Sunday, February 15, 2009

Some Difficult Decision on Spending

I have been banging on for some time about the fact that if they win the election the Conservatives are going to have to make some very difficult decisions about public spending. Two things today make me think that this message is starting to hit home. Firstly, ConservativeHome has published a report from a city analyst, which suggests that a future government will be forced to find more than £100 billion of spending cuts. Download the report HERE.

Secondly, the Sunday Telegraph carries some extracts from my Total Politics interview from David Cameron, which is published in full on Wednesday. In the interview, he makes clear that a Tory government will have to sacrifice some of its reform agenda and concentrate on getting the economy back on track.

DC: We will face an enormous economic challenge so our first task will be sorting out the finances and getting the economy back on track and restoring confidence. We won’t be able to do everything else that we have set out in vast detail, so we will have to be clear about the early priorities. Education will be absolutely right up there. That’s the thing I have a personal passion for, as well as a political one.
ID: Do you fear the economy is going to derail a lot of the things you want to do, because the situation is so serious?
DC: I think inevitably it is going to change what a government can achieve. We’ve got to be honest about that. We are going to be facing a situation where we are already borrowing eight per cent of our GDP. If the economic forecasts change at the budget it could be a lot more than that. It won’t be possible to do all the things we want to do. We will have to be rigorous in prioritising. And we will have to do tough and difficult things as well. We have to prepare people for that over the coming months. I’m really getting a sense that people understand that. Six or nine months ago people were saying: ‘Get rid of them, they’re hopeless’. Now, it’s much more ‘Gosh, this is going to be incredibly tough, you’ve got to do it, but it’s going to be tough’. There’s a mood change. The country senses the state of the economy.
ID: Mark Field wrote on ConservativeHome that there will be three stages to this recession: fear, anxiety, then anger.
DC: There is an anxiety, which is now turning into anger. Before Christmas, people were very anxious. They turned back to the government for a bit. The first thing you do when you are anxious is ask ‘what’s the government going to do to get us out of this mess?’ They got the benefit of the doubt. It’s changed since the New Year. I have a clear memory of going home and watching on the Ten O’Clock News the announcement of the second bank bailout. As a citizen, not as a politician, I just thought ‘God, this government has completely lost control of things’. They don’t know what they’re doing and they are behaving like headless chickens and the things they have done don’t seem to be working. I think what’s happened since the beginning of this year is that the Conservative Party has pulled itself together in a good way. The reshuffle was very important. I think there has been a mood change. At the same time, the government is not saving the world, they are trying to save their own skins and they don’t know how.

We're all going to faced with some very stark choices.


Anoneumouse said...
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marksany said...

There are billions of saving here:
"Systems thinking in the public sector" by John Seddon. Will somebody please get DC to look into this.

Anonymous said...

An incoming Conservative govt must do away with all the unsual trappings of victory - the formal speech and photo opp on the steps of No10 etc.

Cameron should go straight to parliament and call in all the mandarins and demand the truth and demand some explanations.

Then Cameron should give it to us straight from the shoulder from parliament, not No10's steps.

The full extent of the bad news should be made public as soon as possible. The truth is essential as the public are going to face some significant pain. Browns stock is down now because he raised false hopes about being able to mitigate the crisis.

This may be made more difficult by the fact that it will probably take Brown 3 weeks to concede.

Newmania said...

Agree with Trevorsden totally, I`d suggest gallows humour is the sort of thing likely to work best for the British . They can out up with a lot if they know we are all in it together and we have seen a lot worse .

What I will not put up with however is tax rises funding cherished red Tory dreams of the sort Oliver Letwin holds dear and trying to hide behind Brown appalling squander.
Taxes must come down , regulation must be removed from small business and I would dump tax credits which are distorting the economy and are only there to spread dependency into the lower middle classes . Tax cuts are now more vital than ever and I am disturbed to see Cameron hinting that we are going to continue to hose education with largely wasted money .

Wrinkled Weasel said...
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Wrinkled Weasel said...

Cameron whiffles on about mood changes. Read the Tony Benn interview in Total Politics and see the difference.

What we need is a spiritual change. Just read what Richard Nixon said in his inaugural speech.

"We have found ourselves rich in goods, but ragged in spirit; reaching with magnificent precision for the moon, but falling into raucous discord on earth.
We are caught in war, wanting peace. We are torn by division, wanting unity. We see around us empty lives, wanting fulfillment. We see tasks that need doing, waiting for hands to do them.
To a crisis of the spirit, we need an answer of the spirit.
To find that answer, we need only look within ourselves."

Read more and see an astonishing video of a moribund Nixon looking pursued, paranoid and defeated, like someone we know ..on

ukipwebmaster said...

By 'We' I hope you mean many of the local, (Conservative controlled) councils, cutting back on their extravagant spending and slashing their pensions bill which accounts for 25% of council tax?

Unknown said...

Number 1)

Abolish child benefits for all children born 10 months after the election.

If you want children, PAY FOR THEM YOURSELVES.

Anonymous said...

There has to be a bonfire of 'managerialism.'

Top levels of public sectors have to be slashed - those in post can reapply for their jobs at lower rates of pay.
Where it's not working, it has to be purged. Thatcher took on the miners, Cameron can take on the public service unions.
No economies among the front line workers, huge economies among the jobsworths.
Pensions (MPs please note) are slashed - if they haven't been saving, they should have been. What is more, pension payments should be slashed from extra-pariamentary work.
On a board, a consultant? The pension is deducted from what they are paid.

Pain has to be shared.

Oldrightie said...

Dismantle the Giant Banks, divi up Taxpayers' money to taxpayers, create new, local, small banks from the wreckage of the majors. Stop pouring billions after billions down the drain with the bathwater that is the Giant Corporations' legacy of failure.

JoeF said...

Any government from 2010 will definitely face a huge deficit. Main issue for now is we have no idea how bad- but £100 billion may not be an unrealistic number. Plus there is the huge ongoing growth of health spending as population ages and state pensions.

There are some easy gains, like scrapping Regional governments, reducing administration, etc, but if you look at government spending, to get 100bn will need some really hard decisions, like massively cutting state employee's pensions, eliminating whole Government departments. How about introducing a GE- style system of cutting your worst performing 10% of staff each year, at least for a couple of years.

This will require a revolution in thinking and I do not think ANY party is ready for it yet- it will probably take things seeing things get worse first...but asking MPs to cut their own pensions is a sign...

Northern Monkey said...

Easy - get George O in a room with Wat Tyler of Burning Our Money.

Honestly in the time that blog has been running he has easily clocked up more than £100bn of waste.

Little Black Sambo said...

No one has mentioned leaving the EU, presumably because there is not a hope in hell that we shall.

Unknown said...

John said...
" Abolish child benefits for all children born 10 months after the election. If you want children, PAY FOR THEM YOURSELVES."

Well, let's take that suggestion & run with it because it brings into stark relief Iain's point about the TOUGHNESS of the choices very well.

The current total annual budget for child benefit & child tax credits is 18 billion quid & change. John is not suggesting cutting that amount but simply letting it wither on the vine, bringing immediate savings of - being very generous - about 1 billion quid a year, tops. (Even so it's very likely that if David Cameron did that it would severely harm his chances of re-election).

So you could save 1 billion quid a year by gradually letting child benefit wither.

BUT Cameron will be in a position where he has to save tens, if not hundreds of billions. This means a 100 or so decisions for Cameron of the magnitude of 'do we end child benefit?'

Kinda makes you sorry for whoever wins the next election.

Anonymous said...

ukip - most of the money that local authorities spend comes from the national taxpayer not the local council tax payer. So quoting things as %age of council tax is a distortion.

Winkled - one obvious difference between Cameron and Benn is that Cameron is one of the most normal and sane men in politics - whilst Benn is stark staring bonkers. The mad hatter had a greater grasp of reality than Benn.

Raedwald said...

Labour is now spending £185bn a year more (in real terms - adjusted for inflation) than the budget they inherited in 1997, so £100bn a year cut is not frightening - it just takes us back to the zone of good government.

The Remittance Man said...

The 800,000 extra useless mouths that have been employed since 1997 would be a good start. Assuming an average salary of 40,000pa and a cost to employer factor of 1.5 that would save an immediate 48 billion in employment costs alone. Factor in the money these people then splurge annually on consultants, useless IT schemes, stationary, tea allowances, heating, lighting and rent and you are probably past 60 billion pa.

Take the logic just that bit further and axe another 500,000 and Bob's your father's brother - 100 billion saved.

However, since I would double the defence budget you'd probably have to raise the number of useless mouths axed to 1.6 million. But who ever cared about paper pushers?

Anonymous said...

When they come to power I would like Cameron to make a speech outlining the state of the country and explaining just how deep shite we are in,and what we are in for.On parliament steps,nation or better still worldwide.Be straight with us and we will work with you.
Then everyone will know who to blame and any remaining labour mps with think hard before continually sniping at what needs to be done.

neil craig said...

Under Labour government spending has risen by £200 billion beyond the rate of inflation. Now at least 50% of GNP is spent by the government & unlike in the old USSR very little of that is in a productive enterprise & an awful lot of it in the regulatory sphere which generally costs the economy £20 for every £1 spent paying the regulator.

Without that £200 billion drain & without the regulatory jobsworths we would, very much, not be in a recession. That is all the Tories have to do - but they have to do it firmly.

The Grim Reaper said...

Forgive my bad language here Iain, but this country really is in deep, deep shit. I have not seen a single politician which appears to recognise this. The boom of the last few years was largely built on debt, and what does Labour do? Masssively increase the national debt in order to help everyone else pay off theirs. Am I the only one who finds that a bit paradoxical?

David Cameron will have to take some incredibly unpopular decisions if he becomes PM. I can potentially foresee riots and street protests taking place in the first years of a Cameron government - people are very angry, and they're not going to take the medicine very kindly. Having said that, it's medication which Cameron will have to deliver.

Dr Evil said...

Spending cuts. I know it's trite and rather a shotgun approach, but I read that £180 billion quid is spent on Quangos every year. If the Conservatives took a financial scythe to this they could save that amount of money and many people would applaud. Also, if the Con government ordered every gov department to stop giving money to fake charities they would save tens of millions or more. Charities should raise their own funds. Some do. A lot get subsidised then trot out the Government line on alcohol, drugs, smoking or whatever.Outrageous.

Bernard said...

I didn't want an ID card anyway!
I also think that "small dark Sam" is right about the eu.
My god, just think about the billions we could save.

bryboy said...

Brown is wasting so much money keeping himself in power that it should not be too difficult to slash the public budget. DC should concentrate on Education Health and Welfare and allow the professionals to run their own show.

I also think that he should revisit the ancient practice of Foreign Aid. It is ridiculous that we should be giving money to countries who are better placed than us.

He should address the quango problem and announce what he intends to do before the next election so that we know what to expect from him.

Europe is our main problem but until we get a group of people with real courage it will forever be a millstone.

Anonymous said...

I agree that DC must come clean at the outset. If we can't be exactly sure then we have to say so.

It is no good pretending that we can wave a magic wand or that we have all the answers 'on tap.'

The medicine is going to be difficult to swallow, but swallow it we must. The public aren't stupid, they know that we are in serious doo-doo and the extent of the pain they will suffer will need to be made clear to them at the outset.

Unsworth said...

I entirely agree with those here who call for (an elected) Cameron to spell out in detail the state of the nation's books. My concern is that - such is the deep and unremitting ordure - it would take him several days to even roughly outline the mess we are in.

It's going to take many years to unravel this shambles. It'll take even longer to restore some economic stability - let alone real prosperity.

But, whatever the position, we have a right to know and Cameron has - and will have - an obligation to tell us.

Simon Gardner said...

Kippers Dickie said... “I also think that "small dark Sam" is right about the eu. My god, just think about the billions we could save.”

Oh really???

Please elucidate.