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Clegg Prepares the Ground for Cuts

May 23rd, 2010 Posted in Economics, Liberal Democrats by

The last general election was between three parties in different states of denial about the state of the public finances. All agreed there would be cuts, none wished to say on what, and all agreed front-line services would be protected.

Were they all telling the truth the deficit could not be cut and the United Kingdom will eventually be having difficult conversations with the IMF. I think it unlikely the coalition will let that happen. But beyond the substance of what is to be done, they now have the communications challenge of adjusting expectations.

Nick Clegg has started this process with the language of “painful but necessary” cuts, whilst the Conservatives are strongly implying that many departments have been left with difficult legacies by their wasteful Labour predecessors. A process helped by Liam Byrne’s odd sense of humour.

It appears Vince Cable will need to make some of the toughest early decisionsby cutting the budget of BERR, the department of business. This should not prove politically difficult, BERR’s core business constituency are not vulnerable or compelling victims, and many will agree with the decisions.

It should also not prove as painful for Vince as has been reported. Abolishing BERR’s predecessor, the DTI, has been party policy for nearly a decade.

“Our proposal to abolish the DTI is not just about saving money but because we understand the frustration business has with a meddling, centralising, over regulating government. Its abolition is the largest act of deregulation.”

Labour’s narrative during this process will be about threats to “front-line services” and “jobs”. These are fair points. Cutting fake jobs for which there is “no more money”, is still cutting a job. Delivering services nobody needs badly is still front-line delivery. The coalition are going to have to be prepared to be a lot tougher in their analysis of where the public sector does and doesn’t create value, to counter this.

They need to point out that many jobs will transfer from public to third sector or private provision where they are valuable and necessary, and many new jobs will be created in the private sector from the money not been wasted by Whitehall. Do Labour think only public spending creates jobs?

They need to draw distinctions between essential services, those that are nice to have if we could afford them, and those that are political projects of dubious worth that don’t deliver. The latter should go, the second should be cut, the former protected. Do Labour disagree with this?

They need to challenge the crude Keynesianism of Labour’s suggestion that cuts will ‘jeopardise the recovery’ or that they ‘withdraw money from the economy’. They could challenge Labour to reinvent their own golden rule and come up with a less arbitrary definition of the difference between investment for the future and current spending.

As things stand both parties have allowed Labour to get away with painting almost all public spending as a good thing, because it is public spending.

The coalition have referred vaguely to ‘waste’ and talking about reducing the centre, but they have not yet developed a clear ‘public service test’ that might help indicate what the limits of government activity might be and by implication what needs to be cut.

Iain Duncan-Smith, after his leadership, started talking about the difference between public service and the public sector, but this analysis has been narrowly applied, not extended to politically difficult sectors like health. It also doesn’t differentiate between public services that are valuable today, those that are valuable for the future, and those that reflect political priorities from the past which are no longer justified such as the BBC licence fee.

When the coalition come to deliver change then they will then need to deal with unravelling Labour’s justifications for the debt, and their own half-agreements with it, made prior to the election. It will take longer and the cultural barriers will be higher. But the process has started.

One Response to “Clegg Prepares the Ground for Cuts”

  1. Jack Hughes Says:

    Get ready for an epidemic of Washington Monument Syndrome

    The most visible and most appreciated service that is provided by that department is the first to be put on the chopping block

    It’s going to need outsiders from outside the public sector to reorganise each and every department to deliver some effective services at drastically reduced costs.

    And to close down some departments altogether.

    Insiders are incapable of delivering better value – what we have today is their best effort.