Doubts about public expediture plans

The Institute of Government has pointed out that although by 2014-15 public spending as a share of national income would be back to the same level as it was in 2006-7, the composition of that spending would be very different. Expansions in the share of national income spent on pensioner benefits, the NHS and overseas aid would be funded through reduced spend on education, law and order and defence.

At Fathom Consulting's quarterly Monetary Policy Forum, the former Home Office permanent secretary Sir John Grieve said 'it seems most improbable' that the government would hold fast to its plans. Rachel Lomax, a former permanent secretary of three government departments, said the public might not accept large cuts in police and prisons that had not been flagged before the election.

The Public Accounts Committee has expressed doubts over the Government's ability to make genuine efficiency savings. Whitehall failed to make the mere 3 per cent savings set out in the 2007 comprehensive spending review. Two years into the three year programme to release £35bn in cash from efficiency, only £15bn of savings were reported. Of those, the National Audit Office, it judged only 38 per cent, or less than £6bn, to be value for money savings.

The committee is concerned that in order to reduce costs, departments will rely soley on cutting frontline services. The committee says it was concerned at the implications of evidence from the Treasury 'that it will simply reduce departments' budgets and then walk away from the responsibility for the delivery of the level of savings required across government.'

Of course, cutting back office services can have its impact. There are two EU committees working in a technical area which have been highly dependent on the UK and the Netherlands for their work, although with general political support from other North European countries. The UK may now not be able to afford to be involved. Up to now UK interests have been very well looked after because of its involvement.

The Treasury story

In this article I take a look at the Treasury under George Osborne in contrast with its role under Gordon Brown: Treasury

A steep learning curve

I have to admit that I am on a steep learning curve with the Coalition Government. I have a sense of the policy ground shifting beneath my feet even in areas I am very familiar with. The final outcome is very uncertain in many cases.

Part of the problem is a lack of familiarity with the policies of the Liberal Democrats. Mea culpa, but many of us never anticipated they would be in government. I am reminded of an incident in the 2001 Parliament when I was attending a meeting at the House of Commons on higher education. A Liberal Democrat MP came and sat next to me. I knew he was and which constituency he represented. What I didn't know was that he was their spokesman on higher education which sent him into 'Do you know who I am?' mode.

In one policy area with which I am familiar, admittedly not a very high profile one, I have learnt that the Liberal Democrats have a policy which is diametrically opposite that of the Conservatives. It will be interesting to see what is said at a meeting on the subject I have to attend tomorrow.

I am not saying that it will not be possible to arrive at negotiated compromises or agreements to differ on these matters. But it is relatively uncharted territory politically and to some extent the rules of the game have to be learnt as we go along.

One area which is quite important is the role of the Treasury. I think it is no great secret that senior Treasury officials were indicating in the months before the election that they thought their department should continue to be an economics as well as a finance ministry.

George Osborne and his ultra dry Liberal Democrat Chief Secretary are clearly focused on its role as a finance ministry for understandable reasons. Quite a lot of the economic territory is being carved out by St. Vince of Cable. However, we have been here before. Challenges by the business department (in its many incarnations) have always ended up with the Treasury eventually establishing dominant control of the policy space.