Someone should tell Conservative parliamentary candidates then.

Because a recent survey revealed that in terms of personal priorities, cutting the deficit is top-of-the-league.

1. Cuts! Cuts!! Cuts!!!
2. Cutting regulation & ‘red tape’
3. Whack those scroungers on benefits

http://conservativehome.blogs.com/goldlist/2010/01/cutting-the-deficit-is-the-top-priority-of-tory-candidates-reducing-britains-carbon-footprint-is-the.html

I think there are a lot of people in and around the Conservative Party who will be fuming with Cameron and Osborne over this.

As a matter of principle, I don’t want cuts. I think public services were probably already underfunded anyway.

However, I think in the long run an economic recovery would probably be better for more people than an increase in public spending, at least with the financial situation as it is. And most economists I read keep saying that, although making cuts now would be suicidal, there will have to be cuts. Painful ones.

I reiterate, this isn’t the situation I want. But its the very nature of a financial crisis that we’ll have to make tough choices in the short and medium term to avoid catastrophe.

Basically, this comment is a long winded way of saying the following: just because we’re on the left doesn’t mean we should knee-jerk oppose cuts. The Tories look like idiots now because they were knee-jerk in favour of them, against all rational advice. Let’s not make the same mistake.

Agree with what TJC said at the end – but it’s about priorities isn’t it? The Tories want to avoid cuts on issues they care more about like the military and nuclear weapons – whereas I think that’s precisely where our long term reduction should come from.

I think there are a lot of people in and around the Conservative Party who will be fuming with Cameron and Osborne over this.

agree with that too – going to be lots of gnashing of teeth coming when the Tories get into power – from the right

It is impossible to know how much public spending will need to be restrained, and indeed whether it will need to be, until we know the extent of the economic recovery and the state of tax revenues over the next few years. Economists’ ability to predict these things is abysmal (witness how wrong City economists were on the fourth quarter figures for 2009). The left should not be knee-jerk on fiscal issues at all but we must caution against the “common sense” group think which says that cuts have to come and they have to be deep.

We also have to distinguish what should be done, what will be done and what politicians say they are going to do to address the deficit. Each of these elements has very different motivators. For example, politicians may think they have to sound tough to placate the capital markets but the capital markets are not always that bright, thoughtful or even coherent.

In this context, the Liberal Democrats are slowly developing the best line on this by pragmatically linking the timing and nature of any measure to address the deficit to wider economic performance.

@4

going to be lots of gnashing of teeth coming when the Tories get into power

IF, Sunny, not when! The fight’s not over just yet…

Can you ever envisage a situtaion when ‘the left’ would advocate public sector spending cuts? The public sector is not free, the NHS is not free, education is not free, welfare is not free. It all has to be paid for through taxes on the private sector. Surely there has to come a point when we simply do not have the money to keep spending at this rate? Surely common sense dictates that when the government are spending £175bn a year more than they take in tax, something is wrong? Surely?

Does it really matter how the Conservatives position themselves pre-election?

As soon as they get in, they will have an “Emergency Budget” (as – so they say – the current Government is hiding lots of bad news in unpublished places in HMT), which will provide an excuse to get back to their true desire to cut (necessary you see – didn’t realise how bad things were).

As soon as they get in, they will have an “Emergency Budget” (as – so they say – the current Government is hiding lots of bad news in unpublished places in HMT), which will provide an excuse to get back to their true desire to cut (necessary you see – didn’t realise how bad things were).

This is precisely what Labour did in 1997 – held a budget promptly after the election, threw their hands up in horror about the ‘black holes’ that had been revealed in the public finances, and tied that phrase to every public spending decision for the entire Parliament.

Sensible politics – especially as it’s likely to be true this time.

Jed: what is wrong is that tax revenues collapsed because of the recession and the financial crash. Brown can be criticised for some limited fiscal irresponsibility before the crash but that is nothing compared to the effect of the recession since. Running a deficit of the current size is completely unsustainable in the medium to long term but the question is what is the root of the problem and how is it addressed.

We also need to get away from this Taxpayers’ Alliance nonsense that the private sector generate wealth and the public sector spend it. Maybe someone who believes this can explain why a trainer in a FE college is a drain on the national wealth and a trainer working in a private firm is a generator of the national wealth. The truth is a well-funded public sector is absolutely central to the generation of wealth in the private sector in an advanced economy.

which will provide an excuse to get back to their true desire to cut (necessary you see – didn’t realise how bad things were).

That would also crash the economy and scupper any nascent recovery – which voters would blame the Tories for…

“chucking thousands of public servants on to the dole. ”

One of the more amazing political utterances of our time. The trade union organisation for public servants suggests not firing public servants. Just astonishing how that particular one was thought up.

“The big fight now is to convince the parties that after 2011 the sensible approach is to address the deficit through economic growth”

Absolutely agree. And what we’re looking for is that free lunch, the one that’s so hard to find in economics. We don’t want huge cuts (OK, you don’t ) and we don’t want tax rises (OK, I don’t….but tax rises are just as fiscally contractionary as spending cuts, by definition) so where might that free lunch come from?

Well, we do know of something that reduces economic growth. A whole series of things in fact: regulation. Now it might be that certain regulations (even, if you wish, all of them) are desirable things to have in a wealthy society. However, we face the point that we’re not, at present, a wealth ysociety. We’ve got to give up something to get back on track.

So let’s cut regulation. A proper bonfire of all the inanities inflicted upon the economy. That register of people who work with kiddies for example. Sorry, can’t do that now, too much of a burden on growth. Employment rights for temps…sorry, later, when we’re sorted out.

Could be fun making the list really, couldn’t it?

That would also crash the economy and scupper any nascent recovery – which voters would blame the Tories for…

That depends entirely on Q1 2010 growth figures. If they tip back to the negative again (and todays Balance of Payments figures make for particularly grim reading) then the Tories will be able to blame Labour for pretty much everything.

@9 TimJ

Agree it’s sensible politics (disagree that there is really a ‘black hole’ – at least in the sense it is a hidden one anyway).

But all of the Conservatives statements (we won’t cut now, we will protect this spending) need to be viewed through the prism of this continued commitment to the “emergency budget”. It’s a nice mechanism to throw out all the pledges only made for electability reasons.

@Adam

“Maybe someone who believes this can explain why a trainer in a FE college is a drain on the national wealth and a trainer working in a private firm is a generator of the national wealth”

Or even explain why someone working as a dustman for a private contractor hired by a council to collect rubbish is a ‘wealth creator’ and someone working as a publicly-employed dustman in the neighbouring borough is a ‘wealth destroyer’. It’s a bizarre distinction to make.

@sunny

“which voters would blame the Tories for…”

They won’t, I guarantee it. So long as the hard cutting is done in the first couple of years in the “Emergency ‘Labour destroyed the economy’ Budget”.

Conservatives need to get the pain in early if they are to avoid blame though – which will not be good for the economy at all.

Agree it’s sensible politics (disagree that there is really a ‘black hole’ – at least in the sense it is a hidden one anyway).

But all of the Conservatives statements (we won’t cut now, we will protect this spending) need to be viewed through the prism of this continued commitment to the “emergency budget”. It’s a nice mechanism to throw out all the pledges only made for electability reasons.

I think the scope for reversing explicit manifesto committments within weeks of election will be limited (to say the least). The ones to watch for are the ‘we currently have no plans to…’ eg: raise VAT, cut benefit entitlements etc. These are the ones that can easily be wriggled off with a ‘well we said we had no plans to do X, but looking at the astonishing mess the other lot have left, we really have no choice but to…’

The fiscal stimulus has been far less important than the monetary stimulus anyway.

@TimJ

” think the scope for reversing explicit manifesto committments within weeks of election will be limited ”

You are right.

Watch these “no cuts ’til 2011″ pledges being astonishingly absent from the manifesto. Be interesting to see how much of the mood music riffs Cameron has been practicing are actually used for the songs he performs at the election

Perhaps the politicians ought to speak with D Healey , last Chancellor who had to persuade th IMF to lend money to Britain. Healey has said half the civil servants should be sacked. The large increase in white collar employment such as administrators, officers and managers is part of the problem . The councils appear to employ plenty of white collar staff but never enough blue collar staff to repair the housing stock, schools or streets .

I can never understand how the state employing large numbers of white collar administrative staff who undertake pointless jobs, benefits the UK. Removing white collar staff and employing more skilled blue collar staff would increase the skills base of the country and assist in developing manufacturing and infrastructure. A major reason why immigration has occurred is becase we produce and employ to many white collar non-technical people and not enough skilled blue collar staff. High speed railways and green energy projects will not be designed , built and maintained by the mass of white non-technical staff employed by the state.

Tim Worstall

Hi, what took you so long?

Regulation can always be better. But I’m not convinced that further deregulation will automatically foster growth. Some of the supposedly most rigid and regulated labour markets in Europe have massively outperformed the UK in terms of avoiding unemployment: Germany, Netherlands, Poland. Some have actually done worse: France, Spain.

We need to be evidence driven on this rather than relying on the ideological certainties of the 1980s. Which means let’s look at regulation case by case rather than go down the BCC route of claiming that UK business is uniquely suffering under a mountain of red tape.

Where will growth come from and how will it be generated? Ultimately investment, public and private, and setting the right regulatory framework which may mean cutting regulation in some areas, redesigning in others and creating new regulations elsewhere. Boring and pragmatic but true.

Adm Lent. Once a company has reached a certain size and is producing products for the middle to upper markets , the cost of red tape is not so important( Audi, Mercedes, etc, etc). Red tape tends to slow down the creation of businesses and their growth into middle sized concerns. Businesses with higher profit margins tends to be in the higher skilled sector . Therefore small companies growing into medium sized concerns in the middle to lower killed sectors have the greatest problems with red tape and these are most likely to employ unskilled and semi-skilled personel. Consequently red tape is more likley to keep un and semi-skilled workers unemployed than skilled ones. A classic xample if the family run dining establishment employing Mum and Dad plus the children. It may not be worth expanding , even if there is a market, because of the cost and complexity of employing staff; part of the ason why there are so many French in London.

I think its too easy to call any cuts in HE bad. For some time I have been particularly concerned that science and engineering departments have been suffering cutbacks while a plethora of apparently trivial courses have grown. If we want to be able to face the future on our own two feet we do not need millions of liberal arts graduates, we need people who know how things work and can find solutions instead of starting debating societies and making daft TV.

Regarding public sector cuts, the usual rugged individualists crawl out from under their rocks and go on about waste. I wonder whether they are the same people who complain about less frequest waste collections or how social services are failing us whenever some retard kills their kids?

We are still, despite the gloom promoted by our politicians and press, a very wealthy society. We could afford to make a better society. We prefer to make rich people better off while the worst off live in squalor. That is the measure of the morality of Great Britain plc.

Can you ever envisage a situtaion when ‘the left’ would advocate public sector spending cuts?

I can’t even envisage a situation in which “the left” would advocate public sector efficiency savings. Offer it a chance to have the public sector perform exactly the same services at half the cost, and with half the number of staff, and the near-universal result would be horrifed opposition.

Fortunately, the economy is bound to recover as long as the government really, really wants it to. If the economy does not recover fast enough (or at all, or gets worse), it will be because the Tories are Evil.

I think you have to be careful when arguing against cuts along the lines of, because it throws people on the dole. Public services exist to provide services not employment. It might be an inevitable spin-off but it is not their core function. Obviously severe cuts in an anaemic economy would be foolish and counterproductive. The government sector will never save the same amount as they cut from budgets, as GDP and Treasury revenue will always decline with the cuts.

The ‘ we need to see the books ‘ is just political rhetoric. In the year before an election the opposition get full access to the Treasury and Bank of England. Osborne et al will be seeing the same Treasury models and projections as government ministers.

What needs to be eliminated in time is the structural deficit. How big that is no one really knows. In fact, the Treasury and BoE do not even agree about how large the structural deficit. It will only become apparent when the economy returns to trend growth. However, we can’t eliminate a structural deficit through growth alone because it is structural. Therefore, cuts are inevitable.

I would favour raising the retirement age even higher. With the expected living age ever increasing there is no rational reason why the retirement age should not also increase. Moreover, public sector pension provision is going to have to be tackled. Whether that means higher contributions from employees or reduced benefits is open to question. No matter which party wins the election, VAT will be raised to 20% during the next parliament.

One of the reasons we have such a high deficit is because the UK tax base is so unbalanced. There needs to be a rebalancing so we are never again in the position of relying on just 5 banks to provide 25% of the corporate tax revenue.

Cutting capital investment is always the first to go as there is no one to go on strike. However, it is silly as it provides the best multiplier for government spending. Moreover, better infrastructure raises productivity and generates higher growth. Furthermore, cutting frontline education budgets are counterproductive to long-run growth.

It is going to be a difficult time for the next five years no matter who wins the election. The current public sector budgets are based on unusually high revenue of recent years from financial services and the property market. Those Treasury tax receipts will not coming back any time soon. Therefore, spending will need to fall.

@ad

“I can’t even envisage a situation in which “the left” would advocate public sector efficiency savings”

Ridiculous comment.

I consider myself of the left and I agree that Government should look for
efficiency savings. Efficiency savings can – if done right and not purely to reduce a narrow conception of ‘cost cutting’ free up resources for more useful things.

The current Government considers itself of the left and has implemented umpteen efficiency drives – Gershon, the OGC, collaborative procurement and the current HE and NHS savings currently being implemented to Tory resistance.

Indeed, you would struggle to find someone on the left arguing inefficiency is good and must be kept.

Where the difference between left and right is that
“efficiency savings” based on exploiting labour,
reducing quality of services or cutting the front-line is not supported by the former

“Offer it a chance to have the public sector perform exactly the same services at half the cost, and with half the number of staff, and the near-universal result would be horrifed opposition.”

It would be fantastic if that could be done. But the “same services” (and, as is implied, same quality) clause of that would not be the case. While I am sure you would be willing to trade off worse education, worse health and higher crime for higher-rate income tax cuts (you can go private and gate your community), there is a clear trade-off to make. The Major goverent found
this out, and their efficiency ambitions were far
more limited.

“The public sector is not free, the NHS is not free, education is not free, welfare is not free.”

Neither is the army, or paying for wars. But its strange how the military always escapes cuts and the tories never mention it – indeed they are proposing a pay rise for soldiers.

The current Government considers itself of the left and has implemented umpteen efficiency drives – Gershon, the OGC, collaborative procurement and the current HE and NHS savings currently being implemented to Tory resistance.

According to the Office of National Statistics set up by the current government:

“the ONS thinks the average public-sector worker’s output in 2007 was 3.2% lower than in 1998. Contrast that with the private or “market” sector. Over the same period, again according to the ONS, market-sector productivity rose 22.8%.

What does this mean? A great deal. By my rough calculations, if public-sector productivity had matched the private sector, we could have had the same level of public service but for almost £100 billion less than the £670 billion the government intends spending this year.”

http://business.timesonline.co.uk/tol/business/economics/article6493346.ece

Apparently we could cut the public sector pay roll by a fifth, simply by matching the efficiency improvements that everyone except the government has managed. The surplus workers must be equivalent to ~ 5% of the workforce, so redeploying them to other, more productive industries could be of great benefit to the economy.

But looking at the posts on this website, it is obvious that the posters do not want to know.

@ad

“The ONS thinks the average public-sector worker’s output in 2007 was 3.2% lower than in 1998. Contrast that with the private or “market” sector. Over the same period, again according to the ONS, market-sector productivity rose 22.8%”

The old public sector productivity chestnut.

1. Why do you suggest average private sector productivity is the right comparator? Why not private schools, private hospitals etc? Some parts of the private sector (eg construction) have seen relative falls in productivity compared with the public sector.

2. Half of Government output is produced in the private sector. Are lazy bureaucrats to blame for lack of productivity increase here (laziness contagion or something)

3. Output measured used by ONS are still experimental and still highly flawed, as you would see if you actually read the ONS report rather than take the headline. Output is defined as equal to inputs in a third of the public sector. There are time lags between spending and outcomes for most services (eg education outcomes are the result of 16 years of inputs). It is difficult to seperate the influence of Government from other influences on outcomes. The list of flaws goes on…

4. Many things that the public consider as improving quality have no impact whatsoever on output. Anything related with customer service is pure waste. Reducing class sizes is largely waste. Reducing waiting lists is waste. It’s no surprise that If certain parts of spending are defined as waste regardless of their impact on people’s valuation of services, then productivity will be negatively affected.

If you wanted to raise public sector productivity as measured by the experimental ONS data I suggest (for example):

* Trebling class sizes (the decline in exam performance would be less than proportional to the allowed reductions in inputs)
* Narrow education curricula (there is no value at all from a broad curriulum in the output stats)
* Only teach children who are at the borderline of achieving 5 A*-Cs – if either there is certainty over whether they will, or they have no chance of achieving at this level, lock them all in a big room all day and supervise them
* Sack all customer service staff and make access to services via internet only (quality of customer service is irrelevant to output – it is an input with nothing balancing it)

Productivity would sky-rocket. Services would be completely shit, but at least the numbers would look good. This would appear to be what you mean by “efficiency”.