Wednesday, 23 June 2010

Three ways to cut 25% from the public sector

Mark Littlewood was Head of Media for the Liberal Democrats before he left to become Director General of the IEA.

On the 24 March, the day of Alistair Darling's fantasy budget, Littlewood gave a speech entitled The Hole We're In. It is worth reading in full, but this section is particularly salient:
No doubt some money could be saved by sourcing cheaper supplies of paperclips, installing a few more low energy intensive light bulbs and the like; but not much.

The problem is not that the public sector is being run inefficiently; the problem is that the public sector is intrinsically inefficient. Whole swathes of activity need to be moved from the public to the private sector, rather than relying on state bureaucrats under the next government showing a level of productivity on a different qualitative level compared to that displayed in the last ten years.
The 25% cuts that Osborne has called for could come through a combination job losses, pay cuts, and efficiency savings. Anyone who thinks this will have a significant impact on public services should consider that 30% cuts (from £655bn down to £460bn) could be achieved simply by rolling spending back to 2002 levels. I remember 2002, and things weren't so bad.

We could roll back the clock. The sky wouldn't fall. But it would be a missed opportunity, as Littlewood explains:
We need to take dramatic action and make substantial structural changes over the medium term to ensure we guard against the country being driven to the brink of effective bankruptcy again.
We really need to embrace and extend the model of the Canadians, who "stopped government doing things". Whole departments should disappear, not just because they are costly, but because they are doing things that are beyond the proper role of government. Here's just a few:
  • Coal Authority
  • Disability Rights Commission
  • Department for International Development
  • Department for Business, Innovation and Skills
  • Department for Culture, Media and Sport
  • Department of Energy and Climate Change
  • Enterprise and Business Support
  • Equal Opportunities Commission
  • Equality and Human Rights Commission
I expect we could easily achieve 25% cuts in this manner, and it would be the right thing to do even if we had no deficit, and no debt. We could apply this approach in addition to the savings in individual departments, and save 44% overall.

However, the most appealing solution is even more radical:
Let’s not trim, or even slash, a list of specific government programmes. Let’s raze the whole edifice to the ground and start from scratch.

If we did so then it’s hard to imagine that we would countenance a public sector that consumed much more than 30% of GDP.
I suspect that's more turmoil than the public can face at the moment, but let's hope it's coming.

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