I have been sent a copy of Dame Lucy Doolittle’s latest letter to Dr Roy Spendlove:
from The Director for co-ordinating cross cutting initiatives and partnerships
I am pleased to report that we seem to have weathered the storm over public spending cuts as well as could be expected. The campaign to say “too far too fast” has been too political for my taste, but I fear privately that it seems to have gained some traction. Ministers have to accept they need to be careful from here, given the tough criticisms they are experiencing from the Opposition. As we move into the second half of this Parliament I woudl expect greater realism about spending totals to prevail. The original figures for 2013-15 always looked too tight to me.
Ministers do not seem to be concerned by the paradox of our situation. Total public spending is up by 7.8% this May compared with a year ago, but there have been cuts as most acknowledge. It just goes to show how expensive it is now to provide good government, and how many demands there are on Ministerial priorities and budgets. It is good that public spending has avoided the worst of the cuts as originally vaunted in the media, as public spending has contributed to cushioning the fall in total output at a difficult time in the world economy. I see that real public spending overall is up, but as you know it does not feel like that from where we are sitting.
I give you this background as Ministers do now need more help from your Miscellaneous Projects Division. They are naturally concerned about the double dip and the Euro crisis in the background dragging down the economy. They therefore would appreciate our help in identifying and pursuing capital projects that could provide some counter cyclical stimulus to help lift the economy. They would prefer private finance, but I have explained that these are difficult times and we may need some pump priming public sector money. I think it would be best if you concentrated first on the desirable projects, leaving open the method of financing. We can sort out those details later, once Ministers have indicated their preferences on the type and scale of projects.
We still have some difficult distribution issues for money between departments as a result of Ministerial priorities. Overseas Aid is relatively well off, and European programmes seem to do quite well. At the other end of the spectrum defence and local government seem to be in a tight squeeze. We need to reflect the bduget priorities, though of course we can suggest some relaxation of the squeeze in areas where there are good shovel ready projects. I suspect Ministers are going to be pragmatic about the spending totals given the need for more activity. It looks as if the Bank will oblige by keeping government borrowing rates very low, so there is an incentive to get on and borrow now whilst we can lock in to such favourable rates.
I do hope you can theme some of these projects as green ones, as this will help us meet Ministerial aspirations and EU targets in this important area.