Cutting spending – 2

Last night BBC’s Newsnight created a TV Star Chamber to examine three areas of public spending. Two of the areas they raised are large and central to the task of reducing spending. They asked a panel of 3 including myself to evaluate a 5% cut in all public sector pay, and a five year freeze on benefit levels.

I rejected both their specific proposals, but agree the two large areas of public sector pay and benefit bills need to be reduced. I have tabled some questions to get the exact figures, but roughly the state is supporting around 24 million adults – 6 million direct employees, 6 million unemployed on various benefits and 12 million pensioners receiving state pension and in some cases top up benefit. It’s too many.

The task is to get more of the unenmployed into private sector jobs, and to transfer some of the public sector employees into private sector jobs. We need to release the entrepreneurial energies of some public officials and find new ways of delivering some state supported public services which could be privately financed.

I did not favour an EU style 5% across the board pay cut. The public sector pay freeze proposed for this year amounts to a real cut, with price inflation in the UK currently running at 5.3%. I would not myself wish to expalin to low paid care assistants or public sector cleaners why they would have to face a 5% cut. I would be quite happy to see the 5% cut taken by MInisters extended to other better paid state employees, and to see pay cuts negotiated within services or departments with the employees as part of a package to cut the overall costs of their area of work. The private sector found it was possible in the depth of the private sector crash in 2008-9 to agree lower pay in return for no redundancies where the money was running out.

The government has pledged to undertake major reform of the benefits system. Again, I would not wish to explain to a severely disabled person they had to face five years of no increase in benefit. They don’t get that much to start with, and present inflation would make that cruel. I would be happy to defend welfare reform where someone who is offered a job is told their benefit will be removed whether they take the job or not. I do wish to see more positive and successful programmes to get the workshy or the ill equipped into employment. Curbing new immigration will also help with this. There should be more control over the levels of housing subsidy.

All final salary public sector pension schemes should be closed to new members, as most private sector schemes have been. There should also be a review of the terms for future accrual of additional benefits for exisiting members.

The third area Newsnight raised was the question of do we need free libraries? It was an interesting choice of service. My response was we need some free libraries, but we could do it for much less cost. Why do we have a University library, secondary school libraries, specialist public sector libraries and municipal free libraries all in the same urban or suburban area? Could there be more pooling and joint use? Why is the LEA overhead so high? Why does it cost so much to borrow each book? Can more be delivered on line? Have libraries diversified to offer too much free? What if we split the LEA library monopoly? Would librarians like to turn their lilbraries into not for profit charities or social enterprises? Could commercial organisations manage or provide the library facility for less? There must be enormous scope here for innovation and lower cost.


  1. waramess
    June 9, 2010

    Cuts in pay for civil servants will not do the trick as you rightly say and a wholesale transfer of headcount to the private sector is the only answer.

    Do it through redundancies or through privatisation but it must be done for the good of the economy.

    I can't see how civil service pensions can deliver immediate savings but public libraries, now there's a thought. Why not privatise the lot and then, if you wish, purchase admission tickets for those who are deemed unable to afford admission otherwise.

    Maybe you would be able to use this as a model for privatising the NHS and schooling

  2. Mike Stallard
    June 9, 2010

    I very much enjoyed Newsnight last night – well done!
    Anyway, Libraries: Our local library was closed for a year for a vast splurge of "investment". It is now very interesting, painted violet and full of intense ladies with nothing much to do now they have been replaced by a computer. While it was closed, I discovered Waterstones. Marvellous! Cheap, helpful and a really inspired choice of books. Cut the taxes by £9.00 every month and – bingo, as far as I am concerned, you could close the Libraries.
    Public Sector Employees: The people I bump into are mainly middle aged ladies who spend their time begging. They are really good at this. It is called "accessing" "pots" and "services".
    If they were to find out that the pots and services are now closed and that they had to devote their attentions to starting up some kind of private sector thiggy, we would all benefit: they are very skilled and very persistent people.
    Oh – round here they have decided that the Comprehensive and two old peoples' homes are "not fit for service". Bang go a few more tens of millions of pounds. So much for the "recession".

    1. StevenL
      June 9, 2010

      It is called "accessing" "pots" and "services".

      You need to cut not only the 'pots' but the 'policies' that get the 'pots' attached to them and the 'toolkits' that help them access the 'pots' too. Check out this 'toolkit' for example:

      "Food mapping has been defined as the process of finding out where people can buy and eat food…"

      Seriously, they are all well intentioned, and supported by junk economics government studies that say they will save money, but it's got ridiculous!

  3. NickM
    June 9, 2010

    Discussion about closing local libraries is like C. Northcote-Parkinson's bicycle shed: everyone has an opinion about it because they understand what it is for, where they do not understand the ramifications of a nuclear power station. In any case local libraries are a drop in the ocean of what we spend and what must be saved.

    There are so many areas of major savings; it is so easy:
    1. Sell off the BBC – saving £20 billion (?) once
    2. Scrap RDAs as you say
    3. Leave the EU – saving upwards of £100 billion annually
    4. Scrap DfID – saving £12 billion every year
    5. Cut most quangos – saving £billions
    6. Scrap the NHS internal market and the bureaucratic expansion since 1997
    7. Roll employee NIC and IT into one, open ended but scrap the 50% rate.

      June 9, 2010

      In discussions on CGT one matter seems to be omitted.

      We advocated the raising of the tax threshold to £10,000 pa back in Michael Howard's day our files have just confirmed – and to TeamCam since.

      With a HMRC employee in our group we advocated that this change would save an enormous amount of admin time and expense as so many queries involved taxpayers at the lower end of the scale.
      Furthermore small amounts of tax were being collected whilst another part of the depatment then paid them benefits of a varying complex kind. Crazy!

      No doubt, 6 years on, the same argument holds true so why has this streamlining, and the potential savings, not been factored in?
      Have eyes been clouded by the LibDems wish merely to put more into the pockets of low-paid – not a bad plan but only, in our view, half the story.

    2. A.Sedgwick
      June 9, 2010

      Can I add:

      Pull out of Afghanistan

      Deport all foreign prisoners, illegal immigrants and bogus asylum seekers

      Scrap government driven overseas aid in favour of 100% matched private donations(forget 28%tax related support – more bureaucracy)

      Abolish certain types of housing benefit

      Assess and justify all state jobs over £75,000 p.a.

      Means test child benefit and state pension

      Flat income and corporation taxes

      Closing libraries and clobbering the low paid state workers are not answers to our massive debt problems.

  4. nonny mouse
    June 9, 2010

    I havent watched Newsnight yet, this gives me something to look forard to.

    Making staffing budgets public and explaining the trade off between head count and pay rates. If they want to be paid more then head counts must go down.

    Furlough employees – basically close down offices for one or two days a month. California did that in some offices like the DMV and nothing bad seemed to happen. Obviously this would need to be selective because you cant close down a hospital but you could close down a library or tax office.

    Cut welfare handouts to those that dont need it. Welfare is a safety net, not a social engineering or voter buying scheme.

    Time limited unemployment benefits. In the US you have 12 (?) months unemployment benefit and once you use it up you lose it. It takes time back in a job to earn it back. During downturns this can be increased to relieve the pain, but during the good times unemployment should be there to help you get back on your feet not as a permanent job alternative.

    I dont think we have gone far enough on raising the retirement age. This should be linked to the life expectancy. The reason you have 12 million pensioners is that they are living longer. Maybe bring in a sliding scale for pensions at different age ranges – 65-70, 70-75, 75+. Have higher pensions for retiring later. These would encourage more people to retire later.

    Gordon Brown hit the private pension system. Take a chunk out of the public final salary schemes to equalise things.

    Charge people a small fee for missed doctors or hospital appointments.

    Good points on libraries. Honestly, I doubt if the country spends that much on public libraries and I'd hate to see them close. I'm sure they could be run more efficiently. What is their main cost – labour/utilties/rent/capital or books? What is their income vs cost? There must be a lot of unused retail space around which the libraries could move to and be operated by the likes of WH Smith. Sell cheap things like paperbacks, newspapers and magazines but lend out expensive books. Provide social space by including coffee shops and good seating. Merge public libraries with schools and open them to the public in the evenings and weekends.

    Anyway, there are some ideas, most of which are probably not politically viable, but are food for thought.

  5. simon
    June 9, 2010

    A 5% cut will not be enough to bring higher paid public servants into line with what their counterparts in the private sector take home . Even if permanent this does not reverse the excessive pay rises of the last administration or bring costs under control .

    Cutting libraries is a drop in the ocean isn't it .

    The unions always argue that you can't have 2 people doing the same job with widely different terms and conditions so can't the defined contributions schemes be closed to existing members too ?

    JR is there any possibility that defined benefits pensions will be scrapped for new recruits and replaced by higher basic pay/defined contributions in the June budget ?

  6. simon
    June 9, 2010


    so can’t the defined BENEFITS schemes be closed to existing members too ?

  7. nonny mouse
    June 9, 2010

    In further reflection libraries are going to be made extinct by technology soon anyway. I would give it five years. IPad/kindle/ebooks will mean we read books electronically. The internet means we have access to just about every book ever written. The original idea behind public libraries as places of getting access to a wide range of cheap literature will be redundant.

    It is not the books that will be missed. It is the social aspect. Libraries are great places for meeting people and for the lonely people in society. It would be great if we could find away of keeping some aspects of libraries without the link to book lending.

  8. a-tracy
    June 9, 2010

    I love public libraries, as a child I couldn't have read as comprehensively as I did without the free library at school and in the holidays the library a mile walk away from where I lived was great as it was inside a park, the librarian introduced me to books I otherwise wouldn't have chosen for myself. We owned few books and Christmas and Birthday money was mainly used to buy clothes.

    My own three children have regularly used the library from being babies, we buy many more books now as there are some fantastic discount book retailers now and as parents we're better off than our parents but we still visit for reference books even though we're on the Internet.

    After saying all this, I agreed with you last night, the cost of borrowing each book must be reduced. The overhead costs of each location; building, heating, electricity etc. must be shared out and perhaps private sector tea/coffee shops could set up; private tutors could set up study groups in writing skills and hire space off the library; internet cafe's, and/or private job centres where employer's jobs can be advertised at a low cost for a week or two weeks and the IT in libraries used to apply by e-mail. This shared space would also cut down on the cost of building maintenance and rates.

    Library staff should be more proactive, if their library isn't busy they should do what a private business would do and speak with their potential clients: during school visits, at job centres, in their nearest supermarket or shopping centre; and retirement clubs in order to sell their services and save their jobs.

  9. FaustiesBlog
    June 9, 2010

    I'm sure private organisations would run libraries more efficiently.

    The US has book clubs, the model of which could be used in public libraries, which might have a coffee area and perhaps even a retail section for new books.

    If such a model fails to turn a profit, perhaps it could attract a subsidy from the government. This would surely be cheaper than funding the libraries as we do now.

    1. waramess
      June 10, 2010

      Surely if the private sector is unable to run the libraries at a profit it is the cue to close them down, not reach for athe subsidy bucket.

  10. Andy
    June 9, 2010

    My wife is a librarian. Recently the local council went on a library-cutting crusade. Over the shortage of about £13m0 they were going to get rid of 25% ish of the libraries in the area, saving only £2m. (I actually forget the exact figures, but the principle is correct).

    Eventually the council was ordered by central government not to do so; that they would be failing in a statutory duty. Given the relative expense of the library service, it seems that it gets an unfair share of the punishment when budget time comes around every year. (I have supplied enough information that you could work out where my wife works, I trust you will not do so).

    That being said, from what my wife tells me there would appear to be huge potential for savings. Here then are some suggestions from a computing expert with a wife who works in a library:

    – The number of non-frontline staff who are still considered “library” workers is ridiculous. Libraries are not complicated; and do not need any kind of strategic management. Fire a load of the support staff and put more responsibility on the head librarian at each library.
    – The sickness rate is appalling. It seems to me that everyone who has any kind of chronic, but not life-threatening illness works for the local council. The number of people who go off with “stress” is almost comedic.
    – Recently, the local council held a pay review to “normalise” pay grades across the whole of the council. This led to all council staff receiving the standard 1.5 times overtime rate for saturday work. This made no difference to the majority of council staff, but you might be aware that libraries make a lot of use of what they call “Saturday Assistants”. These are typically students who want a weekend job. They were already paid above average for a teenager’s first job and they had no complaints. You can imagine that they have even less now. These people, employed as “Saturday Assistants” now receive 1.5 times their hourly rate for every hour they work because they only work on Saturdays. The Saturday assistants are now paid pretty much the same as the full time professional librarians. This sort of madness must be going on across the whole of the UK.
    – Libraries, in order to survive, have diversified into being Internet centres. I personally have no objection to that — we are becoming an online society, and those who can’t afford access to the Internet now have a place to go (the same argument that we would have used for books and libraries when they were created). However, the libraries charge less than cost for people to print out and use the fax. That’s madness. These things should be priced so that they pay for themselves.
    – Libraries still maintain a “ref” section. Is this really necessary these days? Whatever information is not accessible by computer should be digitised and the ref sections shut down in favour of websites.
    – Public records. Why can’t libraries and librarians look after these documents? They are already masters of the document in book form, why can’t they look after the rest and save a department elsewhere?
    – The IT departments are woefully underfunded. Where I live the library service has three IT employees: two who actually know what they are doing and look after the whole of the library service’s computers and one who is the “manager” and knows bugger all and earns twice what the competent ones do.
    – Why hasn’t the government paid for an someone to write open-source library management software? All the libraries could get the benefit, and all of them could gradually improve it. (This is a policy that would work in many more departments. Government really needs to get a handle on how it can take advantage of open-source principles to allow those who use the software to improve it, and to share those improvements across the country. For the billions the government has spent on a single IT project they could have employed an army of loose-knit open source programmers five times over. Show these people the problems and leave them it to them to solve — if it’s wrong, go again).

    Getting rid of the LEA: definitely. They are nothing but a parasitic drain on resources. They supply nothing that anybody wants. I read estimates that say they take a third of education funding. If that includes a third of library funding, then lose them. Libraries do not need help from the LEA.

    As to your suggestion of joining University and public libraries — are you mad? Go and visit a few of each before you suggest things like that. They are very differently purposed places. At the very least: most small towns don’t even have a university library because they don’t have a university. Further: have you any idea of the abuse that public library books receive? Have you any idea of the sort of useless children that come to libraries simply to cause trouble? University libraries are not places of fun, they do not have book clubs, they are professional places filled with expensive, difficult to read, non-popular books (just as they should be) and journals. Most universities already offer public membership on application. If your idea had any merit, there would already be flocks of people in university libraries. Finally, and this might seem a bit snobbish, the people who go into public libraries need a lot more help than the people who go into university libraries and the librarians do so with aplomb. The staff-to-customer ratio for a public library is therefore significantly higher than the staff-to-customer ratio in a university library. Apart from on the desk, I can’t say I remember seeing any library staff when I was at university.

  11. Stuart Fairney
    June 9, 2010

    Is this true or is there a transitional period of say 18 months? You will understand my concern when you realise I have spent literally tens of thousands of pounds preparing for entirely lawful planning applications to be submitted only to be confronted with this immediate change which probably destroys my company and bankrupts me!

  12. dinosaur
    June 9, 2010

    As an interested viewer, I was disappointed that the discussion really only moved on to efficiency (and was quickly hustled away again) when the public libraries were discussed.

    The most telling point was the "defendent's" comment about local authority administration involving very different numbers of staff in different authorities. This sort of thing is easier to spot in local government (comparisons show it up), much more difficult in national government where overelaborate and costly delivery processes are uniform across the country.

    More specifically, the public library system seems to have had a bad case of mission drift.

    Which of the following should it be doing:

    1/ Competing with with Blockbuster for DVD and video rental?
    2/ Providing access to job websites for those without computers?
    3/ Pre-school activities?
    (If so, this pretty much excludes merging local and university libraries – serious research cannot be undertaken while 12 toddlers are learning "We all know frogs go lah-de-dah-de-dah" in the same room.)
    4/ Cafes and card shops?

    And lest one of your co-panellists statements go unchallenged, the internet is only a substitute for access to books, for those whose reading age is less than about 10 years.

  13. English Pensioner
    June 9, 2010

    I there should be across-the-board cuts which affect everybody, including all those on benefits
    Personally, I would rather have a pay cut than an equivalent tax rise. Either will reduce my spending power, but the former would help my employer (in my case my pension scheme), whilst the latter would give more money to the government which could discourage them from making savings.

    June 9, 2010

    We watched. A wise and balanced answer, both practically and politically.

    There's no substitute for common sense laced with pragmatism is there? We wonder if the new oppositin will discover that.

    It's also very handy to have an experienced, 'on-message' spokesperson from outside the cabinet. particularly when you're known for having an independent mind. P'raps the media are learning too as they have ostensibly stopped trying to trip (trick) you and the party line?

    As an aside how ungracious is Jeremy Paxman? The final questioner looked crestfallen to be interupted when his point was interesting and then dismissed without thanks. Time to put this old Rhino out to grass we reckon…

    We hadn't noticed your YOOSK link before but this is a handy addition for asking direct questions that you wouldn't necessarily have time to address on this site. Thanks.

  15. David Burch
    June 9, 2010

    I think you are being political on not wanting to cut public sector wages. Many years ago higher wages in the private sector were justified as a "premium to reflect the extra risk involved in working in that sector". That does not appear to apply now and there is now a £156 billion pound reason to do something about it.

    I do welcome the pension proposal as it is grossly unfair to inflict inferior pension provision on non government workers and to keep the generous schemes in the public sector and then ask the rest of us to fund the bill.

    These changes will only though get us some of the way. Making government smaller as you also suggest is a big positive and that gives a 100% pay cut to some public sector workers. You might not have too much time to do this as Labour and their friends at the BBC will be keen to run end of the world stories.

    Beware sacred cows as sometimes they need to be removed as well.

  16. Norman
    June 9, 2010

    An across the board pay cut is a bad idea. We need to accept the fact that a lot of the 'services' currenlty provided to us by government shouldn't be and start from there.

    Tinkering around the edges with pay freezes or small pay cuts to employees while leaving the huge infrastructure overheads in place isn't going to get us out of this hole.

    Print out a list of government departments & quango's, grab a red biro and a ruler and get busy.

    I have no real problem with state final salary pension schemes if the state was of a sufficiently small size that those who did work in public service had provided a genuine public service over a lifetime. If someone was a teacher for 40 years, or a police officer, fireman, etc. then I think they deserve to get a decent reward from the public purse at the end of it all and I wouldn't grudge a penny of it but the truth is that the numbers are completely out of hand and unfunded final salary pension schemes can't be dealt with on the current proposed scale without impoverishing others.

    I'd argue that even the unfunded state pension needs a good shake up too but we've taken our eye of the ball for so long that it's a complete mess and difficult to do anything about other than the easy option of raising the retirement age every few years.

  17. Stronghold Barricade
    June 9, 2010

    I have argued for sometime that there should be cross pollination allowed within the library system. In some areas, like East Lothian, the schools are tied into the local systems and proffer their requirements to meet the curriculum. I have often shaken my head, however, at the fact that if the systems in the same town were amalgamated they would probably cost less but also provide a larger resource. I believe the thing that stops this happening is the threat of potential paedophiles loitering in local libraries to ogle the children (according to a councillor I spoke to, as he thought everyone entering the library would have to undergo a CRB check whilst the school children were there on school time)

    To take an example in point: the current reorganisation of Chesire has meant that the library system has been split in to many different units, but the bean counters didn't take account of the fact that the "stack" (the store of books not on the shelves but available to loan) was in Chester and not duplicated elsewhere.

    This was also further fractured with Halton and Warrington leaving the system of Cheshire.

    Yet on the doorstep are the education centres of Liverpool and Manchester. Plus in Lancashire the library system covers many local authorities.

    Effectively it now costs money to get books from libraries in Cheshire where the books were divided up arbitralily, and the system requires a multitude of library cards (and presumably systems) to travel around these libraries which were once joined.

    Plus it also means that the budgets for each library to buy new books has effectively been cut because they no longer have the buying power and could actually be filling their shelves with exactly the same books when an overall "spread" would allow a much greater range of books.

    I believe that the library system is something that should be run centrally, because it is the one utilitarian area where you can facilitate the social movement of people within society.

    I dislike the fact that many libraries have been changed into little more than free internet cafes. If they are actually required then lets add the extra fees so that money is available for the better bandwidth, and possibly to buy other books. Similarly I hate books and drinks together, but in a retail environment where it is encouraged then again maybe it is something to be applauded. It might also discourage some of the poor behaviour of children left as a cheap baby sitting service.

    I would also like to see libraries as places where you can buy books, as this uses their dominant position within the market place to engender greater discounts and compete with Amazon etc.

    So yes, I can see entreprenuerial opportunites within the library system, but at it's core must be their raison d'etre – to ensure that books are available to people to read even when they can not afford them.

    I am sure that those people like Carnegie and other donors, saw the social benefit of education and the realisation of aspiration.

    I would much rather see the libraries spend the money they have more effectively. The savings may well be there in the system just waiting to be unlocked, but I would consider the libraries as much more sacrosanct than the NHS

  18. alan jutson
    June 9, 2010


    I hope when you say transfering Public sector jobs to the Private sector, you are not suggesting that they do the same jobs as they do now only for a private Company, as that will not cut Government spending at all.

    What we need is an actual reduction in what the Public sector does, which means actual job losses, those that then lose their jobs will have to find employment doing something completely different for any savings to be made.

    Yes we certainly need to stop final salary pension schemes now, for all Public sector staff, including MP's. Benefits to date should be honoured, as that is only right, but a totally different scheme should operate for everyone from a set date, say April 2011.

    1. Simon
      June 10, 2010

      I see closing of the public sector benefits defined pensions schemes to new and existing member as an intermediate step towards a long term pensions provision solution for everyone in the country , public and private sector .

      Private pensions currently exist for the benefit of the financial services industry not the public . We deserve better but aren't going to get it whilst public sector and MP's in particular enjoy good pensions .

      It is counterproductive for individuals and companies to have to divert their concentration from core competencies to learning about investments so they can manage SIPP's/administrate pensions plans .

    2. waramess
      June 10, 2010

      Surely, if the NHS for example were privatised, would you not consider that as cutting government spending?

      Wholesale privatisation of services currently provided by government would be a legitimate way of cutting government spending provided government did not end up paying for the services provided

  19. Tony Abergele
    June 9, 2010

    John – The danger here is people who do not use a public service, in this case the libraries, saying cut it out, not appreciating the benefit other citizens derive from it. In my case I no longer use a public library, due in part to where I live and also because my situation is such that I can afford and prefer to buy my own books. Particularly as books and CD's are so cheap these days. I do remember a time when the service provided by my local library was invaluable to me and there just might be some people out there who would be disadvantaged if they were closed.

  20. Lindsay McDougall
    June 9, 2010

    I finally managed to get myself transferred from the ranks of the unemployment to a sort of private sector employment, but only by agreeing to work east of the Black Sea. The days of Auf Wiedersehn Pet are gone; you need to look further afield than Germany and Europe.

  21. BillyB
    June 9, 2010

    Simon Jenkins has an interesting idea

    why not think the unthinkable here as well?

  22. albion
    June 9, 2010

    What about the £25bn of the defence budget?

    Simon Jenkins is spot on

    Armed services are notoriously wasteful and inefficient, mostly in cahoot with arms manufacturers and are doling out huge salaries, pensions and benefits to countless armchair generals.

  23. forthurst
    June 9, 2010

    I agree that cutting salaries and benefits across the board reeks of laziness and callousness and would be extremely unpopular.

    There must be huge scope for cutting public service pension liabilities: this is where Greece lost the plot, allowing retirement at 50 etc. We can't afford to have people retiring or being made redundant at 50 and then being re-employed on contract. That is happening and is unaffordable.

    The way to cut is by function. Libraries are a red herring, the tip of the iceberg. How often do we have teachers on the tv bellyaching about the salvos of 5lb tomes fired at them by the DofE and the LEAs continually poking their noses in at the schools as well. Teaching the 3Rs? what's complex about that? English uses the Roman alaphabet which is phonetic not pictographic so let's stop being stupid about teaching reading. The issue of LEAs and clause 4: why are LEAs picking text books in any case. The best schools (all private) make as little use of the DofE and LEA as they can get away with. What about examination syllabi? give these back to the universities and cut out the DofE and it's executants who have been debasing the currency of learning to the point where the old 'A' level would buy you half way through a university education and the old 'O' level would buy you an 'A'. It's all Big Brother and Five Year plans and Tractor production figures and it all needs to go.

  24. Jonathan Bryce
    June 9, 2010

    I think you could actually reduce benefit expenditure by increasing benefit payments to people in low paid jobs. It is the same less is more argument you make for lower tax rates. Currently, unemployed people face a marginal tax rate of around 100% if they do small amounts of part time work, and more than 100% at the point where they lose their healthcare benefits, so they don't do small amounts of part time work, or they do it for cash and don't declare it.

    These small amounts of work are the critical first rung on the career ladder for many people because if they show they can do that, then more work could be on the way for them. If you reduce the benefit claw-back rate to a more reasonable level like 20%-30%, then more people will go out to work, and you will actually get the benefit or reduced payouts for people moving into work.

  25. Max
    June 9, 2010

    John, on a completely different topic I watched PMQs today and was disgusted that no single MP from either side of the house took Dave to task over his handling of the BP disaster. I'm not talking about jumping on the bandwagon like Obama and his anti-British cabal, I mean how Dave has taken all of it lying down and not defended this great British institution.

    BP pays for my pension and your pension and everybody on this website's pension. They pay billions in corporation tax and employ thousands of people in the UK and around 100,000 worldwide. Obama seems intent on destroying the viability of the business and Dave hasn't said a thing about it, would it be possible for a reasonable right winger such as yourself to bring it up next week or one of your associates who has a slot. It is an outrage that a head of state like Obama could do premeditated damage to a company for little to no reason.

    1. billyb
      June 9, 2010

      Perhaps Mr Obama should be reminded of US oil spills in "faraway countries" and how fast they got cleaned up…. some are still waiting. <a href="http://(” target=”_blank”>(

      "On 1 May this year a ruptured ExxonMobil pipeline in the state of Akwa Ibom spilled more than a million gallons into the delta over seven days before the leak was stopped. Local people demonstrated against the company but say they were attacked by security guards"

    2. Paul B
      June 9, 2010

      And Dave should make sure that any takeover is blocked, should an American (or for that matter any foreign) firm come swooping in to pick BP up on the cheap.

  26. Andrew
    June 9, 2010

    JR, -When you write of reducing housing sudsidy, — what do reckon about reducing housing benefit levels or "caps" for BTL Landlords ?

    I have mentioned the issue of "Benefit led" Buy to Let in an earlier posting about CGT. An alternative to lower Housing Benefit rates would be, -despite your robust campaign against current Coalition proposals to increase CGT , -to have a special CGT rate for BLT landlords, –where the rent is in effect backed by the public subsidy stream of Housing Benefit (i.e. where properties were not let to those in work, but those claimng benefits).

    Housing subsidy per se is a different issue. Here public subsidy could be better utilised by tying social housing allocation to employment status.

    1. Mark
      June 9, 2010

      Housing benefit (and indeed council rents) needs reform. It is one thing to provide housing for "key workers" in expensive areas, and quite another to do likewise for the unemployed. The whole mechanism of establishing rents for social landlords (whether private BTL or larger institutions such as Housing Associations ) needs to be re-thought. The degree of subsidy to council rents also should be reduced (although this would result in an increase in housing benefit of itself), so that market incentives can operate in the allocation of social housing across public and private ownership.

      Grant Shapps' call for everyone to aspire to buy a house the other day is a nonsense at present house price levels. He should be explaining how he intends to see the house price bubble safely deflated instead. Cutting housing benefit rents and ceasing to pay for mansions in Kensington is one obvious way to help.

  27. Acorn
    June 9, 2010

    Interesting talking to my public sector contacts today. Three groups were up for management buyouts of the "front line" business units they manage. One of them was revising his Christmas day formulated business plan for his MBO.

    Two others had to cry off because, the word had come from on high, that they had to count up all the security passes and e-mail accounts they had issued.

    This is getting serious! And not before time.

  28. Javelin
    June 9, 2010

    I don't agree with your analysis on public sector pay. It is already higher than private sector pay -and the public sector has a FAR better contract. Both public and private sector workers face 5% inflation.

    Housing benefit is a very good area to cut as it will bring down the cost of housing and bring down housing benefit further.

  29. Steve Tierney
    June 9, 2010

    I'd be quite happy with an incremental public sector paycut.

    Up to £20K – no cut.

    Then in £10K bands progressively higher cuts up to the really highly paid who would be asked to take a 25% cut.

    I really can't see a valid case for any public sector worker ever being paid more than the prime minister. Not ever.

  30. Paul B
    June 9, 2010


    You don't support a public sector pay cut when inflation is + 5%, and argue that having it frozen is like a pay cut anyway.

    What about savers?


  31. Nick
    June 9, 2010

    Why means test the state pension? If you have paid for it, you should get it. Period. Raising the state retirement age is the same as stealing money.

    However, future acruals for the state pension systems should be stopped. All existing acruals should be honoured.

    Then the question is what replaces the system?

    1. Compulsory savings into a personal account.

    2. If married half goes into the spouse's acount. These funds are ignored in any divorce settlement.

    3. NI contributions abolished for state pension.

    4. The government doesn't contribute to unemployed people's fund. (Wait …)

    5. Invested into an index tracking fund. (Low fees, and no meddling eg. Rover)

    6. Die before retirement, and money goes to funds of spouse or heirs.

    7. At retirement, fund is drawn down at a set rate less existing accrued pensions

    8. If the fund runs out before the retiree dies, then we step in to help.

    This set up has a lot going for it.

    1. Funds go into investment. If you had all your NI invested over the last 40 years and were an average worker (currently 24K) you would have a pension of 20K. Even post crash. The reason is simple. Compound interest. The current state system has no compounding.

    2. The investment also benefits the economy.

    3. Why the no contributions to the unemployed? Well, the safety net should be a safety net. By waiting until retirement many people will have worked for most of their lives and have sufficient. The optimal bail out is to wait.

    4. Why allow people to spend down the fund until they run out? Again, its an optimised bail out. Some people will die early, and we won't have to bail them out.


  32. Conroy Tucker
    June 10, 2010

    I very much enjoyed Newsnight last night – well done!Anyway, Libraries: Our local library was closed for a year for a vast splurge of “investment”. It is now very interesting, painted violet and full of intense ladies with nothing much to do now they have been replaced by a computer. While it was closed, I discovered Waterstones. Marvellous! Cheap, helpful and a really inspired choice of books. Cut the taxes by £9.00 every month and – bingo, as far as I am concerned, you could close the Libraries.Public Sector Employees: The people I bump into are mainly middle aged ladies who spend their time begging. They are really good at this. It is called “accessing” “pots” and “services”.If they were to find out that the pots and services are now closed and that they had to devote their attentions to starting up some kind of private sector thiggy, we would all benefit: they are very skilled and very persistent people.Oh – round here they have decided that the Comprehensive and two old peoples’ homes are “not fit for service”. Bang go a few more tens of millions of pounds. So much for the “recession”.

  33. david b
    June 10, 2010

    Its funny libraries are such a hot topic. I haven't been in one since I cannot remember when. Its not obvious to me how a lending library for books can be commercialised. Is the model like a DVD shop? Surely the original concept of people like Andrew Carnegie was that people could be educated by having access to libraries, and that wealth of itself should not preclude access to knowledge. Maybe Libraries are relics in the google age and we should forget about them altogether.

    The curiosity is that I was having a chat with a customer the other day and it was one of the things which came up. We are fairly certain the cuts will not materially affect the public sector, except in petty ways – like library services, pensioner bus passes, and street cleaning. We think as usual the losers will be poorly paid footsoldiers, while the upper ranks will batten down and look after their jobs and conditions at all costs. We also think that large public construction contracts will be cancelled which will impact mostly on the private sector – as most of the work from building warships to white lining the roads is carried out by private companies.

    All we are going to see here at the end up is a damaged private sector, a pool of disgruntled people who didn't earn much before they lost their jobs anyway, and there will be just as many bed managers and outreach diversity coordinators as we have now.

    I have seen all this before. Libraries are a side issue. If you really want to fix this mess once and for all then the capital budgets should be preserved and the state should withdraw from competing with the private sector. We should accept our role in the world and stop giving aid to foreigners. We have a big private charity sector, people who care about folks in third countries can tithe to them. The NHS should be a core health service – cosmetic surgery and IVF treatment are not life threatening. And there is no need for star chambers. All departments budgets should be cut across the board. If the guys at the top of them cannot deliver the cuts then fire them and get some people in who can deliver.

    I am sceptical. I think we are more likely to provoke a revolution than a return to an enterprise society. I wish you well.

  34. Javelin
    June 10, 2010

    The IMF says western economies will have limited growth, whilst the BRIC countries surge and the BBC say we will have 500k public sector unemployed.

    Why has it taken these people so long?

    Presumably for same reason that when I worked in credit default swaps the investment bank didn't get sucked into mortgage backed bonds.

    My friend says wisdom is about being in touch with reality. It really concerns me these guys don't come out with these predictions earlier.

    I posted a couple of days ago on this site that I felt growth would struggle for a few years to get over 1%. I'm not a keynes fan when I say that pulling £150 bn out of the economy will cause a much bigger negative shrinkage. I think it will cause a huge drop in spending power, but it is the right thing to do to start to pay back the debt.

    Paying back the debt this time will take 2 terms of Parliament and hold back our economy.

    I now see house prices falls and salary growth on non global jobs as the next big "surprise" to the economic observers. I see demand for houses from young people dropping off a cliff and that being felt through the housing chain. University debt, huge lack of jobs, graduate competition, international competition, immigrant competition, increased taxes, lack of public sector jobs etc, etc. Wisdom is not cheap but you have to be pretty stupid not to see years of house price deflation coming.

    1. StevenL
      June 10, 2010

      You have to be pretty stupid to get sucked into these bubbles using masses of borrowed money to begin with if you ask me.

      What makes you think they'll just let house prices fall anyway. If recent experience is anything to go by they'd rather trash sterling than let people think house prices are falling.

      Then again maybe they were just too dumb to realise the banks would go with them, and once the banks have enough capital they'll pull the plug on the participants of this giant ponzi scheme.

      I think people are going to find out why credit fuelled house price inflation is actually about the most damaging form of inflation there is.

  35. Martin
    June 10, 2010

    There are of course some elements down the police station who some might argue could be let go.

    (cites a case involving detention of a professional photographer who was taking photos in a public place under the Counter terrorism Act.)

  36. mart
    June 11, 2010

    Dear John,

    Public libraries are excellent resources. They are one of the very few things that still make me happy about our country.

    Books and facilities offered to the very young, right through the age range to the very old. No ideological agenda, no waste of resource, just pure public service.

    Mix up the various libraries? To save how much money? The cost saving could never justify the disruption and loss of service.

    I am with you on almost every subject, but not this one. I can imagine no good coming from changes to our libraries.

    And no I do not myself use my local library, but my wife and children do, very often.


  37. christina sarginson
    June 15, 2010

    Once again an interesting blog, with remarkable thought provoking content. I agree there must be cuts from public spending as I have commented previously, I do however caution they must not be blanket cuts and the new government must be careful not to send the UK public spinning into poverty with the cuts on benefits. I do know and have worked with a lot of disabled people who want to work but the attitude of the people towards disability is not always a favourable one. This can be helped with education and training but unfortunately will not happen overnight.
    I also have a concern about cutting spending around libraries, we should be encouraging reading for all ages and this cut may present difficulties.

  38. Conrad Jones
    June 24, 2010

    NHS Expenditure – I completely resent the fact that my taxes are going to people who have non-life threatening – and in some cases – purely vain reasons such as cosmetic surgery. Somebody who thinks their nose needs straightening or requires Breast Implants should not get such treatment for free- these are not life threatening. I am a bald man; should I be able to get a Free hair transplant? That wasn't why the NHS was created. If we have two patients in the NHS; one who says small breasts are bad for her self esteem and another older lady who is in constant pain due to a damaged hip joint – Who should we operate on? Bigger breasts and let the old lady suffer – we cannot pay for all medical procedures but we can prioritise. Too many people expect far too much for free.

  39. Conrad Jones
    June 24, 2010

    Let the NHS charge for cosmetic surgery and IVF treaament because I don't want to help pay it. Cosmetic surgery should only be performed for free in the case of severe disfigurement from injury or illness – not because someone doesn't happen to like the way God intended them to look. We should also charge foreign travellers for using OUR NHS. We have to when we visit their Countries. If they are not insured then they should be given any emergency treatment then immediately expelled from the Country at their expense. If they cannot afford it then their Government will be sent the bill. No more free lunches.

  40. Conrad Jones
    June 24, 2010

    Absolutely agree with your statement;
    "I would be happy to defend welfare reform where someone who is offered a job is told their benefit will be removed whether they take the job or not.".

    I've been unemployed myself and know what it's like – it's not nice but there were Jobs available both in Job Centres and Private Employment Agencies and if a Job did arise which was suitable (defining "suitable" could be a problem) the offered pay was usually more than what I was receiving through unemployment benefit. If it had been the other way around then I would have been in unemployment for much longer periods because the logic of going back to work to receive less money is a strong disincentive – and I was only thinking in the short term back then.

  41. Conrad Jones
    June 24, 2010

    During a longer period of unemployment (during the early nineties), there were very few suitable jobs available. My local Council reviewed my situation along with other people in a similar predicament. An option that I was encouraged to pursue was Re-Training and gaining additional qualifications to make myself more attractive to a future employer. As I already had good School and Further Education Qualifications, this meant going to University. At that time – under the then Conservative Government, A Grant could still be given to pay for Tuition Fees and also help with Lodgings, Food etc. with a small additional component added as an Optional Student Loan – which I required and have paid back in full. This is where the Labour Government Failed so badly (Apart from the Wars they helped start). They increased Student Loans from an average of about £2000 to over £20,000 in just ten years. Since leaving University I have been lucky enough never to have experienced unemployment – so far. I have always been grateful for the Grant that my local Conservative Council gave me. It was an investment for all concerned.

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