From the TUC

Vince Cable’s cuts

20 Sep 2009, by in Politics, Public services

Vince Cable has rightly won wide kudos for calling the financial crisis better than any other UK politician. I write this from the Lib Dem conference where they know they have a real star – someone respected for both being clever and authentic. This is a rare combination in a culture that is suspicious of the clever.

But it doesn’t mean that he is always right.

His new cuts package , published by the pro-public service privatisation think-tank Reform is a case in point, and is the basis for Nick Clegg’s claim that the Lib-Dems now stand for ‘savage’ cuts.

In particular I simply do not understand why Vince Cable is proposing that fiscal tightening should be 8% of national income, instead of 6.4%, and spread over five years rather than eight.

Vince of all people understands just how much damage was done to the economy by the bursting of the financial bubble. One can debate when that bubble started to grow, but it was certainly more than five years ago. To expect to work that out of the economic system in just five years is a recipe for prolonging the recession.

It may be that we are now stuck in the Conservative reframing of the financial crisis as being purely about the size of the deficit. Perhaps the Lib Dems, who are worried about losing a slew of mainly southern and south-western seats to the resurgent Conservatives, felt they had no choice but to be macho about the deficit.

But it’s still a far from progressive position.

Of course the deficit is an issue, but trying to cut it too soon will make it worse not better if it simply pushes us back into recession.

Nor can we yet know what the recovery will bring in terms of reduced spending on benefits and an increased tax take as the economy grows again.

In a democratic society you expect political parties to take different views about what public expenditure should be spent on and the size of the public sector. But this cuts package seems to represent quite a move towards the small-state right (of whom Reform are part) and a rejection of the Keynesian view that in recessions you keep spending.

Vince Cable does deserve credit for listing where he would look to make cuts in detail. It would be good if other parties do this too. Some – like scrapping ID cards – are unexceptional and indeed welcome. Others are more worrying.

As I set out the IoD/TPA’s cuts it’s worth doing the same with the Lib Dems.

  • Zero growth overall for public sector pay (saving £2.4 billion a year), a 25 per cent reduction in the total pay bill of staff earning over £100,000 and a salary freeze and end of bonuses for the civil service (saving £200 million a year).
  • Tapering the family element of the tax credit – saving £1.35 billion.
  • A radical review of public sector pensions with the view to moving to higher employee contributions and later retirement ages. There is currently a £28 billion subsidy to unfunded schemes.
  • Scrapping several major IT systems including the ID card scheme (£5 billion over 10 years), Contactpoint (£200 million over 5 years), the NHS IT scheme (£250 million over the next 5 years) and the proposed “super database” (£6 billion).
  • Curbing “industrial policy”, including scrapping Regional Development Agencies (£2.3 billion annually) and EGCD subsidies (£100 million annually) and reducing (by at least half) the Train to Gain and Skills Councils budgets (£990 million together a year).
  • Reforming the National Health Service, by reducing the centralisation and over-administration – starting by scrapping Strategic Health Authorities (£200 million a year) – by strengthening commissioning and with “supply side reform” – in particular tariff reform could save around £2 billion a year.
  • Curbing the centralisation in education, by cutting national strategies and scrapping quangos – saving around £600 million a year.
  • Reducing the amount of waste in the defence procurement process, including scrapping the Eurofighter and Tranche 3 (£5 billion over 6 years), the A400M (total cost £22 billion), Nimrod MRA4, the Defence Training Review contract (£13 billion over 25 years) and the Trident submarine successor (£70 billion over 25 years).
  • Examining possible future public sector asset sales, including some aspects of the Highways Agency (land value of £80 billion) and intangibles such as spectrum, landing rights and emissions trading.

One Response to Vince Cable’s cuts

  1. Vince Cable at the TUC fringe on Middle Britain | ToUChstone blog: A public policy blog from the TUC
    Sep 23rd 2009, 2:30 pm

    […] TUC fringe on Middle Britain Posted at 2:29 pm on 23 Sep 09 by Nigel Stanley I’ve had a couple of posts rather critical of the cuts package proposed by Vince Cable at the Lib Dem conference. It […]