Nov 20 2009
The running deficit
I was asked again yesterday on this site what I would do to cut the deficit.
Just to recap, my advice to the government for this year has included:
1. No more banking subsidies – saving £31 billion cash and £8 billion contigent liability
2. Public sector wage freeze – saves around £6 billion
3. Recruitment ban on all public sector jobs other than front line ones like teachers, nurses and doctors – saves around £5 billion by end of first year
4. Scrapping ID cards, regional government and some other quango overheads- £4 billion
5. Not cutting the VAT rate – collects £12.5 bn more revenue
Total saving £66.5bn or one third of the current deficit. In following years there need to be bigger cuts in the size of the government overhead, welfare reform to cut the cost of benefits by getting mroe people back to work, and substantial reductions in local spending along the Fulham and Hammersmith lines.
49 Responses to “The running deficit”
John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College...
We could save another £6.5bn by not sending it to fund Europe.
With a bit of luck, they’d throw us out.
What do readers of this blog think about what seems to me to be the best and simplest deficit reduction measure – the decriminalisation of drugs. OK, no politician will lift his/her head above the paraphet now – but if the need to save our finances gets really serious! It could save billions. See my ideas on my blog.
John Moss Reply:
November 20th, 2009 at 9:15 am
Perhaps because of the huge additional cost down the line of treating the mental and physical illnesses that will be caused by the use of those drugs should they become legal and their use rise to the same levels as the use of alcohol?
Stuart Fairney Reply:
November 20th, 2009 at 11:46 am
Well you could of course tax the sale of drugs and receive revenue, as well as not spend billions on pointless and failed attempts at enforcement, not to mention locking up about 65% of the prison population for drugs related offences. All that might both raise revenue and cut costs significantly, but the costs you speak of are with us anyway. As for the “use rising” you maybe surprised just how widespread drug use is now* and in the one example of a state which tried prohibition then reversed it as a failed policy, alcohol use increased in the USA during prohibition then declined to it’s pre-ban levels after revocation. Grumpy Optimist is right on the money.
* I am a boring, middle-aged white bloke, living on a middle-class suburban estate with a wife and a kid. Save for the odd speeding ticket, I commit no crime. I could, if I so wanted, make a call and get any drug you care to mention. I don’t, but the point is, if I can get them, the use is already about as ‘widespread’ as it’s ever going to be.
John Moss Reply:
November 20th, 2009 at 12:30 pm
Yes, you could, but the damage to the economy of creating millions of drug-adled minds would be incalculable. A hangover can be recovered from. Scizophrenia and psychotic breakdown are permanent and prevent people from working ever again.
The “tax” on drugs could never keep up and given the extent of smuggling already of booze and fags, you would simply return to a criminal trade within a few years.
Steve Tierney Reply:
November 20th, 2009 at 11:29 am
I think it’s utter madness. Sorry.
Grumpy Optimist Reply:
November 20th, 2009 at 12:38 pm
Well in a sense of course you are right but then again so is the current system. Is it more insane to make this slightly tongue in cheek expression than persist with madness of how we do things now. We feed criminality, employ hundred’s of thousands uselessly and create hypocrasy, double standards and crooked thinking. And remeber we have a budget deficit of 12% of Gnp to cut. How mad is it that we have got to this situation?
alan jutson Reply:
November 20th, 2009 at 3:27 pm
Grumpy Optimist
Interesting that the majority of those in Prison, are or were on drugs, and still it would seem, are able to get them whilst in prison.
I would have thought this on its own would be an argument against making drugs legal.
Whilst I have no experience of drugs, or drug use, I am aware that they can be easily purchased on the streets for not a lot of money, and people commit crime, and sell their bodies to pay for their habit.
If drugs were made legal would they be any cheaper ???
May I suggest not (nothing the Government does ever is), so the crime that goes with this type of lifestyle would just continue.
Surely those who want drugs made legal do not expect them to be free under a simple prescription charge do they, when we have a post code lottery for those who are really ill, through no fault of their own, failing to get correct funding.
Drug abuse and the crime that is committed to feed it, is a huge problem. Clearly we have to find an answer, but to decriminalise I do not think is the way to go.
Correct, hard nosed education maybe the way forward.
Mike Stallard Reply:
November 20th, 2009 at 3:31 pm
Actually, here in Wisbech (small country town) the Old Vicarage is now a Drug Rehabilitation Centre. There are a lot of drugs here too. We have others too. Why not legalise certain drugs, as in Holland, and then license the premises, as we did once so successfully with alcohol. If we threw in smoking cigarettes, we could use places like the Old Vicarage, or the Old Pub as a place where people could go and indulge in public. Perhaps even substance manners might develop too.
Stuart Fairney Reply:
November 21st, 2009 at 10:13 am
It is true that a lot of people on drugs or related to the trade are in prison, but surely this is the ‘reductio ad absurdum’ of the drugs policy?
The government can’t keep drugs out of it’s own prisons where they essentially keep people in cages, how can they hope to ban drugs from anyone free in the wider populace?
Alan, on this I can’t agree with you. Drugs are now way cheaper in cash or real terms than they were when I was a youngster, in a major metropolitan city in the 1980’s cocaine was about £75 for a wrap, now it’s about £20. Similarly ecstatsy tablets were £10 in the early 1990’s now they are £1. What does this tell us about the effectiveness of a ban? We really needto grasp a fundamantal here ~ the ban has failed totally, anyone who wants drugs can now get them. There really wouldn’t be an increase in users (after an intial surge perhaps) following legalisation.
And I really think the idea of “more drugs education” is just a cop out in the absence of any practical ideas ~ is there anyone who thinks that drugs are good? People know ~ they are just risk takers
Neil Craig Reply:
November 21st, 2009 at 11:13 am
Drug damage comes in 4 forms. Damage to the user subdivided into inherent damage because they are dangerous & deaths etc caused by what they are cut with or unrealised variations in strength. Damage to society subdivided by crime caused by users trying to pay for their fix & by the rising influence, up to & including political donations caused by organised crime being much more profitable.
Of these only the first would be likely to increase & the other 3 would virtually disappear.
Grumpy Optimist Reply:
November 21st, 2009 at 11:48 am
Stuart – I agree with everything you say. The low price of illegally supplied drugs is proof of the complete failure of drug policy and to believe that education is the answer is fantasy talk – whatever that education might mean. There are I would say two classes of drug taker – the copers who work and pay taxes and the non-copers – those on benefit, in prisons etc. The former would much prefer that drugs were legal and they would pay heavy indirect taxes. And my guess is that even for the small? subgroup of the copers for whom drugs becomes a serious problem, very few will drift into the non-coping group.
And for the non-copers – well society is falling to cope itself with this group. What is needed is to get this group into work and to legally supply drugs might help at the margin. But we should not use our failure to help this group as an excuse for not thinking seriously about drugs and deficit reduction.
alan jutson Reply:
November 21st, 2009 at 2:53 pm
Grumpy and Stuart
I am fully aware that the present system has failed, I am fully aware that drugs are now cheaper than they probably ever have been.
The point I was trying to make is if they were legalised, do you think they would be cheaper than now, or more expensive.
The answer I beleive is if they were legalised and taxed, they would be more expensive, because even if they were legal they would not be free.
If that is so, and you are a drug addict, then you will have to pay more for your fix, and given that an addict will have to find more money for his fix, he will need to find that money from somewhere.
Given that many addicts (not all) turn to crime to get money for their fix, they they will by neccessity have to commit more crime
For the same amount of drug use than at present if the cost is higher. Its a simple mathematical fact.
Our pathetic attempts at Policing has failed no question.
Our pathetic attempts at education has failed no question.
Unless we get real on both of these, then we may as well give up, and I am sorry I do not believe that this (giving up) is a viable option. It will in time destroy us, as more and more of future generations eventually become dependant.
My wife works in a high security environment and beleive me, it is very, very clear, that exposure and constant use of drugs damages peoples brains, that is a fact, and damaged brains do much damage to society, of that there is absolutely no question.
In my opinion a free for all drugs policy is absolute maddness.
alan jutson Reply:
November 22nd, 2009 at 4:34 pm
Please add to second to last para
constant use of drugs damages peoples brains, that “surely” is a fact, and damaged brains do much damage to individuals and to society, of that surely there is absolutely no question.
Stuart Fairney Reply:
November 21st, 2009 at 6:09 pm
My good lady is from the Islamic Republic of Iran and I have spent some happy times with her friends and family in Shiraz in the South. Now that particular government tries to ban alcohol. There are some very serious penalties for importing or brewing booze as you might expect from a government in that region.
Needless to say there is also serious demand. Last time I was there, I was offered several imported Lagers, Vodka, a really nice malt Whiskey, Brandy and of course Shiraz red wine (albeit by the pint!) I probably got through more alcohol in Iran than I ever do in Europe.
QED ~ bans don’t work if there is any demand, and the market (which we on this blog mostly believe in) will meet that demand regardless of how severe penalties get and Iranian judges don’t issue ASBO’s !
Any truth to this ?
”
A source close to the British Labour Government has just given me reliable information about the most radical copyright proposal I’ve ever seen.
Secretary of State Peter Mandelson is planning to introduce changes to the Digital Economy Bill now under debate in Parliament. These changes will give the Secretary of State (Mandelson — or his successor in the next government) the power to make “secondary legislation” (legislation that is passed without debate) to amend the provisions of Copyright, Designs and Patents Act (1988).
What that means is that an unelected official would have the power to do anything without Parliamentary oversight or debate, provided it was done in the name of protecting copyright. ”
Reply: So called Henry VIII calsues are not new. The power to put things into law using secondary legislation still requires Parliamentary agreement to the measure, though with less scrutiny and no ability to amend.
Recruitment ban? We need to get rid of a hundreds of thousands.
More quangos need cutting, by at least half. Not to mention scrapping all Government advertising. Scrap all Government job advertising and create a central gateway for it, if needed, saving more than 250million etc. etc. etc.
Just off the top of my head.
Of the 4m social homes in England, 1.4m tenants do not claim Housing Benefit or any other benefit, yet their rents are held below market value. This implied subsidy across all social homes is equivalent to around £7bn a year, so on those 1.4m homes where the tenants don’t claim any benefits the cost of this is £2.4 billion per annum.
Let rents rise to market rents and let those who need help get it from Housing Benefit. I suspect it will not be anything like the full £2.4bn!
The only way it can be done without damaging the economy is to cut back drastically on the public sector. Salaries are 30% higher than the private sector, pensions are way beyond any private sector schemes and the number of non jobs is a disgrace. Is there any wonder youth unemployment is so high when outside London the brightest workers are in the public sector thus starving the economy.
Easiest way is to privatise the supply of services, I guess this is where Cameron is going with the idea of Charities being involved in delivery.
Cant see the deficit disappearing for a long time though. This Govt has hard wired in its socialist spending.
But that is only £11bn a year of ongoing Public Sector savings, when we are borrowing and spending £140bn a year more than we should be.
All the talk in the bars around Canary Wharf last night was whether the economic dip that will come when public spending is cut will cause a recession or not. I probably spoke to 2 dozen fx, money market and fixed income traders, business analysts, risk managers, and two guys from a credit rating agency.
The argument for a double dip recession is simple. The economy is massively dependent on public spending. In some parts of the country over 50% of the economy is public sector based. Many companies are also dependent on public spending. Small and medium sized business will struggle to grow given we have so much red tape and taxes. If the Conservative cut spending and increase taxes the overall economy will dip for a few years until the private sector can begin to grow.
The anti double-dip recession argument is whether the Conservatives can or will reduce the cuts in public and taxes slowly enough to pull out of the reccession but also keep growth positive. The Conservatives obviously don’t want a recession on their watch, so it depends whether they can balance the slow growth in the private sector against a slow fall in the public sector.
Personally, and I am in the vast majority, I think the state of the public finances are so severe that the Conservatives have absolutely no choice but to cut public sending by 10% in an emergency budget within a month of getting to power. Then they must cut spending slowly by another 10% over the Parliament.
I think a double dip MUST happen in those (mainly Labour) areas that have been pumped with public money. I think Investment Banking will be the strongest area of growth so London will come out of the situation relatively unscathed. I can see the Labour Party blaming the Conservatives for making cuts – when in reality they just pumped unsustainable services in Labour areas with taxes that were dependent on the economic cycle. New Labour’s love hate relationship with the private sector will be exposed as merely paying the private sector to deliver bad services rather than developing the private sector to create a good economy.
Steve Tierney Reply:
November 20th, 2009 at 11:36 am
The truth is that we have probably been in recession for a decade. When you base your figures on GDP you are making false assumptions.
As a measure, GDP proves nothing. An economy that appears to be in “growth” because of enormous borrowing is fooling itself.
An economy that appears to climb out of recession because of public sector spending fuelled by borrowing and printing money is also fooling itself.
This wont be a “double dip” recession because will have never risen out of the first dip. We will have just fudged the numbers to appear as though we have. The “second dip” will just be reality reasserting itself.
Get used to recession. We’ll in it for the long haul. Whatever lies the GDP temporarily appears to tell us.
Hugh Reply:
November 20th, 2009 at 6:04 pm
Japanese Style
Javelin Reply:
November 21st, 2009 at 4:48 pm
I don’t think we’ll have a permanent recession. I think there will a permanent decline in the UK’s relative standard of living if we don’t start addressing our levels of global performance – which means becoming more focused, disciplined etc.
I do think that the double dip may come from (1) a drop in Government spending and (2) a rise in interest rates (due to Government borrowing and inflation).
We are at the asset-bubble end of the recession. That is to say in 2000 we had the investment bubble (dot com) bursting (just like the city/privatisation bubble of 87) and we are now at the asset bubble-end and interest rates rising will cause problems (just like the ERM debacle in 92).
For me the parallels between 1987 & 2000 (investment bubble) and 1992 & 2008 (asset bubble) are very striking. Its easier going into a investment crash for the public than an asset crash – Investment Banks suffered in 1988 and 2002 but jobs were not really effected. Today we are in the middle of a asset crash. Assets in the country are held by the public and the direct result is a demand depression and the retail sector suffers.
Triggers, timing, duration are also subtly different but can be explained by the different circumstances of the crash.
But what’s most encouraging is that human nature hasn’t really changed since the Roman times. War has been pretty much put stamped out. Demand and the desire for wealth will return, business will be set up, taxes will be generated and we will recover.
This time the circumstances are different because we have the highest real debt ever and relatively POOR INVESTMENT public services to show for it. I think when interest rates do go up and house prices possibly fall again we will look at our dimishing public services and disposable income (relative to other economies) as the real legacy of the New Labour Government.
Ian Jones Reply:
November 20th, 2009 at 3:40 pm
Depends whether you are talking about real GDP or just monetary GDP. Cutting Government spending will cut monetary GDP but may have no impact on real GDP if those jobs are nor generating real output! Plenty of room for big cuts with a loose monetary policy allowing the private sector to step into the space.
Unfortunately bankers only play with money so to them its a cut in GDP, which is why bankers need to be cut.
John Maynard Reply:
November 20th, 2009 at 11:29 pm
Most of those types you have mentioned don’t know what they are talking about, but they have learned to love the illusory Labour comfort blanket. Now they will have to unlearn it !
Cameron should immediately drastically cut business tax to restore confidence and get (real) job creation onto a positive path. VAT needs to rise to 20% too.
Some of the posts on here seem to think we will have permanent recession if we drastically cut back public expenditure (too much listening to Brown-Balls ?) We won’t.
Confidence and sound money is everthing. The economy will turn quickly with the right signals and incentives.
And yes, a well publicised campaign to simplify and cut red tape is also a powerful signal.
The productive sectors of the economy need to be made to smile again !
John Moss Reply:
November 21st, 2009 at 10:12 am
I agree.
Corporation Tax should be reduced to 10% for all businesses, with a £100,000 a year “reinvestment” relief. All other spurious “allowances” should be scrapped.
Growth of the private sector economy is the only route out of recession, out of deficit and back in to surplus so we can start to repay some of Brown’s £1 trillion debt mountain.
A recruitment ban on public service jobs and a drive to cut benefits by getting more people back to work?Hmnn very interesting.The roots of the post-war belief in the mixed economy,where deficiencies in one sector were balanced by the other taking the strain did n’t go very deep ,did they?
Yesterday, on a Conservative Party political broadcast I heard Mr. Cameron say “a couple of hard years are coming and then we’ll get through it and things will get better”. Far from telling people the hard facts that is deceitful. Does he really understand the depth of the economic mess that Brown has created? If you fail to make clear just how much you are going to have to cut then, if elected, you will bear the brunt of the public backlash and fall into the trap Labour has set for you, designed to ensure their re-election in four or five years.
OK, can you categorically state that you can cut the deficit by cutting spending on its own, that is without raising taxes?
For the avoidance of doubt I am of the opinion that you must. There is no scope at all to raise taxes, and in fact cutting taxes on indivduals, enterprise and business (including VAT) will be required to facilitate the economic growth that will be required to create the wealth to speed up the debt repayment. Your thoughts?
Reply: Yes, I do favour sorting out the deficit by spending measures only. There must be no increases in income and business taxes, as we need to attract more enterprise not stifle it.
Lola Reply:
November 21st, 2009 at 2:37 pm
You say ‘no increases in income or business taxes’, but I asked whether you would cut these as part of a plan to stimulate economic growth. One, do you agree with that and do you plan to do it? Or two, do you think Osborne fears the reaction of th capital markets if you do so?
The income tax paid by on earners up to about £35k is confiscatory, and it is especially damaging for those on about £14 to £15K. The same applies to small businesses, especially small partnerships.
Once again I repeat that the best single cut the government could do is in economically destructive regulation. At the normal 20-1 ratio getting rid of 200,000 elfin safety workers would mean 4 million worker’s effort not wasted. The same applies to the housebuilding industry where 75% of the cost of housing is regulatory. Also to the nuclear regulators whose function is to spend years certifying that designs that have worked in France & Canada can, with a little pointless & expensive modification, work here & that sites which have, for decades, been reactor sites can, mostlly, be reactor sites.
I think those, alone, could double the economy over time. I do not dispute the importance of John’s fiscal policies – they are in no way mutually exclusive – but I am rather sorry he has not either said why I am wrong or added some of them to the list.
Wholesale Civil Service redundancies are the only answer. They will scream and kick and find ways of ensuring personal fyfedoms are saved intact but this is the only way.
The easiest route would be to abolish a couple of ministries: not reorganise them, but abolish them altogether and ensure that the incumbents are made redundant.
Sounds draconian and heartless but surplus Civil Servants are already paid for by the state so not a lot would change other than the release of labour on to the free market.
Our resources are finite and so long as the state continues to consume them at the rate it does there will be less room for the private sector to flourish.
Fiddling around with the so called soft options that will hurt nobody is delusionary and fails to appreciate the size of the problem.
With the greatest of respect, to mess around at the margins as you recommend will be the equivalent of fighting with terrorists and you risk spending the whole of the next four years fighting with nothing to show for it.
Frankly, no more banking subsidies looks like a wish list that will not happen, and that makes up 31 billion of your 66 billion savings.
Five good points and all eminently sensible. Out of the 5 the VAT cut has been the most deluded move of this government, it still boggles the mind that they thought this would help the majority of the population or encourage people to go out and buy a television for £980 rather than £1000.
Like above posters have said though more needs to be done, and I’m sure that Conservatives know that. Simply imposing a moratorium on new public sector jobs isn’t enough. Same as a public sector pay freeze – necessary for the short term but for the long term (I’d never advocate a pay cut across the board) public sector pensions will need to be tackled.
At least though the Conservatives are starting along the correct path rather than the path this government has been sleepwalking along for the last twelve years so there may yet be hope.
I have just found out that London Councils – a quango paid for by us – is paying for a two-day “away day” at the Crowne Plaza (not sure which one), for London Council leaders.
What a waste of our money!
Re “Recruitment ban on all public sector jobs” if you ban permanent head count hires they will just hire contractors, or consultants, or folk from the outsourcers here on inter company transfer visas undercutting the native workforce
In my walk of life perm salaries in the public sector are very low, which is one reason they cannot hire anyone any good, and they end up subbing most of the work, which isn’t actually the cheapest way of doing it
So just pointing out that simplistic measures like this on their own will not work, and will provoke tried and tested responses from the relevant management
Reply: You ban consultancies and temps as well, and get rid of all temps on your books outside the front line.
I have always felt the the cause of all the world’s problems is the size of the population. I don’t think that the UK should have to deal with it. Our own problems in that area, could be addressed by encouraging birth control. No child allowances except for the first child, would be a good start. Oral contraceptives in the drinking water may be a little over the top. If only we could find a way to add them to recreational drugs.
Announce that VAT is going up to 20% for 3 years and then back down to 17.5% again. Compared to the current 15% rate that should pull in £25bn a year.
OK, this is what it looks like on the ground. 3/4 of the children leaving our Comprehensive no real qualifications. Our local College was promised, five years ago, and recurrently therefater, a huge rebuilding programme 16 miles away. It was also announced, several times, that the College would therefore close. The permanent staff either left or were replaced with temps.
Yesterday I met a lad who had walked out of College because he wasn’t learning anything. He, like many, many others, had been to the Comprehensive. He is just the sort of person you would expect to do really well, naturally trustworthy and hard working.
There are lots like him, cycling round in hoodies every evening. And this isn’t London. It is in a strongly Conservative country area.
His sisters are all Graduates (with debts, but looking for employment as teachers).
The likely answer? More cut backs of staff at the local Comp and huge tax increases to drive anyone with any “go” in them abroad – or to the bottle.
If only there could be a cull of bureaucrats!
Re “You ban consultancies and temps as well, and get rid of all temps on your books” who exactly is going to do the work then? you dont seriously think perm staff in the public sector do it?
I am on your side, and would love to help you, but you need a bit more pramatic understanding of how things actually get done (all be it inefficiently) at the moment
Personally I would start by stopping PA Consulting writing ITT documents for the public sector, as they are normally a cut and paster of the last one, they charge a fortune, and they get in the way of the bidders and the customers figuring out the best solution
Next I would get rid of anyone who has been in the public sector more than 10 years (docs, nurses and police excepted), they need a lot more churn with people with real world experience
hope this helps
Reply I have run parts of both the public and private sectors so I do know something about things get done. Remember we want a lot fewer things “done” in government offices.
John Wrexham Reply:
November 21st, 2009 at 1:31 am
dear john,
Idea 1 your end to the banking subsidies would help. would we now have three major solvent banks if gordon brown hadn’t cajoled lloyds into its disastrous menage a trois with HBOS and the treasury?
Idea 2 i work in the public sector and i accept the idea of a wage freeze as the best way to cut costs and still deliver services that even conservative voters need eg schools, highways, street cleaning, etc etc.
Idea 3 the recruitment freeze will be rather tricky. you can’t rely on public sector HR departments they are hopeless. defining frontline is very difficult – i bet you all the top directors and chief execs will define themselves as front line although most on the front line never see or hear from them.
the person who says he would sack anyone with more than ten years experience shows such a serious lack of common or business sense, he must be a consultant. ( john, i reckon you’ve been an mp for more than ten years, do you think you need experience of the ‘real world’? whatever that is!!)
the reasons the government and its organs and even the private sector rely on consultants are many, but one of the most important is that people nowadays just are not prepared to take responsibility for decisions. it is so much easier to get someone else in to do the thinking and make the decisions for you. we see it everywhere, but it is a very expensive way of working. i see it in my own line of work, but management would prefer to trust a well paid consultant compared to their own much cheaper staff.
Idea 4
Perhaps we should sharpen the knives for some rather greedier sacred cows? When are the politicians of that bottomless pit, also known as Northern Ireland or Ulster, going to stop using the threat of going back to the bad old days and their bad old ways as a means to squeeze more cash out of HM Treasury? There’s lots of talk about the peace dividend, well it’s about time the british taxpayer had his/her share.
If David Cameron gets elected, he should ring up Vaclav Klaus and ask how did he manage to get rid of his moaning neighbours so speedily. we can’t build a carbon neutral economy on scottish oil and they can’t either so let’s move on and leave them and the polluting oil industries behind. think of the money we’ll save when alec has to pay for his socialist utopia out of his own pocket money.
Final option – slap a one off tax on all those tax havens that are british dependencies. these sleazy sun traps need cleaning out as they don’t in any way improve the fortunes of UK plc, in fact they undermine our economy. we pay off lots of their bills, now they can help pay off Labour’s.
Idea 5
VAT should be raised to the same level as the basic rate of income tax. the idea saving money should be taxed more than spending money must surely have had its day when we are all so in debt.
best wishes to a fellow john
I would like to know what it will take to reduce our borrowing requirement to <40% of GDP and how quickly this can be achieved. Surely the academic mathematical modelers are running the scenarios?
I do not see the sense of continuing to employ those that we intend to make redundant, surely it would be better to reduce costs immediately and waiting will only make the situation more difficult.
Abolish all quangos, without exception.
Didn’t you also suggest selling the motorways for circa £100 billion?
Reply: I did, in the days when that would have made a big impact on the then levels of public debt. It was not a popular idea on this site, but it seems likely that any new main road will need to be paid for by private capital and tolls like the M6 tollway.
The only solution is to stop spending.
1. 10% pay cut across the public sector.
2. Quangos. Most can go. PS they aren’t government
http://extras.timesonline.co.uk/quango.pdf but I’m sure you’ve read it.
3. Axe expensive projects like Cross rail. It’s not an asset its a liability.
4. Axe future accruals to the state pension. Replace it with compulsorary savings and a guarantee. What’s interesting about this is that the money has to go into investment. Investment over time will produce a higher level of income than the current ponzi scheme. That means the guarantee over time becomes very cheap. The crucial point is that those savings have to be invested, and that provides the funding for firms that the banks can’t provide at the moment. That funding will provide the money to get the 2-3 million ex public sector workers real jobs.
Nick
Agreed but I think its important to note that the Gtee to reduce the deficit by 50% over 4 yrs is almost a given. The current deficit comprises structural and cyclical elements. Its therefore more than likely that any takeoff of the economy will deal with the cyclical element by reducing the need for benefits and increasing tax take by HMG. More spin from GB in whom we trust.Yeah right.
Reading the comments of people with direct experience of the public sector, on here, is interesting.
It sounds exactly like middle management (and lots of senior management) in the early 1980s, complaining endlessly how vital every last one of them were, and how any change would be far too complicated and for the worse.
Of course government will face a huge cultural inertia, as business did in the 80s.
I live in hope that Cameron has the men of fortitude, inspiration, talent and persistence, to make it happen.
Once again it’s TINA time.
P.S. We should all thank God that Portillo decided to switch from politics to ‘celebrity’. Close shave !
John,
When you say
2. Public sector wage freeze – saves around £6 billion
Remember that alot of “new” staff get promoted every year within their job title and get 2-4% pay rises each year. These are not counted as pay rises. So I would amend your request to say
2. Public sector wage and automatic promotion freeze – saves around £6 billion