Author: johnredwood

Please find below the link to my participation in the Spectator’s ‘Has Brexit Failed?’ event at Conservative Party Conference last Monday

https://www.spectator.co.uk/podcast/has-brexit-failed/

 

 

Scottish devolution when voted on at the end of the last century was claimed to be the way to allow Scotland to perform better than England in public services and economic growth when they could run their own services and boost their tax revenues.

I have no intention of arguing we should seek to reverse a democratic decision taken in a referendum, and many Scots may well have voted for more Scottish decision taking however it worked out. It  nonetheless sheds an interesting light on policies towards higher spending and higher taxes to see what Scotland has bought by choosing both. It is a perfect experiment compared to England over the last 23 years.

Scotland has imposed a higher 21% intermediate Income tax rate, a higher higher rate at 42% and a higher Top rate at 47% compared to the rest of the UK at 20%, 40% and 45%. This has helped Scotland to afford much higher public spending per head, though the bulk is paid for by a bigger grant from UK taxes. Scotland last year spent £13,881 per head on public services  compared to £11, 549 in England.

If we take the two key services of health and education we see little advantage from these higher sums. Scottish pupils on average are well behind English ones in maths and science judged by international secondary school comparative  assessment, and similar in English. The NHS in Scotland has more long waits to get NHS treatments than England and has a bigger percentage on waiting lists.

Meanwhile there has been no boost to growth from higher spending and taxes. Since 2000, the first full year of the Scottish Parliament, Scottish GDP has advanced 86.6% in cash terms compared to 106.2% for the UK as a whole.

Scottish voters need to ask some tough questions of their government. Why aren’t public services better for all the extra money? Why is economic growth lagging so badly? It also warns England that a further hike in taxes and public spending would not deliver better results on this evidence.

So Labour wish to run large scale investment projects better than HS 2. They wish to halve the government’s use of consultancies, reduce the use of chartered planes for government Ministers and ensure more private investment is added to state investment to boost output.

This is not going to suddenly change the growth prospects, get inflation down faster or transform public sector management. Consultancies may be due a hair cut, but you cannot say how many you need until you identify what they do and whether  they are essential because  the civil  service does not have the skills and knowledge. Otherwise they should only be used where  they are cheaper and better than in house.

Cutting down on plane use may afford some small savings though rail tickets are also dear these days and chauffeured cars do not come cheap.  Most of us would like to see more private investment alongside or replacing public investment. The question is does the state identify enough projects that will earn a decent return to attract the investment? Labour’s wish to impose more windfall taxes will put off some private and foreign investors, reminding them that if their investment works the government will want to pocket more of the profits.

Labour promises us iron clad  fiscal rules. They want to double up on Treasury forecasts and an independent Office of Budget Responsibility . They will make every decision on tax and spend dependent on a report and forecast by the OBR. They should have learned that that very system allowed a huge increase in spending and borrowing over covid when they backed government spending plans and urged more. It then led to big rises in tax revenues  which they attack.  Chancellors have to make judgements as they will be blamed for the results. The OBR needs to amend its models so it can forecast the levels of tax revenue and borrowing more accurately than it has been able to do in recent years. We need an accurate guide to help steer the ship. How would they restore lost productivity with public sector Unions keen to expand workforces?

The Taxpayers Alliance published a study showing that civil service numbers rose by 101,440 between 2016 and 2023. This was an increase of 24% and a bigger increase in numbers than the total strength of the British army. There has been a particular growth in top grades and the higher salary policy oriented posts, with 2,050 paid six figures and 195 paid more than £150,000.

In 2021-2 44,220 people left the civil service, or 8.6% of the headcount. 69,400 new people were recruited. This demonstrates that a decision to freeze recruitment can make a substantial difference quite quickly to overall numbers and to payroll costs. Ministers running such a scheme should be looking for considerably more than the 0.5% productivity gain suggested in the Chancellor’s speech,. given the large 7.5% fall in productivity since 2019.

Of course senior departmental managers should put cases to Ministers to allow external recruitment where a job is crucial and the skills are lacking in the current workforce on the departure of a key member of staff. In most cases there will be plenty of talent in the civil service to find an internal promotion. In many cases the departure of a staff member to retire or go elsewhere will trigger a review of whether that role can be abolished, amalgamated with another or allow the removal of some other role when the person is pro0motoed or moved into the key role.

The Chancellor has proposed £1bn of savings . As the typical cost of employing a person is around £50,000 taking benefits and direct costs on top of salary that equates to around 20,000 fewer posts through natural wastage. This is half the level that could be accomplished in the first year of the programme.

The Chancellor in his speech to conference last week stated that he is  now onto the productivity problem in the public sector I have been highlighting:

He said

“We need a more productive state not a bigger state.

If we increase public sector productivity growth by just half a percent, we can stabilise public spending as a proportion of GDP. Increase it by more and we can bring the tax burden down.

Half a percent.

For those of us with private sector backgrounds that doesn’t seem too much, does it? In the public sector, I’m telling you, it’s harder – but we are up for the challenge.

So I’ve commissioned my deputy, John Glen, to restart the process of public service reform.

He wants to know why teachers say more than half of their time is not actually teaching.

…why police officers complain they spend longer filling out forms than catching criminals.

…and why doctors and nurses say they spend up to half their time not with patients but on admin.

Of course we need modern working practices and better IT. But the Treasury too needs to change its focus from short term cost control to long term cost reduction.

And we’re going to start with the Civil Service.

We have the best civil servants in the world – and they saved many lives in the pandemic by working night and day.

But even after that pandemic is over, we still have 66,000 more civil servants than before.

New policies should not always mean new people.

So today I’m freezing the expansion of the civil service and putting in place a plan to reduce its numbers to pre-pandemic levels.

This will save £1 billion next year.

And I won’t lift the freeze until we have a proper plan not just for the civil service but for all public sector productivity improvements.

That means, amongst other things, changing our approach to equality and diversity initiatives. Smashing glass ceilings is everyone’s job – not a box to be ticked by hiring a diversity manager.

But I’m going to surprise you with one equality and diversity initiative of my own, trust me you’ll like this one: nobody should have their bank account closed because someone else decides they’re not politically correct. We’ll tighten the law to stop people being debanked for the wrong political views.”

Comment:

The government should aim to recoup the lost 7.5% of productivity since 2020 as quickly as possible. Freezing civil service posts will both  help raise productivity as natural wastage brings numbers down, and will act as a stimulus to the senior managers of public services to hasten the restoration of the levels of productiv9ity hit in the last decade and lost so far this. There is a £30 bn saving to be won from just doing things as well as the government did in 2019.

Readers know that I spend a lot of time urging changes and improvements to government policies in some areas. Often people write in  to say they agree and to complain that government does not. Conference this year shows that there are changes for the better that  offer a clear difference and superior choice than the Labour/Lib Dem policy.

Take the speech of the new Energy Security Secretary. She stated that she intends to source more energy domestically instead of relying on more and more imports as the net zero policy enthusiasts have wanted. She proposes more energy that is “home grown, clean and cheap”, essentials for stronger industry and rising prosperity.

She sees energy independence as ” our best defence”. She says she will back our own North Sea  “instead of relying on oil imports , as Keir Starmer would have it”. As proof of that she has already given the go ahead for the new Rosebank Field, an important future source of oil and gas, well paid jobs and plenty of UK tax revenue.

She promises us “the first large scale nuclear project since Margaret Thatcher’s government”.  She has moved the competition on to find the right company to develop and roll out many small nuclear modular reactors. Done well this could be a big boost for UK manufacturing, with plenty of scope to export as well as to install a number of these probably at existing nuclear sites where there is already a trained workforce facing the closure of an old nuclear  generator.

She reflected the change of direction over the road to net zero announced by the Prime Minister. “If we are to succeed, net zero cannot be something that is done to people, by a privileged elite” “We cannot force people to make wrong decisions for their families. And it is immoral to put forward policies that will impoverish people here, when emissions are rising abroad.”

She argued that as the UK produces 1% of world CO 2 emissions and China 30% more of the burden of adjustment must now be undertaken by the large emitters. She attacked the left who have made “Net Zero a new religion, showing condescension to people’s way of life “. She does not want to lecture people about eating meat, taking a foreign holiday or driving to work.

She recognises government can only get change if it takes people with them, and if the new products and services are affordable and popular.

All this makes much more sense than the command and control system based on bans, higher taxes and legal requirements.