Wednesday, 16 September 2009

The cuts menu

Gordon Brown has at last uttered the 'cuts' word more than once, but apart from cutting back on civil service early retirement deals was remarkably vague about how he would achieve them given that he wants to spare 'front line services'.

It was evident from one sentence in the speech that he is looking to growth as a way out of his difficulties, but to have any significant impact on revenues one would need to return to a 2 per cent growth rate which isn't going to happen any time soon. Unemployment is also going to rise for some time and will then fall only slowly, increasing the benefits bill.

What is evident is that all three parties will hold back public sector pay as a means of achieving relatively quick savings. There is also something of a consensus emerging that Britain will have to replace Trident with a minimal deterrent.

The Lib Dems have come forward with quite a detailed cuts menu, but then they are not going to have the responsibility of government. They said that public sector pensions would have to be reviewed and that is inescapable. They also called into question the third tranche of the Eurofighter.

However, two of Vince Cable's ideas were less sensible. He took a pop at quangos which always goes down well. But one has to think about this. Quangos were established to carry out a function, usually a regulatory one and generally in response to public demand (or at least a media storm). If the quango is abolished, can the function be dispensed with, or can it be carried out elsewhere more efficiently? For example, if you abolished the Environment Agency, one of the largest quangos, one could not abandon all the functions as many of them are embedded in law and are essential to protecting the environment.

Vince also wanted to cut higher level civil service pay. Britain has a very good civil service, but one needs to pay well to retain the best staff. I wonder how much Vince got paid as a business economist at Shell? With inflation uprating, I would think that it would be a six figure sum.

The polls show a public preference for cuts over tax rises, but that support tends to break down when specific cuts are mooted. The Conservatives seem to have come rather well out of all this. They have been talking about cuts while Gordon was in denial and many voters might well think that if you are going to cut it is best done by a party that believes in it.

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