The Treasury wants to look at 5% cuts across Whitehall

            The  news yesterday that the Treasury is asking all departments to draw up a contingent cut of 5% each is an interesting development. It only applies to about half of public spending, but is still a serious sum. The stated purpose is to have cuts available should the need arise to offset other increases in spending.

             Readers will know that I advised the government to spend around £30 billion or 5% less in the first year of this Parliament than they decided to spend. Where they put spending up  by 5.3% in their first year   I suggested keeping to a freeze.  Thereafter I accepted their profile of percentage cash increases, though I would have preferred a slower rate of increase in Year 2  and Year 3 and a faster one in Years 4 and  5. That would have saved us at least an additional £150 billion of borrowing over the five years compared to the government’s plan. I thought if we had done this there was a chance of getting through without the need for further cuts, and with a better prospect of a private sector led recovery.

              I hope the Treasury’s request will lead to a more informed debate about how much spending has increased by in recent years, and on where it could be reduced without damaging important front line services like hospitals and schools. It should also lead to a proper debate about why public sector inflation has been so high in 2010-11, and whether public sector inflation is now going to collapse given the pay freeze in place.

                 The government inherited a public sector that did not show good productivity growth, where quality and productivity were falling behind good private sector standards. We need to hear more from DWP about how they are reducing the error rate on benefits, more from each department about how they can manage numbers without incurring large redundancy bills, how they can do more in house without recourse to so many expensive external consultants, and how they can  dispose of surplus assets like property.

              We have spent two years mainly discussing how to squeeze more money out of the private sector by a wide range of extra taxes and public sector charges. Listening to Mr Cameron yesterday morning it sounds as if the government now wants to do more for all those who pay their own bills and have to pay these extra taxes. To do so he needs to get a better grip on value for money in the public sector. Let’s hope we can now have as much media interest in how every pound of tax is spent, as we have recently had in how it is raised.

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73 Comments

  1. Paul Danon
    Posted April 24, 2012 at 6:24 am | Permalink

    Absolutely. It’s the spending that matters. Most of us don’t need an annual tax-statement because we get monthly payslips and a P60. What we do need to know is where it all goes (including the money raised by fees, VAT and duties) and how much is additionally being borrowed.

  2. Alan Radfield
    Posted April 24, 2012 at 6:30 am | Permalink

    ‘Turkeys consider voting for Christmas’.
    I’ll believe that when I see it.

    • lifelogic
      Posted April 24, 2012 at 10:01 am | Permalink

      Indeed – the only input that can is likely to effect any control on efficiency are the elected MP’s and Ministers who should represent the voters. Alas the current batch of ministers already sound rather like actors reading the lines and lies prepared for them by Sir Humphrey or the EU high command.

      Once elected for five year the main input to Ministers are the civil servants and they are clearly the cause of the problem not the solution. MPs need to represent all the 80% who work for the wealth creating sectors they ignore them completely most of the time. (Other perhaps than the ones that hire MP lobby groups to perhaps get them some unfair advantage).

      • lifelogic
        Posted April 24, 2012 at 10:10 am | Permalink

        Government by the state sector, for the state sector, with the odd law passed to benefit certain (well funded) pressure groups at the expense of every one else. Usually on some spurious health and safely grounds. All cheered on by the over paid (by a factor of circa 10 at the top) BBC.

        No one sensible, looking at the laws actually enacted, could see it any other way surely?

      • uanime5
        Posted April 25, 2012 at 3:38 pm | Permalink

        You shouldn’t confuse the private sector with wealth creating sectors as parts of the private sector destroys wealth; such as the entertainment industry.

  3. Robert K
    Posted April 24, 2012 at 6:35 am | Permalink

    Excellent commentary! Keep up the good fight

  4. lifelogic
    Posted April 24, 2012 at 6:59 am | Permalink

    Just 5%? 50% could be saved in administration costs without any difficulty what so ever. There is unbelievable inefficiency and incompetence everywhere. Just fire one in two directly and make the rest cope.

    Constantly changing the names of organisations is a huge waste of money for a start. From, for example, learning and skills – young peoples learning – department of education or whatever it was changes every few months it seems.

    They are mainly just handing money out and could be called anything what so ever it matters not.

    To do the job properly needs a cap on redundancy payments above say £6,000. This would be a great help to the private sector too and would be bad for Lawyers (which is always a good thing). Why is it not in place now.

    Stop all advertising/indoctrination and just put all the information on a single web site.

    The problem is that no one in the civil service will ever make themselves popular by trying to saving money.

    Doubtless their first thoughts will be:- Clearly we need a new department of to organise this saving money what is the budget? Now let’s call the IP consultant and lawyers to see what names we can call it, get the designers to do a logo design and order the stationary. Can we lease that nice posh office just round from Victory station – that would make my commuting so much easier? Now lets get the survey people to survey everyone in all the government departments with a huge individually designed questionnaire on cost savings.

    • uanime5
      Posted April 24, 2012 at 6:49 pm | Permalink

      Randomly firing people will just reduce moral and make all department even less efficient. It also won’t work in schools or hospitals.

      Why should some who has worked at a company for 6 years only get a redundancy package of £6,000? Also how is this bad for lawyers?

      • Bazman
        Posted April 25, 2012 at 6:34 pm | Permalink

        6k for six years? Legally about 3.5 k. Why should a company not pay redundancy or compensation for an employee who is not needed anymore through no fault of their own. Why should the state have to make up the shortfall?

  5. Martin
    Posted April 24, 2012 at 7:10 am | Permalink

    Why is it that the DWP is the one that gets the kicking about errors?

    The Treasury & BofE are not exactly infallible. As for the Ministry of Defence they have a procurement record that few would boast about.

    Reply: Because they are the largest spending department paying out huge sums in benefits to millions of people.

    • peter
      Posted April 25, 2012 at 9:19 am | Permalink

      I had to chuckle when I saw on Newsnight that the UK spends around £20 Bn PA on housing benefit – Absurd!

      Defence costs £30 Bn and the govt is paying top level benefits to people which often amount to 10-20 K PA more than I earn! No wonder we’re broke

  6. Andy Man
    Posted April 24, 2012 at 7:16 am | Permalink

    5% is nowhere near adequate even if it was a real cut not just a paperwork exercise. Given that the public sector produces nothing it is at best a necessary evil for basic services. The problem is that it has grown to a massive parasitic growth on the real economy which it is slowly killing. Actual cuts should be 20%+. I understand that the media and all the armchair economists, champagne socialists and anybody that thinks the government has a limitless supply of real money would scream blue murder if any real cuts were made but at some point the music will stop and reality will show itself. That’s when the fertilizer hits the air conditioning.

    • Denis Cooper
      Posted April 24, 2012 at 1:26 pm | Permalink

      But it’s not “given that public sector produces nothing”, so the rest of your argument falls.

      • lifelogic
        Posted April 24, 2012 at 7:37 pm | Permalink

        Indeed the public sector does produce something sometimes and does a great harm at other times. This through over regulation, endless daft regulations, absurd tax levels and absurd laws – the net effect is probably negative, beyond basic law and order and defence anyway.

        • peter
          Posted April 25, 2012 at 9:14 am | Permalink

          I agree there are many parts of the public sector that are far too big and expensive but to simply say most public services serves no purpose beyond law and order and defence is absurd.

          Is health not important? (though i would fund it differently) through compulsory health insurance

          Is education not important?

          Do the infrastructure services provided by councils not count (though I would want councils to outsource those tasks)

          There’s a lot of things the government do that would be impossible to take away – the thing to focus on in my mind is not to stop doing them but find ways of getting them done cheaper and better which normally means outsourcing thus reducing the state pay roll and generating business.

          • Bazman
            Posted April 25, 2012 at 6:35 pm | Permalink

            Any ideas as what to do with those who cannot or will not buy a policy? No you have not.

  7. colliemum
    Posted April 24, 2012 at 7:19 am | Permalink

    You conclude today’s post with this pious wish:

    “Let’s hope we can now have as much media interest in how every pound of tax is spent, as we have recently had in how it is raised.”

    Sorry, but I have to say ‘fat chance’!

    The media, BBC first and foremost, followed by the trade unions, will describe this as harsh, unjustified cuts affecting The Poor™.

    The only way this government can regain the initiative is by publicising the actual numbers of the departmental budgets before and after the cuts, so that we all can see if, for example, the MOD bureaucrats are going to buy fewer fashionable cushions for their expensive office chairs, or if they cut back on repairing squaddies’ living quarters.

    Reply: The government does publish a vast amount of information on how much it spends and what it buys.

    • colliemum
      Posted April 24, 2012 at 6:21 pm | Permalink

      Thank you for replying, John.

      Yes – the government does publish vast amounts of information on spending.
      My point was and is that the media are not using that information. That’s why I think your hope is misplaced.

  8. lojolondon
    Posted April 24, 2012 at 7:21 am | Permalink

    Any connection to the £10b or more that we are foolishly blowing with the IMF??

    • outsider
      Posted April 24, 2012 at 7:18 pm | Permalink

      No. To be fair, Mr Osborne explained clearly that we shall simply convert £10 billion of our foreign currency reserves, perhaps from euros, into IMF money. This has virtually no implications for taxpayers unless the IMF cannot repay, which is if anything less likely than the UK government defaulting.

  9. Lord Blagger
    Posted April 24, 2012 at 7:39 am | Permalink

    Deficit – 30% of tax revenues.

    5% is peanuts.

  10. Ferdinand
    Posted April 24, 2012 at 7:53 am | Permalink

    Those are well considered words about central Government but much greater emphasis must be put on local government to cut costs. Councils are fighting hard to retain staff and activities by raising revenue from current and extra charges. The 5% cut should also be on Local Government and an instruction that there must be no increase in council tax or any other charges. In other words taxpayers will see a 5% reduction or thereabouts in their payments to local councils.

    • uanime5
      Posted April 24, 2012 at 6:52 pm | Permalink

      Expect libraries to be closed as a result of this cut. You can’t reduce a budget by 5% and expect it to have no negative effects.

  11. Lord Blagger
    Posted April 24, 2012 at 7:53 am | Permalink

    How about media interest into the hidden government debts?

    I remember you making an election promise to publish all the debts. So far nothing on the state pension, state second pension debts.

    Only move is to steal everyone’s state second pension entitlements. Tory policy – Nice.

  12. norman
    Posted April 24, 2012 at 8:04 am | Permalink

    Don’t listen to anything Mr Cameron says, judge him on actions and policy. You can only make so many good speeches, and I freely admit he is an excellent orator, that lead to nothing before people become jaded and dismiss it as another in the ‘record Urals tractor production’ category.

  13. Brian Tomkinson
    Posted April 24, 2012 at 8:22 am | Permalink

    Cameron and Osborne have wasted the opportunity they had in the first two years to seriously tackle the deficit. Even you, who are much more prudent than they, would have increased cash spending over this Parliament. The £150billion less borrowing you presumed under your plans would have meant that the debt would have been forecast to grow to £1200billion instead of £1350 billion or 71% rather than 80% over 5 years. Therein lies the problem. None of you wants to actually really reduce government spending which ballooned under Brown. As for 5% “more cuts” would these be more of the same sorts of cuts that see housing benefit rise from £21billion to £23billion as declared by Grant Shapps on ‘Today’ this morning? The only “cuts” are reductions in future planned increases. Ministers still talk about “paying down the debt” something they are most certainly not doing. Why can’t they stop lying? I say this because they must know that this is untrue and if they don’t they shouldn’t be in office. Then again this lot shouldn’t be in office.

    • waramess
      Posted April 24, 2012 at 9:57 am | Permalink

      @Brian Tomkinson. This unfortunately just about sums it all up.

    • Julian
      Posted April 24, 2012 at 11:41 am | Permalink

      Good point Brian.

      As a citizen, I do not know which scares me more. That our elected representatives in government are deliberately lying to us about “cuts” which have not happened, or that they believe that have cut when they haven’t.
      So they’re either malicious, or incompetent. This does not bode well.

    • The Realist
      Posted April 24, 2012 at 6:42 pm | Permalink

      Spot on sir! I have been ‘ranting’ for two year plus that the political class will fail us yet again!

  14. Mark
    Posted April 24, 2012 at 8:55 am | Permalink

    I was astonished to see that Mr Alexander was calling for monthly data on departmental spending. No normal business of any size survives without proper management information, and yet in the 21st century we appear to have government that attempts to do so.

    This information shouldn’t simply be made available to the Treasury, it should be publicly available on every departmental website. The Treasury (or OBR) should provide summary data that can be drilled down.

    It is very late in the day to be contemplating some cuts, especially given the ongoing increases in real spending we have had. Unfortunately the public seem to think that there have been cuts already, rather than reallocations of spending priorities to budgets such as aid which provide no obvious benefit to taxpayers. It might be better to ask for ranking of much greater quantities of spending, so that the natural defence of the Civil Service to propose areas for cutback that the public and politicians find unacceptable for cuts can outgunned, and so there can be some proper debate.

    • alan jutson
      Posted April 24, 2012 at 9:27 am | Permalink

      Mark

      Agree with many of your comments, certainly about monthly accounts.

      But is it really a cut that is being proposed.

      From information I have heard, all they are being asked to do is put aside 5% of their Departmental budget as a reserve amount, so they can use it instead of going back to the Treasury for more money, from its reserve Account.

      How many Departments will still have money left in their reserves at the end of the year ?.
      I guess nil, as it will all be spent, thus all they would have done is reduce the yearly overspend, they will have still spent their full budget allowance.

      So if the above is true, there is no actual cut at all, not a single penny.

      Now if they were allowed to carry over any reserve to next year, and were given a reduced overall budget of 5% for that year, and another reduction of 5% the following year, then that may concentrate the minds rather more.

      Indeed if a statement was made that the reserve could not be spent on wages/salaries, that may concentrate the mind on other spending even further.

      Surely this is all commonsense to anyone who has ever run a business, but there is the problem, none of them ever has !

      Sad fact of life, ITS TWO YEARS TOO LATE.

      • David John Wilson
        Posted April 24, 2012 at 11:27 am | Permalink

        The reason that departments have spending sprees towards the end of a budget period is that they know if they have a surplus they will lose the money involved.
        Private Companies prevent this problem by having a bonus scheme that pays a small bonus to middle and senior management if they have a surplus at the end of the period. This focuses the mind even if the money is lost to the department.
        By adopting a similar policy, that must be balanced by a need to acheive other objectives, the government could save huge amounts of tax payers’ money

        • StevenL
          Posted April 24, 2012 at 5:34 pm | Permalink

          Local government managers do have the ability to make ‘honorarium’ payments to lower managers, but they’d keep it, and the reasons for it, as secret as they could.

  15. Alan Wheatley
    Posted April 24, 2012 at 8:56 am | Permalink

    I agree with your hope that “we can now have as much media interest in how every pound of tax is spent, as we have recently had in how it is raised”. It would help if the government set out their aims and objectives in a form accessible to all, and not through the editorial control of the media. How about a video on the government web sit explaining all?

    As to the departmental 5% contingency, I can not see how this scheme makes any sense.

    If a departments can produce a plan showing how 5% can be saved if forced to do so by circumstances, then it is pretty obvious that the same 5% could be cut if simply told so to do; the trigger could be a national “emergency” rather than a departmental one.

    Has the government thought of the effect on moral of those employees falling within a 5% cuts plan? Has the government thought about the inevitable on-going row that will result as those falling within the net push to shift it elsewhere and others resist it being shifted to include them?

    This has all the makings of another half-baked idea, where the main motivation seems most likely the Treasury trying to move the burden of contingency planning from themselves to others.

  16. Bob
    Posted April 24, 2012 at 9:29 am | Permalink

    Listening to LBC in the car yesterday and a man called in to complain about the Tory cuts, “what the hell have they cut?” says I.

    My twelve year old daughter responded “The number of people who’ll vote for them?”

    The BBC would probably pay good money for lines like that.

    • Alan Wheatley
      Posted April 24, 2012 at 4:13 pm | Permalink

      Nice one Bob. I suggest The Now Show, who flourish on such material from many contributors.

  17. Tad Davison
    Posted April 24, 2012 at 9:41 am | Permalink

    That’s not all Mr Cameron needs to get a grip on! He promises that all government departments will do better, and that all ministers must do better. A good start, would be to get back to proper Conservative values, and not cheat us natural Conservatives who EXPECT a lot better! Every time Mr Cameron does the right thing, his rating improves. Every time either he or his ministers are seen to be pro-Europe, their ratings fall. What could possibly be more indicative of the public’s mood?

    And it isn’t just the economy or the EU that concerns us. Crime is still rampant, (cites a case with a very light sentence-ed) We rightly expected such idiotic sentences would be a thing of the past with a Conservative-led government, but not much has changed it seems.

    The majority of the British public have remained Conservative in their views, but they continue to be unrepresented. The government, or more precisely, the Parliamentary Conservative party, just hasn’t been conservative enough, and little wonder so many people are so disaffected and turned-off by it all. But isn’t that precisely what the pro-EU ruling elite really want anyway?

    Tad Davison

    Cambridge

  18. MajorFrustration
    Posted April 24, 2012 at 9:54 am | Permalink

    Rather late in the day. Support the idea but little thought seems to have gone into the scheme – think of a number. Actually across Whitehall some departments will find it tough to achieve 5% yet others might without effort find 10% – usual political blunderbus lacking detailed thought. Look fwd to the proof of the pudding but will not hold my breath,

  19. Neil Craig
    Posted April 24, 2012 at 9:56 am | Permalink

    As you point out this could and should all have been started 2 years ago. A second round of promises to get spending under control, when the first one has so obviously not been kept does not inspire confidence.

    As a result of an FoI I have been tolf that inflation in government construction costs has outpaced normal inflation by 4% for 50 years. This means that such government programmes cost royghly 8 times the normal cost, which fits closely with looking at individual programmes. I assume the padding in most other government activities is somewhat less than this but it is pbvious that the amount of government waste/;theft/unknown disappearances/bureaucratic padding must significantly exceed the entire deficit.

  20. Alex
    Posted April 24, 2012 at 9:59 am | Permalink

    Give up now, John; it is never going to happen.
    Why not? Because although you can always make small improvements with efficiency savings, the reason why the government spends so much is because it does too much. The growth of government spending is linked with more and more government meddling with planning, businesses, private behaviour, social engineering, monitoring our lives, security theatre, meddling in the provision of transport and utilities, the environment etc etc etc. Even sports and culture.
    The only way that the coalition can cut government spending is for it to reduce the amount of stuff that the government does, and that won’t happen for 2 reasons.
    1. The Lib Dems don’t want it
    2. Conservatives voters do want it, but the leadership doesn’t.
    And we wonder why economic growth is sluggish. Maybe, just maybe, it is related to the fact that we have too many people being paid to stop useful people from being able to actually do anything?

  21. Steve
    Posted April 24, 2012 at 10:06 am | Permalink

    Agreed. Cut spending by more. Cuts benefits by more (apart from for the sick and the disabled). I want 10% cuts across the board, minimum.

    And raise interest rates back up to at least 5%, incrementally, by the end of this financial year.

    I’m aware of the consequences. A housing market crash would be excellent for Britain: short term pain for long term benefit; and the lazy, greedy selfish generation that caused the crisis will pay for it – instead of pass the disaster (and the bill) to their children.

    • uanime5
      Posted April 24, 2012 at 6:59 pm | Permalink

      Cutting benefits will make the situation worse not better. At present many people are on benefits because there aren’t enough jobs available, while other are on benefits because they don’t earn enough to live on. Reducing benefits will not fix these problems because it won’t create jobs or raise salaries.

      • Bob
        Posted April 25, 2012 at 10:05 pm | Permalink

        @uanime5

        We have a more or less consistent hard core of unemployed, many of them long term.

        Funny how the Polish migrants found work straight away when the borders were opened.

        I think the problem is less about the unemployed and more about the unemployable!

    • ian wragg
      Posted April 25, 2012 at 6:12 am | Permalink

      As a post war baby I assume I am one of the lazy, greedy and selfish generation which caused all the problems. At 67 years and still working full time, I dispute that.
      I have always believed you have to work for things and I have no sense of entitlement as have most of todays generation.
      If there was a little more work ethic today we wouldn’t need so many foreigners to do the menial jobs.

      • uanime5
        Posted April 25, 2012 at 3:40 pm | Permalink

        Perhaps if menial jobs paid a living wage people would be more inclined to work in them.

  22. NBeale
    Posted April 24, 2012 at 10:23 am | Permalink

    What we really need is a 30-year plan to raise the retirement age by 6 months and cut all benefits and public sector pensions by 0.5% in real terms every year. Combined with a substantial increase in investment in infrastructure and innovation.

    • uanime5
      Posted April 24, 2012 at 7:03 pm | Permalink

      Given that there isn’t a retirement age any longer it can’t be raised.

      Cutting benefits is little more than bullying the poorest in society and will just make things worse, rather than better.

      It’s illegal to reduce public sector pensions this way; so expect strikes, industrial actions, and lawsuits.

      Innovation isn’t something the Government can just increase. It would be far better to leave innovation to large companies.

      • Bob
        Posted April 25, 2012 at 10:10 pm | Permalink

        @uanime5

        Was it right to change the tax treatment of the private sector pensions? bearing in mind that once the money goes in it cannot be withdrawn.

        This strikes me as retrospective taxation, and if the government want to change the terms, then the saver should have the right to wind up the account and invest elsewhere.

  23. Bernard Otway
    Posted April 24, 2012 at 10:29 am | Permalink

    Words FAIL me and even IF I did write some WHAT I said would be the subject of your Ed.
    button,only harsh words are able to describe the situation. 100 years from now when historians write their astonishment at how our rulers alongside most of the western world actually did things all the political class will be lokked at as complete imbeciles and charlatans,in the 1800,s in the USA they were the SNAKE OIL SALESMEN who left behind them small towns addicted to a supposed elixir that actually was morphine based,what withdrawal symptoms ?

    Reply: I do not have time to read all the links you want me to publish, and find editing your pieces time consuming. It would be a courtesy to me and some other readers if you would make your points without reference to sources I do not know, and in moderate language so I do not have to worry about others taking offence.

  24. Mike Stallard
    Posted April 24, 2012 at 10:54 am | Permalink

    At the very start of this government’s administration, I well remember that you set out clear and inoffensive measures to reduce government expenditure. Nobody listened. Mr Balls and the Labour, however, made great play over the “cuts” which did not exist.
    As you subsequently proved with just the right figures.
    Nobody listened again.

    George Osborne is the Chancellor who has to implement the cuts.
    he is also the man who is in charge of getting this party elected at the next election.

    Go figure.

  25. backofanenvelope
    Posted April 24, 2012 at 11:04 am | Permalink

    This is obviously a plan produced by the Dept of Farcical Ideas. If the Civil Service can find 5% to put in a contingency fund – “just in case”, then surely they can just return the money to the Treasury.

    As I’ve said before, the only way to cut government spending is to STOP doing things. How about that favourite of your readers Mr Redwood? Scrap the DfID and stop overseas aid till we have reduced the deficit to zero.

    • Bank of Britain
      Posted April 25, 2012 at 8:48 am | Permalink

      A Bank of Britain would sort it all out. If anyone who recieves public money has to have it paid in to a Bank of Britain account that money could be used to pay off the debt , like a reservoir , we’re all in it together. the government already does this on a small scale with the government banking service and debt management department, we own the majority share of RBS and LLOyds ( we could use project Verde ) there is the post office facilities , the german postbank is a much bigger player ,
      councils overpay mllions in bank charges , my council pays 1/4£m for £50k of services to one of the banking cartel who the sit on £200m buudget .

  26. Horatio McSherry
    Posted April 24, 2012 at 11:23 am | Permalink

    John,

    If we can’t afford to be spending that 5% in the first place, could you ask the Chancellor why are we sending £10billion of it to the EU’s slush find at the IMF?

  27. Barbara Stevens
    Posted April 24, 2012 at 12:50 pm | Permalink

    Most government departments should have been cut to the bone from the beginning, espeically Whitehall, where there is vast amount of waste, and expectation to spend freely. We have the House of Lords too, who are very overcrowded, and need trimming by half. I like the present system and therefore would propose a retirement age of 75, after that they sit at their own expense. As 25% are over 90 we could cut this house in half at one stroke.
    Then we come again to cuts, it appears to most laymen and women when they hear of £10 billion, again, to the IMF, and the cuts they are proposing, why is it we can lend money and not fund our own government? I know the IMF are loans, but its not being used as that its being used to fund a currancy and saying it is not is blatant lying. Any fool can see where the money will land up and whatever Tory MPs say, when they say it’s for countries, we all know it is not. Cameron and Osbourne should begin to tell the truth for a change.
    With the elections in France taking a turn into Socialism, and the Dutch government on the brink of change, it appears the eurozone is in trouble again, and may not survive much longer, hopefully. Who cares what happens to this millstone, I don’t.
    I see a referendum on the Lords has been mentioned, well if we can vote on that we can vote on the EU, what’s the difference? I’m afraid the Conservatives have completely lost the plot and particularly when it comes to practicing open democracy. It appears some of their own MPs now are beginning to open the door once more and making noises. They had better make those noises much louder or they will be past over by many come the next election.

    • A.Sedgwick
      Posted April 25, 2012 at 8:05 am | Permalink

      I see only two practicable options for the Lords – enforced retirement, I would make it at 70, or abolish it. The much vaunted revision of legislation justification for its existence could be replaced by legal civil servants, who probably do most of the work now anyway.

  28. Mark
    Posted April 24, 2012 at 1:04 pm | Permalink

    The monthly public sector finances data are now out:

    http://www.ons.gov.uk/ons/dcp171778_263397.pdf

    The OBR have published a useless comparison with their “forecast” published just last month to mask their forecast errors made previously: that’s called moving the goalposts, and they should be upbraided for it. We won’t learn if the forecast errors aren’t highlighted and evaluated.

    The data themselves show continuing weakness in tax receipts, particularly for income tax – now being blamed on bankers not getting high enough bonuses! Meanwhile benefit spending continues unchecked, thanks to the failure to impose caps soon enough. Interest payments are increasing, despite “refinancing” maturing debt at lower yields, indicating just how rapidly the debt is growing.

    The real funny money is revealed on the last page of the ONS publication. PSND (including financial interventions) is down to £2,181bn compared with a peak of £2,259bn in Q2 2011 (but has risen by £25bn in the last quarter). Underlying this is the reduction in nominal support for banks, which has fallen from £1,303bn in Q2 2010 to £1,050bn now. This £253bn reduction mainly reflects repayments to the BoE under the SLS – but these have been at least partly replaced by extra QE funding of £125bn. The numbers do illustrate the squeeze on bank liquidity that has been concentrated on lending to businesses.

    These numbers deserve much more attention, since the markets will assess overall creditworthiness on overall debt – not the narrower figures normally cited.

    • uanime5
      Posted April 24, 2012 at 7:07 pm | Permalink

      Benefit spending is up because more people are unemployed and house prices are continuing to rise. Forcing people out of expensive area where there are jobs, to the cheaper areas where there are less jobs won’t fix this.

      • Lindsay McDougall
        Posted April 25, 2012 at 3:57 pm | Permalink

        That’s why it’s important to cap benefit levels – the cap is OK in London and the Home Counties. House prices are still falling in real terms in most places, thank goodness. The situation isn’t helped by public sector busy bodies telling banks what their lending policy and capital ratios should be. Not is it helped by public sector busy bodies preventing the construction of small one bedroom flats and bedsits to meet demand. There is nothing like pitching standards too high to cut the poor off from the housing market.

      • Bob
        Posted April 25, 2012 at 10:13 pm | Permalink

        @uanime5

        How about moving into the dormitory towns where prices are more affordable, like most workers do.

  29. Denis Cooper
    Posted April 24, 2012 at 1:20 pm | Permalink

    Apart from money sent abroad, which is not being curtailed, public spending goes into the economy and not only directly provides the livelihoods of public sector employees and directly pays for state pensions and welfare benefits but also indirectly provides the livelihoods of employees of private sector suppliers and contractors to the public sector.

    The central problem is that about a fifth of public spending is being funded by borrowing, either directly from private international investors or indirectly from the Bank of England, to the tune of around £9000 a year for the average family.

    Naturally Merkel thinks that she has the solution to this problem, a “one-size-fits-all” austerity policy to ultimately free all EU governments from the need to borrow to fund their spending, bringing them up to the (theoretical) standard of the most excellent German government.

    What she and those around her appear to forget is that Germany gradually put its house in some kind of order over a decade or so when the global economic conditions were favourable, and that however desirable in principle it may be that all other EU governments also run something like balanced budgets it may not feasible for them to achieve that supposed ideal over the same timescale starting in the middle of a global slowdown, and in some cases attempts to do as she wants that may prove disastrously counter-productive.

    Fortunately Cameron refused to sign us up to her “fiscal compact”, for whatever reasons, but of course we would still be affected by the adverse consequences on other European economies.

  30. Richard Jenkins
    Posted April 24, 2012 at 1:33 pm | Permalink

    In fantasyland, it would not be ministers, but instead the departmental permanent secretaries who would be told that they must cut 5% from their departmental budgets, but without affecting services delivered to the public. This would end the nonsense of civil servants proposing politically sensitive cuts in spending programs while preserving their own bureaucratic empires. Any permanent secretary who said that this was impossible would be fired, with no inflation proof pension (remember, we are in fantasyland). Any vacancies thus created would be filled by promoting a civil servant with the energy to make the necessary budget cuts. This approach would probably yield savings greater than 5%.

    Of course, in my experience some parts of the private sector operating in the real world do take this kind of approach to budgetary management. Probably not in PR at Carlton TV, though.

  31. Bruce of Burghfield
    Posted April 24, 2012 at 3:24 pm | Permalink

    What a sad situation Cameron and all of us are in: trundling across a minefield of economic despair and problems, with a ball and chain attached to each ankle – on one the pathetic and self indulgent liberal democrats, and on the other the EU and its dead weight of disasterous socialist rules and regulations. We cannot go on like this, the two balls have to be jettisoned, otherwise we shall tread on a really big mine and suffer the consequences. We need leadership, unfettered by the frightened rabbits of the Liberal party and by the one size fits all unelected EU government. Come on you Tories, get a grip, otherwise you will be ousted next time by UKIP. How can that happen? Ask Sarkozy.

  32. Barry
    Posted April 24, 2012 at 3:31 pm | Permalink

    Annual 5% efficiency improvements would be normal for a commercial organisation to stay in good health. Top leadership is needed to ensure efficiencies are delivered and not just cuts.

    Statements from Government using the term “cuts” exemplifies the need for a fundamental change in the public sector mind set. This must be driven from the top leadership. DC should demand at least 5% efficiencies (although probably more given past years of efficiency avoidance).

    The good news is that it would appear that public sector finances are in good order. Only a 5% cut (=EFFICIENCIES) is needed. DC should demonstrate top level leadership and demand 5% EFFICIENCIES and replace Ministers and Department Heads that fail to deliver. Anything less is cheating the hard pressed taxpayer with weak leadership at the top.

    • Bob
      Posted April 25, 2012 at 7:41 am | Permalink

      “cheating the hard pressed taxpayer with weak leadership at the top”

      In a nutshell.

  33. Lindsay McDougall
    Posted April 24, 2012 at 4:26 pm | Permalink

    I believe 5% of all pubic expenditure is about £30 billion, definitely serious money but at the lower end of what needs to be done. It will be difficult to achieve unless we include all ministries and EU expenditure too. It will be easier if we suspend index linking of all benefits and public sector pay until further notice. Public sector pay is still running about 8% ahead of private sector pay. Reasons given are (a) greater % with a University education in the public sector and (b) higher average age in the public sector. Perhaps the most meaningful comparison is between groups with similar educational achievement.

    Public pay vs private pay
    Degree or equivalent – 4%
    Higher education + 6%
    A level or equivalent + 2%
    GCSE or equivalent + 6%
    Other + 9%
    None + 7%

  34. Alan Wheatley
    Posted April 24, 2012 at 4:44 pm | Permalink

    As several contributors have already pointed out, it is the extent of what government is doing that needs to be cut.

    To set the task as a cut in departmental budgets could lead to unintended, and unwelcome, consequences. And a 5% blanket requirement can prove to be unfair and unreasonable; those departments that have been run more efficiently and with better focus fare worse than those with less efficiency and excessive largess. Of course, asking for 5% across the board is much easier for the person doing the asking and requires minimal understanding of the issues.

    I suggest that the easier it is for the public to see where the money going the easier it will be for the politicians to cut what they will be told is not required.

    As to departmental budgets, more emphasis should be made to match expenditure to income and to show that is being done, or not, and again the clearer the situation is made to the public the more they are likely to support what needs to be done.

  35. Acorn
    Posted April 24, 2012 at 6:14 pm | Permalink

    Looking at the March PSF, there isn’t actually a lot of austerity showing up at street level yet, which is a bit worrying. What cash UK companies have in the bank is only coming out to invest abroad, not in the UK.

    Of our four top export destinations, three of them are EU states, not good. Looking at our economic sectors, you could say that seventy percent of them are grounded by austerity and consumer debt reduction, they am going nowhere.

  36. matthu
    Posted April 24, 2012 at 7:00 pm | Permalink

    Roger Helmer lists some of the reasons why he is no longer Tory:

    “I know from long experience that the views of rank-and-file Conservative Party members in the East Midlands are much closer to my own views than to those of the leadership. I can represent those views much more effectively from a Party which shares them, rather than from a Party which is embarrassed by them.

    It is not just Europe. For me, disagreements on climate and energy have been equally important. I believe that our present energy policy (or lack of it) will on the one hand undermine our economic competitiveness and drive pensioners into fuel poverty. On the other hand it will jeopardise energy security and lead to serious shortages and black-outs by the end of the decade.

    I have also been angry at the Tory positions on university admissions, grammar schools, Nanny-Statism, immigration, the ECHR, policing and defence. Indeed I struggle to find a Conservative policy that I do agree with. I think it was Andrew Lillico who said “UKIP may not be conservative, but at least it’s not as anti-conservative as the Tories.”

    Which of these Tory positions do you agree with, John?

  37. MichaelL
    Posted April 24, 2012 at 7:54 pm | Permalink

    >Don’t listen to anything Mr Cameron says, judge him on actions and policy.

    Yes, 5% should be easy to achieve. Businesses of course would just introduce redundancies where necessary, or simply force cuts. But government – who knows.

    That said, people must be getting a bit disappointed with David Cameron, if he had cojones, he’d have sacked Jeremy Hunt by now, it all gives the impression of limp wrist government.

  38. Electro-Kevin
    Posted April 24, 2012 at 9:15 pm | Permalink

    My friends who run shops tell me it’s VAT that’s really screwing them.

    I suppose that they have to pay a lot of tax in socialist Britain. Otherwise they’d have no customers.

  39. Owain
    Posted April 24, 2012 at 9:59 pm | Permalink

    The way that Jim Hacker managed this in Yes Minister, was to say that any civil servant who didn’t achieve a 5% saving in his department, wouldn’t be put forward for the honours list. Maybe it’s time for life to imitate art, imitating life?

  40. David Langley
    Posted April 25, 2012 at 10:51 am | Permalink

    Just a thought, apart from the altruistic motives behind subscribing to the IMF, not forgetting once we went cap in hand to them to support our government. If we are paying out more in interest on our debts than we are getting on our loans to them, perhaps we should be paying off our debts with the IMF fund?
    Do we actually part with the money or do we make a promise to lend when called for. Otherwise is there currently an IMF deposit account earning interest and if so where is it and what, where, and who does it invest in. How much does the IMF structure earn and how much does it spend on maintaining itself? The current French Lady President looks well dressed to say the least.

  41. Derek Emery
    Posted April 26, 2012 at 8:30 am | Permalink

    How can there ever be a driving force for efficiency in the public sector? If you are more efficient then the prize will be that your allocation of money next year will be reduced i.e. all the forces are to be as inefficient as possible because you are more important the more you spend.
    In the private sector the drive is to either cut losses or increase profits. Both concepts are totally meaningless in the public sector.

  • About John Redwood


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

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