Thursday, June 05, 2008

How to Save £50 Billion Without Even Tryng

The First Post has a piece by David Craig showing how a Cameron government could save £50 billion. While I am not going to comment on each of his suggestions (some of which have more merit than others) the general point is that George Osborne's team have nearly two years to work out how to cut public expenditure without slashing public services. I've said it once, and I will say it again. There needs to be a revival of the James Commission, and then some.

42 comments:

Cinnamon said...

Public service and expenditure used to be related, but not anymore.

In fact, getting shot of the thousands of lazy spongers and jobsworth on government pay would not only save money but also by removing all those little emperors, their empires will once more return to be productive workplaces.

Anonymous said...

The problem is some of these aren't really 'do-able'. Whilst it would be nice to hand back the Olympics, I can't see that happening under Labour - and by the time the Tories get in, nobody else will want it.

Some of the others will also challenge the ability of politicians to 'bite the bullet'. Ditching ID cards would be easy.

Flushing the £ 20 billion cost of NHS IT down the toilet, so we could avoid flushing another £ 10 billion down the toilet by trying to finish it sounds 'logical' to an economist - but it would be a hard sell to the public.

It is the old 'sunk cost' fallacy - people just won't accept that cash already spent should be discounted when making investment decisions - they think it is 'common sense' to finish the job.

Dave B said...

I think Mr Cameron's "Living within our Means speech" made it very clear that another James Commission is not on the cards. The Conservatives want to cut taxes for the long term, by reducing the need for state action. Sounds like a plan to me.

lola said...

Trouble is government 'services' really have to be cut as well. The goverment tries to provide far too much under the guise of 'services' which in reality are nothing more than cash transfers to interest groups to buy votes. Slash and burn is what's needed.

David Boothroyd said...

David Craig's piece is a mixture of naive optimism and hopeless ignorance. He starts off with a routine rant at NHS management consultants and non-clinical staff; the NHS budget is so huge that unless managed effectively, it is very easy for it to get out of control. Start cutting the people who manage its budget and you'll find out how useful they were the hard way. NHS managers will never be portrayed as the heroes on 'Casualty' but serious politicians should be looking to the truth behind the perception.

Reducing benefit fraud is a great idea which is far easier said than done. Serious moves against benefit fraud can very easily cost more than they save. Reducing Housing Benefit to over-21 year olds will force young people onto the streets.

Refusing to pay EU contributions might sound good but the EU will simply sue for the money. Is this supposed to be a trojan horse for EU withdrawal?

Are teachers supposed to absorb the work done by all those teaching assistants David Craig wants to sack? They will demand more money if they have more work to do, and will be entitled to it. Like the NHS, the cost of education will rise if its budgets are not monitored.

The National Audit Office itself is not discredited, only its previous leader Sir John Bourn. David Craig seems to want to destroy a system that's working.

There could be no bigger blow to British international prestige than cancelling the London 2012 Olympics.

Anonymous said...

Oi ! I'm already in my third year of pay freeze (pay cut this year).

Since I'm a GP you probably assume that I'm lazy/overpaid/playing golf etc.

But actually no.

Jonathan M. Scott said...

Does this mean Oliver Leftwing was right in 2001 about cutting by £10bn + ?

Anonymous said...

'some of which have more merit than others'

Iain, when are you and the rest of the complicit media going to wake up! The 'slowdown' is going to make the 1990/92 recession look like a stroll, a cakewalk.

Massive falls in property prices, massive banking losses (unless, of course, accounting rules are changed - now wouldn't that be a surprise!), a general population maxed out on credit the cost for which is rising every week.

Spending in the high street will fall off a cliff and jobs in retail lost by their thousands resulting in less demand for everything else. And the whole merry-go-round starts again.

Result for Bean - massive falls in the tax take and a big decision to be made - do we cut spending or do we massively increase borrowing? If they do the latter, expect the pound to fall throught he floor with a resultant rise in import costs and inflation and ineterst rates back at 15%.

Got the gist? Cut spending and cut it now - the Welfare State is history!

PS - I'm having a s**t day!

Anonymous said...

Iain - I like the idea of saving £50bn as much as anyone, but that is the laziest sort of back-of-a-fagpacket savings figure I've seen.

How exactly do you drop the Connecting for Health programme? What happens to the NHS IT software and the records it holds. Extracating it from the operations of the NHS would cause a disaster, and cost as much as continuing.

The Olympics won't be 'given back' - no government would do it.

Getting rid of the management and IT consultants saves £3bn? Well assume there are no severance payments in the contracts, and at best you cause the Civil Service, with its complete lack of capability (in IT, management or any other area) to fall over.

The idea that a new NAO would save £10bn is ridiculous as well - the very best cost-ratio in industry is 10-1 (savings to cost) - give the NAO £1bn, and I guarentee they won't save 10. 6 would be impressive, 4 likely.

Everyone agrees there is too much non-medical management in the NHS, but cutting it by a third? Overnight? I would prefer to see exactly how that is done before accepting that a few billion drop into the lap of the Exchequer.

Nobody sensible thinks that Labour haven't been unspeakably profligate, but claiming that saving £50bn is straightforward is what scares me about a new Tory government. I suspect they don't quite grasp how difficult the job is, and their impatience to show changes will lead to cuts that appear sensible, but have massive consequences downstream.

Pretending the work of good government is easy is the worst thing Conservatives can do. Recognise the complexity and difficulty of the challenge, and swing voters like me might just feel comfortable enough to vote you into power.

Philipa said...

Take all the translators off the public purse (they can be privately employed and on a public list), that should save a few bob, and sack all the 'ethnic integration workers', that too should save a bob or too. If immigrants don't adhere to the laws, don't change the laws, deport them. If they want to integrate then our culture used to be all around them, nowadays they can watch it on video in black and white.

Gaz said...

The biggest challenge that Cameron is going to have is, stabilizing the public finances. At the moment the gap was about £40 billion last year at the top of the economic cycle, its only going to get worse. A small contraction in the economy is going to see that number double or even treble.

We are going to need more then 'getting rid of non medical management from the nhs'.

Richard Nabavi said...

I'm not sure it's quite as easy as James Craig says, but he's certainly on the right track. There's no doubt there's a vast amount of waste in public expenditure, but rooting it out is going to be hard. The future Cameron government needs to get this right, and realistically we can expect reversing 11+ years of profligacy is going to be a long, hard job.

For example, the NHS IT project is a spectacular disaster, but I doubt whether simply cancelling it can be done without massive disruption, and cancellation costs.

This is why I think that David Caneron has been quite right to be cautious.

Having said that, I'd like to add to James Craig's list some local government examples. From what I've seen of local government, there's a lot of waste there too. In some cases this is, ironically, because they've been working to tight budgets, and have therefore cut services - but without making corresponding cuts in the local government staff who are supposed to run those services. So they're paying lots of people to go around saying 'we haven't got any money!'

theorangeparty said...

I am highlighting similar issues as David on my political blog. Maybe you would care to take a look sometime.

http://theorangepartyblog.blogspot.com/

Charles said...

How about saving £31bn a year by paying off the National Debt.

The £581bn debt, funded by bonds, is set to rise to £700bn according to Darling's latest budget. The interest payments are staggering: put is this way, council tax raises only £22bn, a full £9bn short of paying a year's interest on the debt.

Simple.

I don't know why DC doesn't make this his Number One manifesto commitment.

Newmania said...

David Boothroyd like most of the New Labour would be managerialists has in fact never managed anything and therefore has not seen just how many savings you can make when you have to , and thats in the competitive private sector.
He does have a point in a sense though , its is no good imagining the same system can simply be run better , it probably can to some extent but long term pressure on costs must be built in and this has to be through privatisation and federal costs centres .. True the inadequacy of New Labour`s experience has lead to unnecessary squander but more importantly the entire New Labour approach of tax and spend through bureaucracies is inherently wasteful. Good Point David , although I still see him as a worthy recipient of the new eco friendly flatulence jab overall

On the other hand , New Labour have been actively using the public sector as a means of buying votes and for wealth redistribution, additionally as an employer of the last resort to massage figures just as they have with incapacity benefit . This new political mis-use of our institutions has lead to a new order of super -waste insulated from political accountability only by the world wide ten year boom. For this reason the usual sytemic imperatives as above may not apply and this is why Oliver Letwin was bold to promise £35 billion of savings when he did but would be right to do so now

This is where they are going to get the funding policies aimed at poverty which will in the medium terms cost more but are aimed at solutions at least. The point for tax payers is how long do we allow Cameroons to spend the waste dividend when tax cuts are urgently needed .


PS

Why is a Conservative Coucil employing a Town Clerk at £200,000 ( oh sorry Chief executive ) and a Press officer at £81,000. Once again a Tory County Coucil ( Suffolk )poisons the well with their stupid greed and self importance . Why why why ?

Anonymous said...

I note that the proposals include cutting benefit fraud but make no mention of cracking down on tax evasion.

Getting the rich and the mega-corporations to pay their fair share would do far more to enable tax cuts for those who really need them any of the proposals put forward in this silly article.

Zeddy said...

***Rebuild the discredited National Audit Office (NAO) under competent, independent management to do the job that it is paid to do. Then introduce a Whistleblowers’ Act which guarantees to pay frontline public-sector workers a percentage (say five per cent) of any savings achieved if they report examples of waste to a reorganised, effective NAO, saving at least £10bn.***

Pity that the piece was spoiled by the total bollocks of the last 5 words of the above quote. Talk about plucking figures out of the air.

Joe F said...

There is no way to save £50bn without trying, but there might be with alot of trying.

As one example, cutting 30% non teaching staff- in schools this means mainly teaching assistants- pretty hard. However try cutting paperwork dramatically (as a school Governor I get at least 200 pages of policy etc documents every term, and we have to complete about 30 pages of returns every term- and this has nothing to do with teaching). Then you can cut staff in Whitehall and Councils.

Now an easier one would be to ban all use of consultants in Government for at least a year- just as in business, use of consultants is basically lazy management. And Government is spending billions on them.

Another more radical- many minor taxes cost a huge amount to collect- i.e. it can cost 20, 30, even 50% of the income just to actually process the taxes (never mind what it costs tax payers to deal with them). Thus one could abolish a wide range of tazes- e.g TV tax, car tax, inheritance tax, etc, and it would only actually cost the revenue about 2/3 of the total take, which could then for example be added to income tax or VAT for example (which cost almost nothing to collect relative to income). Say every tax where collection costs over 20% of income (oh yes, London congestion tax- costs practically 100% of income excl fines)

Now there's a thought- the opposite of Brown's stealth taxes- get rid of all the inefficient taxes and add it to income tax, so at least people know what they are paying.

Effectively this would also be a huge spending cut (collection costs are spending)

Just to avoid accusations of hurting the poor etc, can even add it just to top rate payers- actualy would be quite marginal.

Also of course the poor actually pay the most as a % of income for things like TV tax, car tax, etc.

Albert M. Bankment said...

Tryng - is that a poncey 'olde worlds' spelling for a nondescript town in Hertfordshire?

Auntie Flo' said...

David - spend, spend, spend - Boothroyd,

Since you oppose all spending cuts, what strategy do you propose UK should use to survive the coming recession?

More reckless borrowing?

The OECD's last report is highly critical of Brown's government for ignoring the OECD's advice to cut spending and for continuing to squander and borrow billions.

Brown and nulab are criticised for failing to save during the boom in order to create sufficient economic flexibility to survive the bust.

The OECD warned Brown that he was spending and borrowing too much, yet, true to his past arrogant form, Brown refused to listen.

UK is consequently in a perilously weak economic position, says the OECD, in respect of the impending recession.

As you oppose all spending cuts and want to continue Brown's spend and borrow til we're bust squanderitis, explain your policy to save our bacon during the recession, please.

Anonymous said...

For starters quit the EU.

DiscoveredJoys said...

Nobody mentions the herd of elephants in the room, Iraq (certainly), Afgahnistan (possibly) and Trident (probably).

The EU certainly requires financial diligence to be applied, and we could choose to defer payments until that happens.

The NHS certainly needs an IT system, but not necessarily a national system. One big issue with any computerisation project is whether you need to faithfully mimic the existing manual systems (lower adoption costs but limited savings) or change your processes to meet the IT system requirements (high transition costs, but scope for mega improvements and savings). If you adopt the later, you could buy existing systems 'off the peg' and use their charging mechanisms to run a 'virtual' finance system as a bonus.

Tell the world that we are to champion a 'distributed' Olympics and reuse more of the nations existing sporting facilities.

Dump vehicle excise duty, save on bureaucracy, and recover any loss through fuel duty. Get an 'Inspection Disc' and an 'Insurance Disc' to ensure roadworthiness.

Put a ban on all recruitment of public service staff - move people around to fill jobs. You may have to consider how to fill teacher posts.

Dump NHS Dentists and Opticians - provide vouchers to cover basic costs for the needy.

Start cutting the number of Quangos (by lottery if necessary - save all the arguments) and see if each one is actually needed.

Define the minimum number and quality of local services covered by 'council tax'. All other services to be paid for by a separate 'local facilities tax'. That should concentrate the minds of the electors, and run down the number of council staff required.

No unemployment benefit after 6 months unless you can be found employment working for the council or similar. We could end up with clean streets and public buildings in a good state of repair in next to no time!

Reduce the number of MPs. Do we really need so many?

Whatever else you do, put a single person in charge of each of these cost saving initiatives, and hold them to account.

Scipio said...

So, does that mean that if we agree to make some cuts in public services as well (which, dependent upon the cut I wouldn't have a problem with) we could save £200bn plus!

Excellent!

Hand back the Olympics - inspired idea!

How much off income tax is £200bn? Lots I assume.

I think there is an attitude now that says 'yes' to slashing the non-jobberss, the jobsworths, the bureaucrats, the hundreds of pointless people employed because they cannot hold down a job in the real world - all of whom have been sucking off the state and getting fat as part of Labour's client state.

The difficulty is one of politics. If Cameron comes out and says 'pass me the knife - let's trim some fat people', the client state would rally around Brown at the election, fearful for their own interests.

This is the major division in the country at the moment - not of class, but of public sector employees who create nothing and cost plenty, and the private sector who create everything and benefit increasingly less for their efforts!

Therefore, I suspect that Cameron will instead opt to not frighten the horses, and slowly restructure the UK so that there is less of a need for the public sector, and therefore less of a spend on it.

Smart boy that Cameron! He will go far - mark my words!

haddock said...

".....team have nearly two years to work out how to cut public expenditure without slashing public services....", any ideas why this pathetic opposition has done none of this work in the last eleven years ?


"and they have nearly two years" only because they are such a p*** poor opposition..... as they will be a p*** poor government with blairMkII.

Anonymous said...

http://news.bbc.co.uk/1/hi/uk_politics/7437493.stm

Of course there's always the option of Hamilton style Tory sleaze to make money - as todays news from the European Parliament indicates.

Same old Tories...

Zeddy said...

***The £581bn debt, funded by bonds, is set to rise to £700bn according to Darling's latest budget. The interest payments are staggering: put is this way, council tax raises only £22bn, a full £9bn short of paying a year's interest on the debt.***

What on Earth has the Council Tax got to do with paying off the National Debt?

Auntie Flo' said...

Newmania said:

Why is a Conservative Coucil employing a Town Clerk at £200,000 ( oh sorry Chief executive ) and a Press officer at £81,000. Once again a Tory County Coucil ( Suffolk )poisons the well with their stupid greed and self importance . Why why why ?


Yes, why, why, why?

Because councillors are bl**dy lazy and want officers who will work their socks off to save the lazy gits work?

Anonymous said...

errrrrrr

The NHS computer system project should be stopped immediately.

* The project is actually nearly completed, so no chance of saving money there, as its already spent.

Cancel the 2012 Olymipics

* Dont be so bloodly stupid.

Introduce a Whistleblowers’ Act which guarantees to pay frontline public-sector workers a percentage (say five per cent) of any savings achieved if they report examples of waste to a reorganised, effective NAO, saving at least £10bn.

* Most of Marks proposals target sacking tens of thousands of public sector workers, hardly going to be on your side and whilsle blow.

Cut 30% of non teaching staff

* That’s about 50,000 low paid teaching assistants. Good Luck selling that one.


I could go on but David Craig is clearly mentally ill, and it isnt wise to poke fun at such people.

Anonymous said...

Charles (1:41pm)

"Pay of the national debt...."

With what exactly?

Anonymous said...

No One talking about Giles Chichester ... Oh dear.

The NHS IT programme has been a massive success and has saved the lives of 1000's of Brits.

The programme has delivered choose and book, which has largely ended the paper trail in the NHS.

The Programme has delivered digital screening and Xrays.

The Programme has delivered the Electronic Prescription Service

The Programme has created the worlds largest secure broadband network. Consequently GPS and Doctors get patients lab reports and lab analysis in days not weeks.

The programme has enabled PCT's to target their services. etc etc etc

Man in a Shed said...

Mmm £50 billion now thats a familar figure. Was that the figure in the lie that Gordon Brown told before the last election about Conservative spending plans ?

Ian Thorpe said...

It always struck me when working as a consultant that government departments were the only area where a computerisation project led to an increase in staff numbers.

If George and his team could just help the civil service to get their heads round the idea that computers cut down the amount of work that needs to be done by pen pushers..........

And then of course, they can always save a few extra billion by cancelling Blair's big vanity project, the Olympics.

Gallimaufry said...

Why do those people who criticize lazy overpaid civil servants with gold standard pensions not get a job in the civil service? Surely their obvious talents would be recognised immediately and they could save the nation's finances by cleaning out the public sector Augean stables. Failing that, they would still have a nice cushy job without any stress beyond deciding which biscuit to have with their tea.

Dave B said...

@ anonymous

The NHS IT programme has been, and is, a disaster.

Anonymous said...

While there is massive scope for improving efficiency and effectiveness it will be a long haul to do it while improving service delivery. The intelligent use of managers, consultants and IT systems will be essential, so don't make doctrinaire attacks on them, just give them more appropriate targets to work towards.

Fundamental reform will need to start by going back to the 19th century foundation that the civil service must be run only by people who are there on merit not patronage. Out must go all the diversity crap, and open public examinations for entry and major promotions re-instituted. Political appointments should only be at expense of party not government, and substantial amounts of training provided to get better operating practices developed.

The short term way to save money is to chose not to do many of the things that Zanulab has added to the workload. Don't just cut all Quango budgets by 10%, they will only overspend. What's needed is a bonfire of Quangos. At least half of the regulators that never intervene (eg FSA, FoodSA, Ofall crap etc), standard setters that preside over falling standards (School exams, healthcare performance etc) and coordinators that just waste trees and block change would not be missed. Add tax offices handing back the tax collected by their colleagues down the corridor, and £50bn should be the absolute minimum cut to target in the first 2 years. None of it would it actual service delivery.

oran habush said...

He's spot on, but doesn't go far enough

Anonymous said...

Ho, yus, my beauty! Because the James Commission didn't go down like a cup of cold cat sick with the public, did it, when it reinforced the "Michael Howard's an unreconstructed Thatcherite who wants to flog off the NHS to the highest bidder regardless of end result" message?

What we need is ANOTHER one of such glorious PR victories which portray us as unthinking dogmatists, just as Cameron is getting to the final stages of detoxing-the-brand and proving to people he's a pragmatist.

Madasafish said...

I would love it to be realistic. But frankly it's all absolute bollocks and written by someone who has clearly never run any kind oof organisation...

For a start many of the contracts are that.. contracts. So there will be penalty clauses. Big ones.

And making people redundant costs money.

And reducing quango spend .. is fine.. but some of the jobs HAVE to be done.

I'm not defending the indefensible.. but "cut benefit fraud " just like that!
Bollocks.

Anyone who writes drivel like that has no idea of how to do it.

Personally I'd start by halving the number of MPs.. saving £250Million,
Make civil servants retire at 65 like everyone else..That I think is at least £5 billion a year...

Richard Nabavi said...

gallimaufry 5.31pm:

"Why do those people who criticize lazy overpaid civil servants with gold standard pensions not get a job in the civil service? ... a nice cushy job without any stress beyond deciding which biscuit to have with their tea."

This raises an important point - attacking waste in the public sector is NOT the same as accusing civil servants of being lazy and incompetent. Some may be incompetent, just as some private sector employees are. But I don't think blaming government employees as a whole is either fair or helpful.

The problem is more to do with the structures and culture in which they have to work. And this is frustrating for them, and - yes - stressful. Which is why public sector employees tend to have high rate of sick leave - a classic symptom of poor morale. (if you don't believe me, ask any policeman, teacher, doctor, or local government officer).

It is true that they are relatively well-paid now, and of course some have pension arrangements which the rest of us can only dream of. But let's not attack them as individuals - let's get the organizations in which they work turned around so they become focused, efficient, and productive.

The problem is poor and confused leadership from the top. Don't blame the infantry, blame the New Labour generals!

judith said...

Well, for a start we could stop all foreign aid.

And we could stop fighting tragically pointless wars in Afghanistan and Iraq.

And we could terminate regional government.

And re someone's comment earlier - how on earth do you think teachers managed before teaching assistants were introduced?

Dr Blue said...

I think David Craig is on the right lines. Tinkering will not do.

There are whole areas of government spending achieving no return or extra service in return. The work of the Taxpayer's Alliance and Burning our Money in exposing this has been very effective.

In the NHS the bureaucrats are the burden the front line staff carry. You could send them on a spaceship to Mars and not miss many of them.

I wonder if Cameron is now realising the extent of new Labour's licensed robbery of the public and subsequent squandering of tax revenues. I hope he is.

I don't want to dismiss civil servants and NHS managers as "lazy/overpaid" Most of them aren't. Many of them are the tragedy of very intelligent people placed in jobs where they can only do harm, and the least harm they can do is to artfully do nothing.

But the public sector, and its many parasites are now a drag on the economy, and on the public services themselves. The game has to stop.

The government's correct response to each interest group saying "something must be done about this" should be to say "Says who? Why? What? Why don't you do it? No, that's not a government role"

The next government may spend its time getting out of things rather than into them.

Mark Valladares said...

Newmania,

Suffolk is worse than that, I'm afraid. The new Chief Executive (of a council that will be abolished after the new Unitary authorities are formed) is on £220,000.

Madasafish,

Retirement at 65 for civil servants? Good idea - it's a pity that retirement at 60 is a legacy of Conservative attempts to reduce civil service numbers in the late eighties. Labour have reintroduced it for new staff but the impact on pensions will linger for years.

The great irony is that, as gallimaufry points out, keeping civil service salaries low means that the brightest and the best go elsewhere. If we paid competetive salaries, we wouldn't need as many people, and the civil service could be just that.

To be blunt, if you pay peanuts, you get monkeys - and that's what the public thinks it's getting.