The (new) Auditor General’s comments on public spending have added nothing to our understanding of the challenges, and added plenty to the clamour for cuts. The next issue of the Bevan Foundation’s magazine – out soon – challenges the hysteria in a series of well-argued pieces from leading politicians, economists and thinkers. The conclusion? There IS an alternative, and this is why.
First, it is by no means universally agreed that the UK’s deficit needs drastic and immediate cuts. There is a sound argument that it can be lived with for some time. A dose of inflation – say 5% – would reduce it further.
Second, we are not looking at total budgetary devastation but at a marginal, managed decrease in funding from historically unprecedented levels. Even with cuts, public spending will be higher than it has been for years.
Third, even if cuts are made there are alternatives to attacking staff – cutting Trident and ID cards are two obvious examples and there are surely plenty more.
Fourth, the usual response to managing cuts – recruitment freezes, slashing grants to voluntary bodies, etc – is very shortsighted. It risks affecting the most vulnerable, as well as increasing costs in the long-term.
The alternative? Refashioning services, as has already been achieved in some local authorities, can save a fortune and deliver better outcomes. Cutting out what doesn’t work. Joint back-office services, such as payroll. Generating returns on public investment. Better leadership to drive through change. Cutting staff. attacking pay and pensions are easy targegts – but not the right ones.
Jeff Jones 1:48 pm on 16 March, 2010 Permalink
It will be interesting to read the alternatives. In both the 1930s and 1980s there were alternatives to orthodox thinking. But no one listened. Some of us still have the books outlining the Alternative Economic Strategy in the early 1980s. But meanwhile in the real world according to Philip Stephens in today’s FT “Treasury knights,now helping Alastair Darling, the Chancellor, to frame Labour’s pre election budget are privately urging Mr Osborne to be much tougher if the Tories win.” Whoever wins in May will implement sooner or later cuts in public expenditure.
The problem in Wales is the size of the public sector and the fact that the Assembly has a budget fixed by the UK government. If the UK government cuts expenditure then the Assembly will have no choice but to cut. The debate should centre around where those cuts should be. If this debate isn’t led by politicians then civil servants and local government officers will shape the cuts agenda. Arguing that Trident should be scrapped is not I’m afraid a realistic option given the attitude of both main parties to the UK’s position in the world and before a defence review.
The danger with the no cuts strategy and relying on inflation is that it could lead to increases in interest rates which would definitely kill off any recovery. The reality for all decision makers in the public sector in Wales is that the next few years will require some very tough decisions. Wether they have the ability and courage to take the decisions needed only time will tell.
Unfortunately the huge increase in public expenditure in the last 10 years hasn’t exactly provided the necessary training ground for what is to come. Rather than looking at reconfiguring service delivery history often tells us that it is often far easier for decision makers to go for the soft options.
Valleysmam 10:14 pm on 16 March, 2010 Permalink
I think a lot is down to the capcity of many officers, they are incapable of doing anything other than what they have already done,compound this with the profile of the majority of councillors and what do have same old same old same old
Where are the WLGA in this
Steve Thomas WLGA 1:42 pm on 20 March, 2010 Permalink
Crisis, what Crisis?
Valleys Mam asks where are the WLGA on this? The answer is that that we have been warning for well over two years of the potential problems ahead in the public finances and the impact this could have in Wales. Sadly councils are seeing job losses although hopefully we can avoid the compulsory route. That said even if the public sector were in a benign financial climate we would be struggling with the scale of challenges not least of all in adult social care, a serious collapse in investment income, significant pressures on benefit services and a huge decline in areas of capital spending where the worse problems are to be found. Birmingham City Council’s recent sad decision to shed 2000 jobs is an attempt to save £75m over the next year alone as a result of these pressures.
I think Victoria is right to try to provide some form of corrective to the scale of alarm around at the moment but I would firmly contest the view that this is about a “marginal, managed decrease”. Since 1975 the advanced economies have not been in a situation remotely like this and already published figures by Alistair Darling set out huge challenges. In terms of Wales a 50% reduction over the next 5 years and possibly beyond in capital spending as highlighted by the former Finance Minister Andrew Davies couldl decimate key engineering, architectural and professional services.
What the WAO report shows is that the Assembly budgets could go down to 2003/04 levels while at the same time the service pressures I highlight are dramatically increasing costs. In this pincer movement lies the source of our problems. Indeed if some of the larger services in addition are ringfenced the potential of a 15% reduction in some local government services is a possibility between now and 2014. Arguing that back of office services restructuring such as payroll can meet this is I am afraid a pipe dream. The big money is not there in the first place as both Jeff Jones and Rodney Berman have rightly pointed out on this blog. More than this the turnaround for shared services projects are slow and clearly with staff costs accounting for a huge proportion of budgets all major parties are looking to bear down on pay costs. I sincerely hope the Bevan foundation is analysis is right and others wrong and look forward to your publication.