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+++ Vince Cable proposes cuts worth £14 Billion +++

By Sara Scarlett
September 15th, 2009 at 12:06 pm | 6 Comments | Posted in Economics

The Guardian has the story.

And unlike the Tories or Labour he’s saying exactly where it’s going to come from.

Nine specific areas of potential savings are identified as a start to a radical programme of reform. The main proposals are:

> 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.

This is an excellent move by Cable. This document proves that he is the only individual to be trusted with the economy. Darling and Osbourne are simply not in the same league. His plans are detailed and the onus is now on the Tories and Labour to be specific and honest about their plans right before Conference season.

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Vince Cable’s moral compass

By Tom Papworth
August 25th, 2009 at 12:34 pm | 12 Comments | Posted in Economics, UK Politics

cableIt is said that you can judge a person by the company they keep. In that case, Vince Cable’s halo has slipped a bit.

His decision to give his support to Compass in its campaign for a High Pay Commission to curb “excessive” pay is bad politically, economically and morally.

Compass is an avowedly socialist campaign group, the primary focus of which is the Labour Party. It is a partisan body that has for some time sought to make Labour even more interventionist, statist and illiberal. Vince Cable should not be giving it intellectual succour.

In addition, the very idea that the government should impose maximum wages upon individuals should be anathema to him both as a liberal and as an economist.

I have written an article on the Institute of Economic Affairs blog explaining some reasons why maximum wage legislation is a bad idea. On the one hand, “There is no reason, functionally or morally, why a person should not enjoy any amount of wealth”. On the other, free economies have a far better reputation for wealth creation, poverty alleviation and even wealth distribution than interventionist ones. So maximum wage legislation is unfair both on an individual and a community-wide basis.

On top of this, Vince’s reason for supporting the High Pay Commission is flawed. In his words “There is no justification for massive pay and bonus awards in financial institutions, the most important of which are guaranteed or owned or have been rescued by the tax payer. Transparency and tax are important but a High Pay Commission looking at both equity and economic aspects is a welcome suggestion too.”

Firstly, the justification for “massive pay and bonus awards in financial institutions” is the same as it always was: it is necessary to attract the best talent. That the industry spectacularly failed in 2007 does not mean that there is no need to chase talent in 2009. What was wrong with the bonus culture in 2007 (and before, and indeed since) was not the size of the bonuses but the behaviour for which they were being paid. Had Compass proposed a Short-Term Gain Bonus Commission they might be on to something, but that is not what they are proposing. In attacking the size of the bonus rather than the behaviour they are rewarding, Compass is off the mark.

It is also not true that “the most important” financial institutions “are guaranteed or owned or have been rescued by the tax payer”, unless he is referring to the Bank of England’s lender of last resort function, which is centuries old and has been exercised without the need for maximum wage legislation for all that time. Only some financial institutions are actually owned by the taxpayer; Barclays and HSBC did not require a bailout and should not be subject to interference. Indeed, Lloyds TSB would be in a far better state had the government not effectively strong-armed it into merging with the bankrupt HBOS.

Of course, the government should not have a stake in the banks. Even if a bailout was necessary it should be reversed as soon as possible. But while the government does own shares in the banks it has a duty to taxpayers to get the best return on its investment. This will require the best talent available in the industry, which means that state-owned banks will need to compete with the rest of the sector by offering pay and bonuses commensurate with market rates. In fact, one cannot escape the feeling that the idea of limiting pay in the private sector is just a means of keeping down the costs to state-owned industries; a case of government being forced to intervene further to address the consequences of its past interventions.

His final point is the one I have discussed at in my IEA blog posting. The “equity and economic aspects” of government intervention are far more harmful to the poor than are the effects of leaving people alone. Free societies are not only fairer than less free ones, with the poorest owning a larger proportion of the nation’s wealth than in more interventionist economies, but they also create more wealth, so that the poor enjoy vastly more absolute wealth in free economies than in command economies.

Maximum wage legislation is a bad idea. It is also a bad idea for the Liberal Democrat’s shadow chancellor to support the socialist wing of the Labour party.

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Mellow Yellow Vince

By Mark Littlewood
May 26th, 2009 at 7:07 pm | 20 Comments | Posted in Economics, UK Politics

With all the furore around the Snoutgate scandal, it’s worth remembering that one of the most trusted and respected politicians of recent times just happens to be LibDem Deputy Leader and Shadow Chancellor. Here’s Liberal Vision’s tribute to Vince Cable.

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Question Time, Vince the invincible and that orange tie…

By Angela Harbutt
May 21st, 2009 at 11:07 pm | 10 Comments | Posted in UK Politics

mark-on-question-time-extra-2Vince Cable appeared on the earlier-than-usual Question Time (watch here) tonight and gave one of the best Lib Dem performances I have seen from any of them in some time. 10 out of 10.

Following that (at 10.30pm), (and after a turn the previous night on Newsnight) Mark Littlewood popped up on Question Time Extra. Did anyone else spot  his exceptionally natty ORANGE tie ? ……

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Cable should be next speaker – The Times

By Mark Littlewood
May 20th, 2009 at 3:07 pm | 5 Comments | Posted in UK Politics

Today’s Times argues that Vince’s time has come.

The latest odds are here. Surely, John Bercow is only supported by Labour loyalists who want an anti-Cameron Tory?

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