Author: johnredwood

The surge in civil service numbers since 2016, up by a third has been coupled with plenty of grade creep. We have a much larger more top heavy civil service.

One of the reasons is departments always want new  people and new resource for any new policy or Ministerial initiative.There is  a reluctance to wind up old initiatives and transfer all the staff to the new. Another reason is people are kept in any given post for too short a time. They are regularly transferred and promoted, with their old roles being filled by  someone else caught in the  eternal reshuffling.

It means at any given time there are numerous people recently arrived in a new area needing to spend time trying to get up to speed, and others getting ready to move with diminishing interest in what they are still meant to be doing. There is a strong reliance on collective working entailing several personnel and layers of management being involved in framing advice to Ministers or making administrative decisions.

The danger of this system is no one ever feels responsible or can be blamed for an outcome. It means people with too little experience or  knowledge of the issues is involved in the work. It makes officials dependent on others often outside the civil service to be informed. It encourages duplication by hiring external consultants to do much of the task that an experienced official could do without outside help.

At the age of 21 I won two elections that changed my life. In the autumn I was elected to a fellowship of All Souls  College by examination. In the following spring I was elected as an Oxfordshire County Councillor in the newly enlarged  County incorporating Oxford City and a part of Berkshire.

At All Souls I met Sir Keith Joseph, a Distinguished fellow of the College and a Cabinet Minister. I predicted the Heath defeat, being an opponent of the Price and Incomes Policy he brought in and appreciating the difficulty of refusing the miners better pay when inflation and energy prices were surging. After the defeat Keith helped Margaret become leader  and suddenly became interested in my views, recognising I had been uncomfortable with the Heath u turn from a free enterprise Manifesto to  the intense failing detailed  interventions he made in the economy.

Keith was put in charge of the policy rethink. He made me adviser to the review on public spending and the economy. Margaret and Keith knew Labour was overspending badly and thought it would prove unsustainable.They did not have to wait long as 1976  saw the need for an IMF bail out and spending cuts. The  Shadow Cabinet and Policy review  had been running shadow budgets  just in case the  government collapsed. They told the public they would spend less but kept the detail private.

I advised them not to cut NHS and education but to save billions by changing management and targets of the nationalised industries and selling many of them. To be continued.

I will give a few thoughts on Parliamentary Opposition now there is a new Leader.

The task of His Majesty’s Opposition is to oppose when the government is doing harm, proposing bad laws, mismanaging the public sector or imposing bad taxes and charges. It is to support when the government is doing the right thing. The Opposition should not run down the country or damage relations  for the U.K. abroad out of narrow partisan interest.

Maybe four years before a new election the Official Opposition should not have a full set of detailed policies, budgets, tax proposals and  the like for a possible entry into government then . Many things will change in the next few years, and the Opposition needs time to think about what it did badly or what it failed to do last time in government, to ensure it does better when next given the opportunity.

It may, however, strengthen its opposition to current policy if it not only explains what is wrong,  voting against,  but also suggests a better course of action for now. So whilst it is right for it to oppose vigorously a set of tax increases that will hurt growth and damage jobs and incomes, it would help to set out offsetting reductions in public waste and needless spending to show the government it could have its spending rises for schools and the NHS without tax rises or extra borrowing.

I have regularly  set out several tens of billions of reductions, starting with the £19 bn of carbon capture and storage and over £10 bn a year of needless Bank of England losses on bond sales. There are several others.

I am going to write some pieces on better public sector management. The government says it is going to increase productivity by 2% a year. Its plans need at least that. This century so far there has been no overall public sector Labour productivity growth. So the bi* issue is how will they do this?

It will need examination of the range of activities carried out to see if some are redundant and if others could b3 performed better with more use of contracting out.

It requires better management of staff, with better incentive pay an£ performance review.

It requires better management of computerisation, use of AI, robotics and other investment to assist employees.

It needs review of the number of layers of management and  promotion policies, and of the n7mbers of quangos involved as well as departments.

Please use this blog as an opportunity to express your views on what could deliver a more efficient higher quality public service offering

The National Wealth Fund has taken over the U.K. Infrastructure Bank, set up by the previous government. The new government is adding £5.8 bn in current plans to the £22 bn of inherited investment potential in the Infrastructure Bank and widening its remit and powers a bit. The Infrastructure  Bank lost £22 m in its last reported year, 2022-23.

The idea is to finance projects and ideas the private sector is nervous about, and to crowd in private finance to projects by putting up some of the capital or offering guarantees. Taxpayers should expect returns from these investments at a minimum to cover the taxpayer costs of borrowing all the money to put up the capital. Let us call that 4.5%. It would also be good to provide for capital repayment at say 3% a year. A private investor would clearly  expect  a risk or equity addition to the return, say at least 5%. That takes the total to 12.5%.

It seems unlikely the National Wealth Fund will aim for this. They may well be satisfied with a low single figure return, and may at least in early years run with more losses. They need to guard against being seen as the  last resort for high risk projects the private sector thinks will go under or as a first resort for a potential private sector consortium that sees the Fund as capable of absorbing risk through guarantees or high risk debt tranches which gives the private investors a less risky ride.

The state borrowing at 4.5% to invest in projects should ensure that the overall portfolio can avoid losses and pay for the borrowings.

Labour have been good at abusing the word investment. Traditionally it refers to a decision to spend money on equipment or property that allows you to supply goods or services over a period years. This spend can be accounted for as capital spend, with building or equipment included as an asset in the balance sheet. If an enterprise spends more on employing people or on energy that is a running cost  to be included as a cost in annual accounts.

You can argue that spending on training or research is an investment as they may yield benefits in future years that add revenues.

If you do spend on capital items you often have to borrow to pay for them. You put both the value of the item and the loan to buy it on the balance sheet. Businesses expect to earn sufficient money by having an extra machine or a bigger building to be able to pay the interest on the loan to buy them, to repay the debt over a period of years and make a profit.

The government often makes investments that cannot do this. It may be good to build a replacement school but there will be no extra revenue to pay the interest on the debt or return a profit. Plenty of investments in free services paid for by taxes need some other way of appraising their contribution.

The state also makes investments that can and should be appraised like private sector investments. New railway lines need to generate new and additional rail revenue to justify their capital costs. Green investments by Great British Energy or the National Wealth Fund need to be cash generative. I will discuss how in a future blog.

The new government’s policy to the NHS so far looks like the old one’s. Tell them getting waiting lists down is the priority, and then give them more money to do so.

There are to be new hospitals on capital account. Boris promised that but despite record funding little was completed and a lot was not started.What will be the change to get to construction contracts faster?

There is to be £1.5 bn of extra equipment. There always is a substantial equipment budget. A bit more might remove a few bottlenecks as people wait for tests.

The obvious think lacking is hospital beds or surgery small operations capacity. Of course beds need staffing, but the NHS is always recruiting extra staff.

There is some talk of the NHS making more use of private medical capacity as Blair and Milburn started. It is certainly a good idea to explore if the private sector could for example tackle a lot of cataract removals or knee joint repairs in dedicated facilities contracted to perform NHS work to a high standard. The patient would still be treated free.

There are some obvious money saving things to do to help bridge the gaps. Foreign visitors should pay for any use they need to make of the NHS, though that often does not happen.

The NHS should accept returns of equipment suitable after cleaning for reuse, like crutches  and frames. It should get better at controlling stocks and reducing wastage of foods and medicines.

I struck up a conversation on Thursday with a local entrepreneur who had set up a successful company. He had made his own way in the world without inherited wealth and now wanted a good future for his family.

He told me he had opened an office in Dubai and could use modern computing and communications to run it from there. As a result last week was to be his last week in the U.K. He decided his business and his family have a better future in Dubai.

When I asked him why, the tax and regulatory attacks of recent weeks were clearly the last straw. He felt the government does not value or want people like him in the U.K. In Dubai he finds a positive approach to business success, lower taxes and sensible regulations.

I hear on the media that there are many successful strivers thinking like this, and  hear Dubai is just one of several locations making a good pitch to attract U.K. business and talent.

The world does not owe us a living. We are not so full of entrepreneurial energy that we can deter and export it in large quantities. Many of the so called rich are hard working, providing the rest of us with goods and services we need. Who will provide all these if we attack self employment and small companies, overtax employment and take away profits and gains?

Amidst the many figures and forecasts in the March budget there was one that stood out which got too little attention. The Official figures said the Bank of England’s bond buying which had sent the Treasury £124 bn of profits in the early years will end in overall loss of £104 bn when they have finished their fire sale and run off of  the bonds. That is a hidden way of saying they plan to lose £228 bn on bonds. Taxpayers have so far had to stump up £49 bn of this loss by March 2024, with more big bills this year.

This whopping increase in public spending goes undiscussed in Parliament now I have stood down. The last Chancellor wrote a letter saying this is a real cost to the public sector which reduces scope for other spending and or leads to higher taxes. The Bank of England for its part denies that selling all these bonds at low prices is important to its monetary policy. It wants us to believe these sales do not depress bond prices and therefore push up interest rates. The time when they first announced a major programme of £ 80 bn of sales was the start of the big autumn 2022 bond sell off, when the news coincided with a rate hike and triggered the LDI problems.

No other Central Bank thinks it clever to incur big losses by selling bonds they paid too much for at depressed prices they help create by the sales. No other central Bank sends a huge bill to taxpayers. Why do we put up with this? Why do we pay the Governor more than £500,000 a year for being the world’s worst large scale bond trader, presenting us, the taxpayers, with a forecast £228 bn bill?