficiency – give them a percentage of any saving!

    • Tedgo
      Posted February 13, 2012 at 4:15 pm | Permalink

      To my mind a PFI is simply a mortgage. Just like the mortgage you or I take out they can be changed or closed.

      Take the fire control centres, the government should simply pay off the outstanding capital amount, stop paying anymore interest and sell or demolish the properties. The people who lent the money get their capital back which they can lend on to someone else. There no need for compensation etc.

      If the contracts are not written that way then the Civil servants involved need their P45’s.

  28. Phil C
    Posted February 13, 2012 at 10:39 am | Permalink

    Departments, whether of public authorities or large private businesses, are always governed by their budgets, and what is spent from it is therefore the concern of their budget holder and whether it is spent efficiently or not is immaterial, unless and until it is reviewed for prospective reduction.

    The problem with the public sector is that its fucnctions are statutory, and it has little choice whether to perform them or not. Its revenue does not depend on satisfying its customers. Government must reduce its reach if it is really serious that public spending is to be reduced.

  29. lojolondon
    Posted February 13, 2012 at 10:56 am | Permalink

    Interesting article, John.

    A major difference between US politicians and UK is the emphasis on taxes and spending. In the US, politicians are voted in on the basis of how much they will cut spending and taxation.
    Unfortunately in the UK, every party promises to spend more and more every year, there is no party that openly stands for tax cuts and spending cuts. Even when the Tories offer spending cuts they completely fail us and end up spending even more, no sign of any tax cuts in sight!

    One of the reasons for this is the Biased BBC – every cut is seen as bad, every suggestion of savings and they always have union leaders and Labour politicians grandstanding with prepared speeches that are unchallenged by the myopic, one-sided interviewer.

    The BBC is totally complicit for about £30Billion per annum wasted on the pro-EU, pro-Global Warming/windmill and anti-Cuts campaigns they run incessantly, against all the evidence that these are all bad for Britain.

    • Bob
      Posted February 13, 2012 at 8:32 pm | Permalink

      The licence fee system has passed it’s use by date.
      We have the technology to provide TV programming on a subscription basis.
      Sky do it.
      Virgin do it.
      What is the BBC afraid of?

      It is bizarre that we have TV licence inspectors raiding people’s homes in the 21st century!

      • APL
        Posted February 17, 2012 at 8:39 am | Permalink

        Bob: “It is bizarre that we have TV licence inspectors raiding people’s homes in the 21st century!”

        The BBC is just another lucrative arena for ex and failed politicians to preen in public and milk the public purse.

  30. Posted February 13, 2012 at 10:59 am | Permalink

    The purpose of long established government programmes is to pay government employees and their friends. The nominal purpose is, at best, secondary. – Pournelle’s law

    Work expands to fill the money and time available. – Parkinson’s law

    • Andy
      Posted February 13, 2012 at 4:10 pm | Permalink

      Exactly. See my comment below on Road Fund Licence for a perfect example of this in action.

  31. Jack Tar
    Posted February 13, 2012 at 11:09 am | Permalink

    It might be a useful idea if each Permanent Secretary were told that unless he came up with a budget REDUCED by, say, 2% easch year – and kept expenditure wtihin that figure – then he would be looking for employment elsewhere.

  32. sm
    Posted February 13, 2012 at 11:29 am | Permalink

    It has even been known that leading proponents of more state spending find ingenious ways of avoiding tax for themselves.

    Start at the top with much much higher standards,the trickle down effect might follow.

    What do you want HMRC to do? Bring out and embed the general anti-avoidance principals and write it into public procurement rules? Stop writing laws or striking deals which specifically exempt certain vested interests.

    Bring in anonymous reporting and act on it via SOCA and money laundering rules.

    Link top public pay and pensions to output. All MEP’s/MPs/Lords/Judges/BOE/MPC and top mandarins rewards should be linked to outputs GDP/capita and basic living standards. Inflation protecting and featherbedding failure at the top must stop. Fraud by politicians/lords etc should result in forfeiture of office – where are the recall powers?

    Continue to open the door to transparency and look to strengthen freedom of information laws.

    We should look at the primary things we require and start to remove legislation which imposes duties with benefits below the cost. For example what do we need from the BBC, should we continue to restrict TV (technology) use to enable its extravagant funding. and stifle alternatives.

    The problem is the insiders are in positions of control. Be it regulatory capture,political capture,cartelization- look at the public utility of banking/government funding/democracy.

    Living standards are taking a big hit everywhere except where the buck should stop.

    Someone told me years ago if voting (read referenda/recall) changed anything it wouldnt be allowed.

  33. Iain Gill
    Posted February 13, 2012 at 11:31 am | Permalink

    public sector is driven by fashions, and impressing folk by adopting the fashions, its manipulated by big consultancies which make big money implementing the big fashions. you only have to look at something like road design to see the fads and fashions spread throughout the uk, road thinning and so on, based on highly non scientific evidence and counter the approaches adopted in other countries. like the tower blocks of the 60’s many of todays fashions will in time become famous as the bad ideas they clearly are. the problem is nobody can question these sacred cows and have a career in the public sector, thinking for yourself, and producing results (such as lower road deaths) doesnt actually count for anything when up against the dogma of the wider public sector crowd.

  34. Denis Cooper
    Posted February 13, 2012 at 11:32 am | Permalink

    Fundamentally the public sector now finds it difficult to cut spending because we are a representative democracy with the universal franchise, and a substantial part of the electorate have been trained to assume that increased public spending is naturally a good thing.

    So if a parliamentary candidate openly advocates the opposite, that public spending should be decreased rather than increased, he will lose far more votes than he gains.

    Which is why Michael Howard quickly chopped Howard Flight as a Tory candidate, back in March 2005, after he’d said that a Tory government would have to constrain public spending to a greater extent than was being officially admitted, and why at one time David Cameron dared go no further than his proposal for “sharing the proceeds of growth”.

    I don’t think that the voters are stupid; however they’re not just poorly informed but deliberately misinformed, both by politicians and the mass media, as evidenced by the common belief is that the present government is imposing severe “spending cuts” when in fact public spending is still going up.

    Nothing much will change until the balance of public opinion is changed, and the voters start electing a majority of MPs who will force ministers to bear down hard on public spending.

  35. Posted February 13, 2012 at 11:52 am | Permalink

    Three simple answers:
    1. Remove anything that government should have no part in. e.g. The Olympics.
    2. Where the government has to provide social goods, fund them, rather than running them, giving power to the people to choose the provider and creating competition.
    3. Parliament has to create very simple solutions in law. So, for instance, simplifying taxation reduces the cost of the administration of the taxation system, which reduces costs.

  36. Posted February 13, 2012 at 12:11 pm | Permalink

    One only needs to take the Road Safety Industry as an example. Many annual billions a year spent on it, most doesn’t even prevent one single accident and we wouldn’t believe that, for all the quangos, alleged charities, advisory groups, limited companies and partnerships, there is less death on the road, from all causes, than from accidents in the home. The mandarins in government support all this profiteering and waste, so on it goes; with blessings from DfT & Home Offfice. If it weren’t for life and death and 1000s of unnecessary prosecutions too, it would all be a big joke.

  37. Winston Smith
    Posted February 13, 2012 at 12:59 pm | Permalink

    One of the problems in the public sector is the position of accountants. We have the “world’s only professional accountancy body to specialise in public services”, CIPFA. This has produced a permanent divide between the private and public sector. It is very rare for a senior accountant with experience in the private sector to move into the public sector. It is a virtual ‘closed-shop’. Waste and inefficiencies are eradicated by good accountants, schooled in a commercial environment, where costs matter. Some Conservative run LAs attempt to circumvent this problem by employing management consultants at vast expense, to audit the efficiency of their services and systems. This is because they cannot break the obfuscation of the established finance teams within their organisation. In most cases they spend £ms and a few face-saving initiatives will be implemented, and then quietly dropped.

    This problem needs to be addressed. If I was the leader of a LA, I would replace the senior Finance staff with experienced private sector people immediately. The benefits would not be instant, but after a while you would see better accountability, efficiency and economy.

  38. Acorn
    Posted February 13, 2012 at 1:04 pm | Permalink

    Central or Local Government can’t spend any money unless there is an Act of Parliament that authorises them to do it. Who makes all the Acts of Parliament; POLITICIANS.

    All the time the HoC vomits out more and more knee jerk populist policies mangled into poorly drafted primary and secondary legislation; the more that legislation costs to operate. Currently, the public sector procures; grants or subsidises £3 worth for every £1 in spends on Pay. (£168 billion on pay last year)

    Zero based budgets!!! Good luck with that one, you will never have enough people to do it in less than three years. It took the Treasury ten years to put together the Whole of Government Accounts system. I don’t think they had to ask the question, “which Act or SI is causing you to do what you do all day my little public sector person”. Until you can answer that question you will go nowhere.

    It all went wrong when they did away with time sheets for normal rostered work and only used them for abnormal hours and overtime. You had to keep a list of all the budget codes to book your attendance hours to. It soon showed up if you were trying to scam some other budget holder. Those were the days.

  39. REPay
    Posted February 13, 2012 at 1:30 pm | Permalink

    One nonsensical government practice is the perceived “duty” to spend the allocated budget, in case next year’s budget is cut.

    Yes Minster was a documentary as much as sitcom. Jim Hacker did have some good ideas…How about no honours or bonuses in any department that does not cut expenditure by 2% per annum for the rest of the parliament.

  40. John B
    Posted February 13, 2012 at 1:40 pm | Permalink

    “Why does the public sector find it so difficult to cut spending?”

    As a businessman Mr Redwood you should have that answer.

    First there is no price system for Public Services,so it is impossible to determine whether the value of output exceeds the value of input or vice versa.

    Second: no way of knowing if anyone actually wants to buy the output.

    It is then impossible to use the normal business tools of productivity and efficiency either to maintain the value of output whilst reducing the value of input, or maintaining levels of input whilst increasing output.

    Politicians and bureaucrats have no concept, and need none, of maximising value of output for the advantage of those who provide the investment, in this case the taxpayer, or whether the output is needed/wanted, because unlike true investors taxpayers are not at liberty to withhold their investment or put them elsewhere, and the recipients of the output have no choice but to take what is on offer and the ouput is there whether they use it or not.

    And of course the jobs of the politicians and bureaucrats – dare we use the bonus word – are not in any way linked to the differential between input and output.

    The short answer to your question is: they don’t care because they don’t have to care.

    The solution?

    Denationalise the Public Sector as far as that is practical – that means most major things except, for example, defence, security – and start a free market where the recipients of the service the taxpayer – can make choices, so money follows in the wake of the choices they make. If few or no takers for the output, shut it down.

  41. Marc Cranfield-Adams
    Posted February 13, 2012 at 1:44 pm | Permalink

    Whilst I find myself increasingly in agreement with your position on a range of issues, and far more than I ever would in the 1990s, I nonetheless don’t recall you making many cuts to the budget of the Welsh Office.

    Reply: I was heavily criticised for saving taxpayers money and sending the surplus back to the Treasury.

  42. Phil Richmond
    Posted February 13, 2012 at 1:46 pm | Permalink

    John – I work in the private sector and have seen with great leadership how my department has turned around in the last 5 years. It starts at the top and as a businessman you of-course know that.
    At the moment we have terrible leadership in the form of Mr Cameron. What has he ever achieved in the “real” world? This is a man who only cares about political positioning because he thinks it is what will get him re-elected. (although he couldnt even win against Gordon Brown)
    Our country is finished unless Cameron & Osborne go!

    • Bob
      Posted February 13, 2012 at 9:22 pm | Permalink

      “…he couldn’t even win against Gordon Brown…”

      A fact that should be of great concern to his party.

      If it hadn’t been for the bigoted woman incident, it could have been even worse for the Tories.

    • APL
      Posted February 17, 2012 at 8:47 am | Permalink

      Phil Richmond: “At the moment we have terrible leadership in the form of Mr Cameron. ”

      Cameron was John Redwoods preferred candidate.

  43. David John Wilson
    Posted February 13, 2012 at 1:48 pm | Permalink

    I thought that there was a rule introduced that for every new regulation introduced the government would get rid of at least one other. Is there any evidence that this has happened? Is there a list regulations that have been lost under this rule? What have been the resulting cost savings?

  44. Zorro
    Posted February 13, 2012 at 2:06 pm | Permalink
  45. Richard Jenkins
    Posted February 13, 2012 at 2:10 pm | Permalink

    I spent several years as a senior financial manager with an American multinational where the control of expenses was close to a religion. Yet even there one could sometimes find, in the field of expenses, sacred cows and secret gardens. Without the aggressive and very detailed budget reviews that were routine in my former employer, I dread to think of the herds of sacred cows running wild on the untamed secret prairies of UK public expenditure.

  46. Steven Whitfield
    Posted February 13, 2012 at 2:22 pm | Permalink

    Mr Redwood’s analysis is very astute shining a light into this murky world . Without very strong leadership the rotten culture of government will never change. To change a culture within any organisation requires years of setting good examples from the top down to set out the right approach. So no chance under this useless coalition sadly.

    The way the system works it seems is that budgets are seen as a mark of the importance and status of each department. So if a council or government department manages to spend less money than it is allocated, it is seen as being less important. Thus if a department or quango gets to a month before the year end without spending the bulk of it’s budget it will burn off the rest of the money as quickly as possible. Unneccessary overtime, hiring more managers, buying new facilities.
    If the department has a surplus, the government will say ‘well if you managed in 2012 on X millions, you only need X millions this year. Heads will then roll. In this crazy system, waste is actively rewarded. Waste and inefficiency are locked into the whole rotten system.

    We need a man with a business brain in government to sort this mess out. John Redwood.

    ‘Redmeister’ for PM!!

  47. forthurst
    Posted February 13, 2012 at 2:26 pm | Permalink

    This is a political problem and cannot be blamed on civil servants, since to do so would be the acceptance of defeat. Much of what politicians do is driven by pressure groups including major donors rather than their own constituents. Much of what they do is pure treason when they deliberately import foreigners and give them special protections and privileges over the native people or when they fight wars for the benefit of foreign regimes; such policies cost money, cost lives, and make England less green and less pleasant.

    The HoC is very full of people who simply do not deserve to be there because they are insufficiently competant or loyal to their constituents. The fact that the civil service is inefficient is a direct result of the failure of the democratic accountability of politicians to their constituents since otherwise they would be far more pro-active in ensuring reductions in the cost of government. How do politicians guage their constiuents’ priorities? Letters? In this day and age? Instead of using their websites for showing pictures of fair openings etc, how about for voting on local and national concerns so that politicians have more than anecdotal (ie this website) insights into constituents’ concerns?

  48. cosmic
    Posted February 13, 2012 at 2:28 pm | Permalink

    Commercial companies have to produce goods and services that people want to buy and their shareholders have a say and can sell the shares. Certainly, it doesn’t work perfectly with celebrity CEOs and all the rest, but it’s essentially true.

    Governments can’t go bust in the same simple, direct way and they can do things like print money. Feedback from the shareholders and customers is feeble. Taxes are gathered with the threat of the law.

    We have a history of government projects which have been hugely expensive and pointless but which it’s been easier to soldier on with than to fold. The Groundnut scheme is a good example, as are numerous government IT schemes.

    You have to look at the given and implied objectives which politicians and department heads have. If it’s clear that they are essentially rewarded for expanding the department and spending as much as possible, they are going to perform to those objectives.

    I would say that stopping this requires a fundamentally different arrangement to a system where we elect governments every five years, which are essentially similar and usually seem to find it easier to pursue the follies started by their predecessors than can them.

    If you are spending someone else’s money on something they’ve got little say in whether they want or not, there really isn’t any clear check, and you tend to be rewarded for spending as much as possible, we are likely to end up with exactly what we see.

  49. libertarian
    Posted February 13, 2012 at 2:33 pm | Permalink

    Zero based budgeting should be mandatory in ALL public organisations funded with taxpayers money

  50. Graham Hamblin
    Posted February 13, 2012 at 3:02 pm | Permalink

    It is the glossy self congratulatory magazines that, the County, Borough and even Parish Councils produce and deliver to households in this area that I object to. Any letter of complaint is met by another load of justification.

    I had a walk round a few weeks ago noting the drains in the road and over half of them were full to the top with soil and rubbish and obviously hadn’t seen a gully machine for a very long time.

    Apologies for being a bit off message.

  51. stred
    Posted February 13, 2012 at 3:02 pm | Permalink

    Off subject re. the current pear shaping of the NHS re vamp, last year you ran a discussion on this and it may be time for another. Some of us were not too keen on handing the management over to doctors and pointed out that they would probably be unable to run it. Now they too seem to agree and some highly paid NHS officials have been made redundant. The process seems to be developing into a benefit match for management consultants who are even better at steering money into their pockets than medical consultants, the system possibly becoming even more expensive than before.

    In my entry, I suggested just putting willing doctors on the board of Trusts and this has recently also been proposed by Phil the MD in Private Eye. Maybe this would be a way out of the mess. It might be possible to get the redundant managers back without paying all their redundancy payments with a bit of luck.

    Some of us suggested copying other countries and putting the power to chose doctors and hospitals directly in the hands of the patients.

    We have recently been following an old friend’s fortune with the NHS. 5 months ago he fell and cracked his ribs. He also had to have treatment for an eye condition and a skin tumour. During all of this time he has been unable to sleep in a bed and has been propped in a chair because of the pain. His skin operation failed and needs doing again. The eye condition has lead to the sinking of the eye in its socket. The cracked ribs were X rayed and he had to wait 3 weeks for the result and was given the all clear.

    None of the specialists spotted that he possibly had cancer until his glands enlarged and following a scan they have now found that he has 3 unhealed cracked ribs. Not one of the doctors suggested any pain relief and even after an investigative operation he was given no pain medication following his dicharge the next day. The whole system seems to be full of uncaring individuals who are only interested in their own speciality and wish to get the patient of their hands as soon as possible. Parts of the NHS are a disgrace. I should add that the Trust is one of the worst indebted to a PFI hospital.

  52. Lindsay McDougall
    Posted February 13, 2012 at 3:08 pm | Permalink

    You did the right thing but this is not where the main savings are to be had. You need to acknowledge that spending by the NHS and by the Social Services is out of control. These are nasty Stalinist monopolies and in many instances the ‘services’ that they provide are neither wanted nor welcome. Getting rid of the NHS centralising bureaucrats is a good start but it is very far from the end of the matter.

    The NHS spends a fortune on drugs and rarely asks questions such as ‘Is there a cheaper alternative that is nearly as good?’, ‘Are the side effects so bad that the cure is worse than the disease?’ ‘Are we prolonging the life of this person so that he/she can become a victim of senile dementia in a few years time?’ I can well remember my father’s final days. He had been a doctor all of his life and he knew that the end was near. One of the last things he said, in considerable exasperation, was ‘Why can’t these bloody people let me die?’

    As for the social services, they are now depriving parents of their children in record numbers. It is a reaction to the Baby P case. However, they are now taking away children who are ‘at risk of emotional abuse’. In other words, daddy might shout at them too much. Aw, diddums. Bear in mind that the prognosis for children taken into care and fostered out is pretty poor.

  53. David Peddy
    Posted February 13, 2012 at 3:14 pm | Permalink

    Spot on. Added to which the majority of poeople employed in the Public Services are not good buyers; often have no knowledge of what they are buying ( MOD & NHS) and we now have the ludicrous situation in the NHS which is cutting back so heavliy and not buying new equipment if it can possibly help it that we are employing ,at vast cost , people in Procurement/ Supplies not to buy !!! get rid of them and there would be some money to spend on replacing stuff

  54. Posted February 13, 2012 at 3:21 pm | Permalink

    “Zero Base Budgeting” is how it used to be described.
    As is mentioned often a career graveyard is attached.

  55. Mike Fowle
    Posted February 13, 2012 at 3:28 pm | Permalink

    You are so right, John. What a pity your common sense is not being put to use at a higher level in Government. It is enormously difficult to change the system – not only is there no connection with commercial reality, but nothing compares to the virtuous feeling of spending other people’s money. I think Ben Gummer’s idea of tax statements showing how our tax is spent might help. Those who will brook no criticism of the NHS for instance might feel a little differently when they see (if on average earnings of £26,000 pa) that £1,000 has gone to the NHS.

  56. Richard
    Posted February 13, 2012 at 3:44 pm | Permalink

    A quick look throough the Sunday Times jobs supplement shows there seems to be plenty of money for recruitment in quango land:-

    Natural England need a Chief Executive salary “up to £141,000”
    An NHS trust looking for a Chair 12 days per month £45,000 pa
    Ofwat looking for a Chair £100,000 per annum for 3 days per week
    The Civil Nuclear Constabulary looking for a Chief Executive salary circa £100,000 per annum
    The Woodland Trust looking for a Director of Communications £65,000 to £75,000 pa
    A NHS trust looking for a Director of Finance and Information offering a “substantial six figure salary”

    I only quote these vacancies because in contrast the school crossing patrol person outside my local school has been sacked, libraries near me are threatened with closure and a Council near me is considering turning off street lighting at night all apparently to save money “due to the cuts”.

  57. Andy
    Posted February 13, 2012 at 4:09 pm | Permalink

    Talking of saving money, I still have not heard a good reason not to abolish the road fund licence and its associated bureaucracy. By putting the price of this tax on petrol you would:

    1) Stop all evasion
    2) Make high mileage drivers contribute more than low mileage ones
    3) Make those with large engined polluting cars pay more than people with efficient cars
    4) Save 1000’s hours of police time in chasing evasion
    5) Save 1000’s hours court time prosecuting evaders
    6) Remove a layer of admin that all car drivers have to go through once a year to renew their tax disk
    7) Save millions by getting rid of the department salaries, HR, IT, Building, grounds costs etc.

    Seriously John, what does the road fund licence deliver that could not be dealt with by putting the cost on fuel? To check if driver is insured (Its one potentially useful function) can now be done automatically via the number plate.

    • Bazman
      Posted February 13, 2012 at 7:40 pm | Permalink

      This madman is volunteering to pay more for petrol! What was your reason again?

    • Bob
      Posted February 13, 2012 at 9:32 pm | Permalink

      What about the problem of people leaving derelict vehicles parked on public roads?

      • Bazman
        Posted February 16, 2012 at 7:49 pm | Permalink

        That’s just cars left by shoppers Bob.

  58. Posted February 13, 2012 at 4:21 pm | Permalink

    I agree with the literature that’s not required and costs a bomb to tpoduce but they are nevertheless produced for the council, a coffer no doubt never looked at that is expendable. Bromsgrove Council is a joke, it’s run for the Conservative PARTY ONLY, THE PEOPLE do not come into their deliberations…can we not do away with politicians belonging to a party of people and just get on with supplying the public services we all pay for?
    1.Drains/potholes/pavements-we will repair all within 2 weeks.
    2.Hospitals-we will supply treatment immediately, if not then within 48 hours.
    3.Elderly-they will be looked after and ensure they do not starve or go cold.
    4.Children-they will receive an education not biased to religion or political.
    5.Education-we will supply education via teachers that must teach from a corriculem and not their own.
    6.We will ensure young people are taught a trade.
    7.Elderly again-they are given money to give a feeling of not wanting.
    8.Energy-prices will be agreed upon and if companies providing increase above reason they are heavaily taxed so they must reduce prioces.
    9.All councils must have a public scrutiny committee made up from the the public.
    10SAME on Standards.
    ..is that enough to go on with?..after that u can look after the rich!

    STOP TREATING US WORKERS LIKE MODERN DAY SERFS-ONE DAY WE WILL SAY ENOUGH IS ENOUGH..THAT DAY CANNOT BE THAT FAR AWAY?

  59. Posted February 13, 2012 at 4:43 pm | Permalink

    I’ve been pondering this for quite a while.

    The area in which this kind of behaviour was most obvious under the last government was in the setting up of more and more quangos and advisory and management bodies. Rather than reform what was already there, they would set up a new body next to the old one – bringing in the latest ICT, management and consultation systems. The brightest and best from the old bodies would then move to the new ones along with upcoming talent and the old body would be left to wilt or perhaps continue with some duties.

    It was extremely costly but, on the other hand, we did see some real improvements in the way the parts of the public sector were operating as a result.
    And so I found myself asking precisely the same question as you John and my insights were as follows:

    It is not easy to reform public sector bodies – the kind of processes going on under the last government were much easier to achieve. However such reform was going on in Scotland and I was curious to see why it was possible there and not here. The two driving factors seemed to be the strength of the professional bodies in the public sector and level of intelligence and experience of the politicians.

    If you appoint inexperienced, ideologically driven politicians they are not capable of driving positive change. Efficient change needs to be robustly consulted and trialled and consulted again to work.

    I think the question you are asking is, effectively, Why can’t we have this in England? We seem to lurch between the politicians who set up parallel bodes and the ones who shut down the old bodies and set up worse, ideologically driven bodies without ever getting government which is capable of intelligently addressing the problems with the current bodies and reforming them. Efficient reform will not happen if it is led by politicians who listen to the loudest complainants and haven’t the experience to see the wood from the trees and it will not happen unless it is constructed by people with substantial experience in the areas being reformed and education to at least MBA level.

  60. Julian
    Posted February 13, 2012 at 4:47 pm | Permalink

    The way that public sector managers spend cash mirrors the way that executives in the PLCs give themselves excessive bonuses. Both groups of managers have effectively wrested control from the “owners”: the general public and the shareholders respectively.
    Separately but related is the public sector bonus issue. When did the idea of bonuses spread to the public sector? Up to say the early 1990s there was a clear trade off: public sector workers accepted lower salaries for security and a higher pension and the risk takers went into the private sector. Now the public sector gets it all: higher average salary, pension and job security!

  61. Barbara Stevens
    Posted February 13, 2012 at 5:49 pm | Permalink

    The problem is all different governments have done what Mr Redwood as described, and done nothing about it. Its now become the norm to spend as much as possible and not look for savings at all. Look at the MOD for an example. Whitehall is another. Local Council’s are equally to blame.
    Take for example ‘Private Rented Housing Sector’ which all council’s have now we a majority of private rented accomodation; these are operated within exsisting councils. At one time they were so small know one knew they were there, now the complaints they recieve about private landlords is so large they can hardly cope with the work load. Bad housing is such they are now an important essence of hope for tenants.
    This is paid or via the Council Tax which we all contribute, is this fair? I don’t think so, when the complaints are about bad landlords and bad housing. Therefore I believe all private landlords should be registered with the Councils, or, liceneced. They should pay for the licences which would help pay for the work load they have created by their bad homes needing repairs. Why should council taxpayers have this loaded upon them while they are in it for profit? There is waste in government and Councils, but MPs, Councillors, and government do little to ease the burden upon Council tax payers. The 2004 Housing Act is quite good, but Councils need more powers to tackly these landlords more effectively. By charging for a licence, and having the power to revok a letting licence would make them do the repairs for unsuspecting tenants, and the householders, who live by they unrepaired properties. They too, suffer loss of value by these landlords.
    There are then lots of ways to save money for taxpayers, it needs of cause good MPs, and that’s where we are stuck, we lack a parliament which is full of them with no such caperblity. Which in turn means we have no faith in governement.

    • stred
      Posted February 14, 2012 at 9:20 am | Permalink

      Last time a survey was carried out, tenants were more satisfied with private lettings than coucil housing. Most landlords have an interest in keeping their property in good condition and have to update them in order to attract good tenants.

      Bad landlords tend to be those that take problem tenants and the rate of delapidation is then beyond belief. Licencing will simply put costs up. If councils do not carry out inspections or resolve matters on properties that attract complaints, how are they going to manage when they have to inspect every property?

      It is this sort of blinkered thinking that creates the ridiculously over blown bureaucracy that is characteristic of the UK.

  62. Steven Whitfield
    Posted February 13, 2012 at 6:09 pm | Permalink

    Mr Redwood’s analysis is very astute – shining a light into the murky world of public spending . Without very strong leadership the culture of government will never change.
    The correct approach can be summed up easily – every public servant should endeavour to spend public money as if it was their own. This should be at the core of government policy – delivering real value for money. And by real value I mean delivering tangible benefits that people value – not for example more PC schemes to further the ‘equiality’ or ‘diversity’ agendas of the left which seem to do more harm than good.

    It seems that the size of a budget is now viewed as a mark of importance and status amongst town hall beaurocrats. . So if a council or government department manages to spend less money than it is allocated, it is seen as being less important throught the eyes of government.
    Thus if a department or quango gets to a month before the year end without spending the bulk of it’s budget it will burn off the rest of the money as quickly as possible. Unneccessary overtime, hiring more managers, buying new facilities.

    If the department has a surplus of cash , the government will say ‘well if you managed in 2012 on X millions, you only need X millions this year.. In this crazy system, waste is actively rewarded. Waste and inefficiency are locked into the whole system.

    We need a man with a business brain in government to sort this mess out. John Redwood.

    Redmeister for PM!

  63. Sean O'Hare
    Posted February 13, 2012 at 6:32 pm | Permalink

    So different from the MoD department I worked in the mid 60’s. There were about half a dozen magazines the department subscribed to and they only one copy of each. It circulated in rank/grade order so by the time it got to the bottom of the pile (me) it was at least two months old! Even later if staff were away on business or on leave as the magazine just sat in their in-tray until they returned. If we were genuinely interested in keeping up to date with a particular magazine we bought our own copy.

  64. Steven Whitfield
    Posted February 13, 2012 at 6:51 pm | Permalink

    Mr Redwood i’m sure your on on this case already, but could more be done in terms of asking ‘awkward questions’ of government ministers regarding spending decisions?. Surely the ministers are ultimimtely responsible for setting the overall budget and helping to create the right culture of keeping waste is kept in check.

    There must be thousands of examples of incompetence and gross overspending that should be made public to highlight the issue -particularly as the message of ‘austerity’ is staying firmly on the agenda.

    My view is we need a panel of high calibre, succesful business people going into the NHS , MOD and local government using their knowledge of best practices in the private sector.
    There remit should be to to explore the gap between private and public sector productivity and customer satisfaction when appropriate. These experts could report to a committee chaired by John Redwood who would make recomendations to ministers based on the evidence presented.

    Back in 2007 the businessman Gerry Robinson made a documentary called ‘Can Gerry Robinson save the NHS’. Did anyone in governement ever listen to him ?

    http://www.open.edu/openlearn/money-management/management/leadership-and-management/managing/gerry-robinson-on-management

    Redmeister for PM!

  65. Jon
    Posted February 13, 2012 at 7:06 pm | Permalink

    When the economy is not growing and lets face it the post war boom ended in the late 1990s, the “base cost plus growth” has no place anymore.

    Add to that increasing costs from ageing population, medical advances, fuel cost increases a huge cultural shift in the public sector is needed.

    When the private sector needs a huge cultural shift there are workshops, conferences, change managers etc. Its an upfront cost but it delivers cost reductions and gets the workforce pointing in the right direction.

    The public sector, not just in this country but also in Europe, can’t carry on in the same way as before.

    Gordon Brown masked the end of the post war boom through credit and borrowing. Its not a temporary change its a long term if not permanent change.

  66. Steven Whitfield
    Posted February 13, 2012 at 7:12 pm | Permalink

    On the subject of the NHS

    http://www.open.edu/openlearn/money-management/management/leadership-and-management/managing/gerry-robinson-on-fixing-the-nhs-lessons-learned

    (please allow this link Mr Redwood)

    Hat tip to the Open university documentary.

    “And I was left with a very frustrated feeling that actually quite small sums of money properly and sensibly spent could have produced very large results in terms of reduced waiting lists, and actually very large sums of money had been thrown at the NHS and produced very little”.

    What do you think the biggest lesson the NHS can learn from this project?

    ‘I think what the NHS needs to learn is that actually you don’t solve problems by throwing money at it, and not every problem actually needs money to solve it. That’s the first lesson. Secondly, to get out of their heads the idea that things have to take three years to do and get into the idea that there is a series of objectives that we need to do now, and that we’ve got months, not years to do it. Those two things, I think, would have the biggest single impact on the way that the Health Service is managed’.

    It’s a pity that David Cameron didn’t bother to read and learn the lessons of Gerry Robinson’s 2007 report – he might have reflected on his decision to further increase NHS spending.

    Not once did Gerry Robinson complain about a lack of money in the NHS. So why the obsession with increasing NHS spending when the evidence is what is spent is wasted ?

    Earth to David Cameron – stop stuffing the NHS with more and more cash your slowly killing it with your liberal minded kindness.

    I’m convinced that the practice of equating increasing spending with better care is part of the problem – not the solution.
    The NHS ‘child’ has now become very flabby and sick indeed, fed on a diet of government sugary treats.

  67. Richard Hobbs
    Posted February 13, 2012 at 7:23 pm | Permalink

    This strikes a chord, John. I was always taught that if you look after the pennies then the pounds will look after themselves so, if you look at this across the whole Civil Service, then the cost of magazines etc not actually required for business would certainly add up – especially if you included the time taken to read them all. My experience was that a certain number of various magazines were purchased and then distributed on a circulation list, each with perhaps 10 names on them. How much would these have cost in the end?
    Now, if they would save all this money, perhaps it could be put to uprating the frozen pensions of some of us living overseas!!!

  68. Bazman
    Posted February 13, 2012 at 7:46 pm | Permalink

    Where you not even a little tempted to have some specialist magazines ordered on such subjects as jazz and Russian literature John?

  69. Terry
    Posted February 13, 2012 at 8:00 pm | Permalink

    Dear John
    Thank you for the enlightenment as to the wretched waste that goes on in the Kingdom of Whitehall. There is no doubt, to the man/lady in the Street that too much of OUR money is wasted on the frivolousness nature of Civil Servants.
    After all, it’s not THEIR money, it’s not REAL money – it is there to be spent.

    This country really needs a non-Governmental committee to evaluate and CONTROL the unfettered spending regimes that have manifested themselves within the Civil Service over the past 50 years or so. We, the British citizens, are not getting value for OUR money and we want an independent audit.

  70. Do we need the BBC?
    Posted February 13, 2012 at 9:16 pm | Permalink

    Tis simples, yes? I have seen the public and private sector first hand.

    You can’t fire people in the public sector so very low quality people persist. When trimmings are required to the workforce, the best people leave because they are the only ones with sufficient skill and confidence to cut it in the real world.

    The best people usually leave in the cycle at a time when the job they left is a poisoned chalice (all cutz, see?). No decent people will therefore apply at that time. The job needs filled though. The crap annoying people therefore get promoted into those jobs to get them out of harm’s way (the front line is where crap people can really do damage in the public sector, after all).

    The public sector is therefore anti-Darwinian. Only the worst survive and thrive. It therefore gets gradually worse management by unsackable people who know they will never ever get a job as cushy as this ever again. Given that there is an -ism for everything now, they will deploy these like nuclear weapons behind union-men infantry, ensuring jobs for life for both parties. The mediocre will then seek out and crush anyone who threatens to upset the golden applecart through excellence. Excellence exposes them, you see. It is a sorry tale.

    • Bazman
      Posted February 16, 2012 at 7:59 pm | Permalink

      Interesting to hear what you would say if someone came to you at work with such a stupid generalisation? Or what you would say?
      “Massive problem BBC. Drugs. What strategy should we take? Nieeeghhh! They shouldn’t take drugs! ” Nice input BBC”
      This is a man who claims he has a job so important that we would be begging him to work should we face Armageddon. You’re’ sacked BBC. At least by me.

      • Do we need the BBC?
        Posted February 16, 2012 at 11:42 pm | Permalink

        Blimey. I had heard that today’s schoolchildren were illiterate but I didn’t realise things were this bad. Perhaps starting sixth form will improve matters.

        Thank God for Michael Gove.

        • Bazman
          Posted February 17, 2012 at 9:11 pm | Permalink

          Sorry? Ehh? What? You’re not in the pub now BBC.

  71. Ian_UK
    Posted February 13, 2012 at 11:44 pm | Permalink

    I got this link from the Conservative Home daily feed, along with the story about the massive increase in spending by MPs. Perhaps John should start there and let the MPs set a good example.

  72. Derek Emery
    Posted February 14, 2012 at 4:43 pm | Permalink

    My understanding is that UK PLC never had an overall balance sheet until possibly quite recently, and there are virtually no chartered accountants at high levels in government. It is reported that there were only sorts of accounts for each “division”.
    If this is true is then it is not surprising the the UK regularly gets in a financial mess. I cannot believe there is any big company that does not have centralised accounts for the whole business. How can government take meaningful financial decisions if it does not have an accurate overall picture of its financial status? The board (in this case the cabinet) should surely have a chartered accountant to call on?
    There are also virtually no proper project managers so you can hardly expect public projects to be a success. Government appears to be decades behind business.

    Reply: I did construct a balance sheet in opposition for our use, and the Coalition government has produced a more accurate one now in office.

  73. Conrad Jones (Cheam)
    Posted February 20, 2012 at 11:40 pm | Permalink

    Does anybody actually read these magazine periodicals or do they just request them to impress their colleagues? It is clear that when someone goes into a bar – and orders a drink – thinking that they will have to pay for it; they will order a cheap shandy. As soon as someone says they’re buying, the order will quickly be changed to a large malt whiskey (matured for 12 years).

    Define Public Sector:

    Does this include Royal Bank of Scotland and Northern Rock?

    Should we take more notice of what Banks Invest our money in?

    Take this scenario for instance:
    Bank A Invests in Weapons Manufacfturuer
    Weapons Manufacturer makes gruesome bombs that can kill and maim inocent civilians.
    Gruesome Weapons get sold to Middle East Dictator and Arms Manufacturer pays Bank A back with interest.

    Everyone’s happy; Bank A gets interest payments on its loans, Weapons Manufacturer makes profit on sales of it’s products, Middle East Dictator has new toys to play with.

    Middle East Dictator’s civilian population rises up (with a bit of outside encouragement) and Middle east Dictator wants to suppress uprising as soon as possible, possibly knowing that outsiders are involved. Lots of civilian casualties occur after New Weapons – created by European Weapons Factory, funded by European Banks, encouraged by Governmental Export Agencies for overseas trade; resulting in global outrage of Dictators use of cluster bombs.

    My question would be; “What exactly did the UK Government think would happen when a UK Bank (amongst others) helped finance cluster bomb manufacturers which were then legally sold to a Middle East Regime suspected of blowing up a Pan-Am Aircraft in 1988?”

  74. Conrad Jones (Cheam)
    Posted February 21, 2012 at 12:00 am | Permalink

    Why does the UK Government find it difficult to create the Nations money instead of letting Private Banks do it – who then charge excessive interest for it and direct newly created money into non-productive investments?

    Only 8% of Bank Lending goes into productive enterprises, the rest goes into inflating House Prices, Arms Manufacturing and other dubious overseas investments.

    “Why does the public sector find it so difficult to cut spending?” – by this do you mean that Austerity is the solution to our debt based money supply problems?

    With a sound monetary system (where the Government created all the money in the system, and Banks could not), you would be right. Many people think that is how money is created – solely by the Government.

    Only 3% is created by the Government, the rest being credit – on loan from Banks, who need their pound of flesh. It’s a Catch 22 situation, we cannot afford to be in debt, but we cannot afford to reduce the money supply, therefore we must increase the debt to maintain the money supply. Austerity measures are not working because the Bank of England has just announced that it is to inject a further £50 billion into the Banks to encourage lending and keep interest rates low. The money supply is collapsing precisely because – ironically; we do not have enough debt due to Banks being the main source of money through lending.

    Therefore, our system demands: waste, consumption and debt – otherwise the money supply shrinks and we go into a Depression. Saving money through so called austerity will – and is proven to; deepen the Recession.

    Reply: The governemnt is in the process of creating £325 billion of new money, so I do not recognise your figures.

  • About John Redwood


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

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