There is another leak, this time from Dr Roy Spendlove to Dame Lucy Doolittle
I have returned to work after the day of action about pensions. I hope you realise just how strongly many of us feel about the pensions issue. I am pleased to report strong support for our principled stance, with all my main reports joining the industrial action.
You asked me to review progress with the government’s main aims one year on. Pressure of work has made this difficult, but I am now in a position to send you a preliminary outline of our findings.
The government’s stated main aim is to cut the deficit. The civil service has consistently advised that this has to be done mainly by higher taxes rather than by inappropriate spending cuts. The government has raised VAT, confirmed the increases in Income Tax and National Insurance commenced by the previous government, and increased taxes on banks and oil companies. In their first year they were persuaded to allow increases of more than 5% in cash spending. We warned them that this was still tight, and there have been some signs of strain within the public sector as a result. This year they want to limit increases to 3.8%. The pay freeze and pensions attack are both unfortunate and will result in a further erosion of morale and the loss of some good people.
From here I am concerned about the government’s deficit cutting strategy. I think it unrealistic. I do not see how the government can reduce the cash spending increases to the very low levels ;planned for the last three years of the strategy. I think we all have a duty to spell out the consequences, as this will represent real cuts. The government also needs to allow for the increased spending on EU programmes and on the necessary solidarity expenditures for Eurozone member states. Our preliminary advice is the government should revisit the Red Book targets in good time for the Autumn Statement, and should increase the spending lines. It should explain to markets that it needs to take this action to reflect the slower rate of growth being forecast worldwide, and to help avoid a worsening of the position in our main export markets in Europe. Support for EU governments is also support for European banks. If Ministers do not come to the aid of weak banks the recovery will suffer.
The government has also made much of its intention to cut immigration to tens of thousands a year from the much higher levels of recent years. In its first year immigration remained at higher levels. Our advice again is to come up with a more realistic statement of the position. Much of the inward migration has come from within the EU. The UK is committed to common borders with our European partners. The government in its more thoughtful statements exempts EU migration from its aspirations. It is important that the language on the overall objectives is moderated to allow for this reality. We also need to stress to Ministers the importance of the Higher and Further Education sector to the UK and therefore the need to allow foreign students to enter. International human rights legislation puts on the UK strong obligations to let in asylum seekers. We need to ensure Ministers live up to the high standards the Uk sets for itself in these areas.
In its early days the government briefed that it intended to be radical government undertaking wide ranging reforms of public services. In the first year we have seen them largely abandon their forest sale plans, have a pause to reconsider the wide ranging health reforms, and take a more measured approach to the speed of welfare reform. We have successfully changed Ministers minds on large computer schemes, persuading them of the wisdom of such approaches to both tax and welfare reform. We have further work to do to explain to them that if they wish to push through radical reform from the centre there are limits to what they can do with their so called localist agenda. I think they may discover that some of the welfare changes they have pencilled in for the second half of this Parliament may not look so appealing when they see the full detail nearer the time. It is also doubtful how much of the very extensive computer systems can be delivered as quickly as Ministers would like. The government is pressing ahead with Academies and a limited number of free schools. There were troubles with their over hasty cancellation of the Schools for the future programme, and I fear there could be more legal and administrative challenges over free schools. Some of our colleagues in DFE are concerned about the pace of the changes.
Ministers are now saying that they cannot deliver the welfare to work programme if migration continues at current levels. I suggest we put to them options for tackling this, as it is difficult to forsee a sudden collapse in migration. I fear all options will cost more money, but Ministers will have to learn that you cannot undertake these big tasks on the cheap.
Please let me know if you would like further work on these outline conclusions. Given all that we are doing on HS2, renewable energy and the EU response to Greece, I will need additional staffing if you need a detailed paper on these large and complex themes.