THE build-up to the election saw all of the major parties arguing over when to start cutting public spending. Straight away, some said. This year is too early, we could put the recovery at risk, others replied.
What we didn’t hear was how they would cut spending. The new coalition is right to think that spending cuts can be made this year – so it was encouraging to see many sensible measures in David Laws’ speech.
Getting rid of the Child Trust Fund is one. It is available for all households, no matter how well off, and this a luxury that we cannot afford. Cutting the bill for the bloated and inefficient quango state is long overdue so it is good to see the new team at the Treasury is willing to take this on too. The body Becta is a good example of a quango that performs a job that is simply not needed in the public sector and its abolition will yield a significant saving of £80m.
There will be cuts at the Department for Business, Innovation and Skills which we’ve long sought after at the TPA, giving a saving of over £830m. Much of the money goes through the inefficient and needless Regional Development Agencies (RDAs), which will have their budgets cut.
Add to this freezing civil service recruitment (£120m), cutting back on consultants, reducing first class travel and cutting back on advertising (£1.16bn) and you get the feeling that there will be a change of attitude at the Treasury, too. This new approach needs to permeate through the whole public sector, which has become too big and too profligate in the last ten years.
But yesterday’s announcements have to be the beginning and not the end. The scale of the fiscal crisis means that £6bn is small beer when trying to close a deficit of £156bn. In our book How to Cut Public Spending (and Still Win an Election) we outlined £50bn of cuts that could be made this year. Given that government spending now accounts for 52 per cent of Britain's GDP, more significant steps have to be taken if we are to successfully tackle the fiscal crisis.
While it’s good that the quangocracy will be reined in, only one body got the axe yesterday. There was very little detail in the Treasury document but there are certainly many more organisations that should be abolished: the Carbon Trust, the School Food Trust and the National Policing Improvement Agency to name but a few. Getting rid of these bodies alone would save more than £600m. Additionally the Regional Development Agencies should be scrapped, not just cut back. It makes no sense to tax businesses too much and then give some of the money back in grants. A low tax economy will allow dynamic businesses to thrive and create wealth; the status quo of turning businesses into grant-junkies cannot go on.
Protecting the budgets of health and international development is unwise. Over £650bn has been spent on the NHS in the last 7 years. For that sort of money, we should have an unrivalled healthcare system. But we don't. The International Policy Network found that millions of pounds have been given to the Trades Union Congress by DfID since 2003 – hardly a Millennium Development Goal – yet politicians still want to ring-fence the budget. A lot of money is wasted in these departments and cutting out the waste would help to cut the deficit.
On 22 June George Osborne will deliver his emergency Budget. Yesterday’s announcements were welcome, but more detail will be needed before we can decide whether the new government is serious about taking on the deficit. We know when the government will start to cut spending and we’ve had a taste of how; we await the Budget for more substance.
Matthew Elliott is chief executive of the TaxPayers' Alliance