Saturday, 22 May 2010

Axeman uses the A-word

Liberal Democrat Chief Secretary to the Treasury David Laws is a former banker and as dry as they come in economic terms. He is in effect the Govermment's axeman and he makes it clear in the Financial Times this morning that he won't be afraid to use his axe, using the austerity word that was taboo in the election. He also made it clear that he will be sensitive in seeking to protect vital services.

The problem is that the Coalition Government doesn't have a lot of room for manoeuvre. They have said that NHS spending will increase in real times: in practice this means cutbacks given an ageing population and advances in medical technology. They are seeking to protect spending on schools.

Various perks for pensioners such as the winter fuel allowance and free bus passes will be retained, even though the recipients are often still in work or well off. What's more pensions in future will go up in terms of either inflation or earnings, whichever is greater, or by 2.5 per cent as a minimum. Transfer payments like this cost huge amounts of money and increasing the retirement age to reflect the fact that people live longer has been postponed well into the future.

So other aspects of public services will have to take a big hit. There will have to be a bonfire of quangos and some of the monitoring ones set up by New Labour will be no great loss. Others deliver important regulatory or scientific services, e.g., FERA which I visited on Thursday.

Higher education is likely to take a big hit, but the Lib Dems are reluctant to allow universities to raise the fees they charge to home students.

Some people I encounter don't seem to be facing up to the new reality. They are burying their heads in the sand or recognising that they will have to be made pure, but not just yet. Well, cuts are going to start impacting services near you before long. That's when we can expect political trouble. The structural budget deficit has to be reduced but it's difficult given the number of sacred cows there are.


sat said...

Of the regulatory authorities, surely the Security Industry Authority is one most ripe for re-structuring, if not axing. A year or two ago there was a strong rumour it would be merged with the HSE, who moved from central London (south bank) to Liverpool. Yet, the SIA expanded last year, taking on extra staff, and now occupies two sites in Holborn. Most of its staff are inspectors - a role that do jointly with local authority officers and police officers- and are dispersed through out the country. Additionally its main service provider is based in Liverpool and its executive team will already be familiar the city from their regular trips there.
Ironically, the Security Industry Authority offices, which they share with the Independent Police Complaints Commission, had a break just before Xmas 2009. Their own security was found wanting and the incident was not made public. Over 20 laptops were stolen, many would have contained the detals of private security personnel and on-going investigative enquiries. It's difficult to see how the SIA will withstand the scrutiny of an erstwhile axeman. Deadwood is great for getting a bonfire started!

Wyn Grant said...

Very informative and amusing. More examples welcome.

Justin Greaves said...

Rumoured to be some cuts to universities in the first £6 billion of cuts. Although David Laws is economically 'dry', I hope and expect that any cuts he is involved in will fall less on the poor and vulnerable than would have been the case under a majority Tory government. I am beginning to reluctantly think that a rise in VAT may be necessary - but hope it would go alongside other tax and benefit changes to ensure it was not too regressive.