Ministers in office but not in power

 
Allister Heath
THERE is nothing more depressing than a good idea that is badly executed. The government is right to seek to regain control of the public finances – but its inability to implement austerity properly could yet destroy the coalition. The wrong cuts are happening – and far too little meaningful restructuring of the public sector is taking place. Even well-managed private firms are usually able to reduce costs by 5-10 per cent in an emergency without consumers noticing. After years of spending increases, the generally bloated, monopolistic and badly managed public sector ought to be able to absorb much larger cuts while preserving essential services. Services could be outsourced (including overseas) or privatised, councils could merge, all unnecessary functions and staff could be eliminated, management could be streamlined, new working practices could be introduced, departments could move into cheaper offices and so on – all the things that private firms do when they need to make substantial savings while still continuing to please their customers.

The tragedy is that the public sector doesn’t have to compete for paying customers – its resources are extracted forcibly via the tax system. The incentive structure is thus very different: top managers need to meet their budgets – but how they do it does not matter as much. In fact, if they cut vital services, the resulting outcry can actually end up boosting their resources over time. It is a very different game to that faced by the private sector. Ministers have discovered, to their horror, that they have even less control over the public sector than they feared in their worst nightmares. There are few levers that they can pull to ensure that change takes place; the bureaucracy is desperate to put its own interests first.

The result is a looming disaster for the coalition. Take cuts: yesterday, London Ambulance said that it would be cutting 560 frontline positions over the next five years, which is very bad news. Yet at the same time local councils are still recruiting politically correct non-jobs. One recent investigation revealed that “walking coordinators", “obesity strategy officers”, and “active” workers are still being recruited. One council has just hired an “age friendly communities” manager, a walking and cycling officer, a “community conservation”officer and an “Energy Island” administrator. Meanwhile, many bureaucrats prefer to shut services such as libraries rather than seek the help of more efficient private providers to keep them going at a much cheaper cost. Earlier this year, Library Systems and Services, a US company, offered to run libraries for 35 per cent less than councils are spending. Book borrowing would remain free, while add-on services, such as coffee shops, IT and book stores would be used to generate revenues. Others have suggested purchasing second hand books. Yet many councils aren’t interested.

The coalition should legislate to force local authorities to seek to put services out to tender – or even to privatise them completely – before they shut them. An independent consultancy should be hired to analyse all the staffing of all government departments – and to make a list of non-essential jobs. The government should legislate to cut these as a priority, to protect nurses and teachers. Unless radical action is taken, and fast, the wrong cuts will be made – with disastrous consequences for consumers as well as for the coalition.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath