Vince Cable has this morning launched a pamphlet published by the independent think tank Reform called ‘Tackling the Fiscal Crisis: A recovery plan for the UK’ setting out proposals for tackling the fiscal crisis. A PDF of the pamphlet can be downloaded here. Here’s what the Lib Dem website has to say:
In the pamphlet, he argues that there should be no “ring fenced” areas of spending and that all existing spending should be justified. Mr Cable claims the situation is probably more serious than the Government’s proposals for a fiscal tightening of 6.4% of GDP over eight years suggest. He argues that a fiscal consolidation of 8% of GDP over five years is more realistic, with the emphasis on controlling public spending, not higher taxes.
He identifies nine specific areas of potential savings are identified as a start to a radical programme reform.
Vince Cable said:
The time for generalities is over. Instead, we need serious proposals for cutting public spending and tackling the UK’s budget deficit. The priority is to move the economy out of recession but there is also a need to restore fiscal credibility and to allow Government to focus its resources where they are most needed. We need to debate when, how and where the cuts will come.
“Undoubtedly more are required to meet the exacting fiscal disciplines but asking the British public for their vote at the next election means being upfront from the outset about what Government should and should not be spending its money on.”
Here are the nine specific proposals:
* Zero growth overall for public sector pay (saving £2.4bn a year), a 25% reduction in the total pay bill of staff earning over £100,000 and a salary freeze and end of bonuses for the civil service (saving £200m a year)
* Tapering the family element of the tax credit – saving £1.35bn
* A radical review of public sector pensions with the view to moving to higher employee contributions and later retirement ages. There is currently a £28bn subsidy to unfunded schemes
* Scrapping several major IT systems including the ID card scheme (£5bn over 10 years), Contactpoint (£200m over five years), the NHS IT scheme (£250m over the next five years) and the proposed ‘super database’ (£6bn)
* Curbing ‘industrial policy’, including scrapping Regional Development Agencies (£2.3bn annually) and ECGD subsidies (£100m annually) and reducing (by at least half) the Train to Gain and Skills Councils budgets (£990m together a year)
* Reforming the National Health Service, by reducing the centralisation and over-administration – starting by scrapping Strategic Health Authorities (£200m a year) – by strengthening commissioning and with ‘supply side reform’ – in particular tariff reform could save around £2bn a year
* Curbing the centralisation in education, by cutting national strategies and scrapping quangos – saving around £600m a year
* Reducing the amount of waste in the defence procurement process, including scrapping the Eurofighter and Tranche 3 (£5bn over 6 years), the A400M (total cost £22bn), Nimrod MRA4, the Defence Training Review contract (£13bn over 25 years) and the Trident submarine successor (£70bn over 25 years)
* Examining possible future public sector asset sales, including some aspects of the Highways Agency (land value of £80bn) and intangibles such as spectrum, landing rights and emissions trading
25 Comments
I love the disclaimer at the bottom of the Lib Dem website article:
Please note: this is not official Liberal Democrat policy and examples are illustrative and represent only a first, rough attempt.
Lovely!!
seriously though, good to see Vince kick-starting the debate. I have a feeling our party may well have a lot to say about taking the consequences of cuts into account before carrying them out – no use cutting costs here to end up spending more there as a result – but an honest assessment of the country’s priorities is needed. Bring on Conference I say!
Interesting.
Taking all that at face value, it looks as though those proposed savings would amount to something like £16bn a year from 7 of the 9 points – plus whatever can be raised from points 3 and 9 (public sector pensions and asset sales) – of which perhaps half would be ongoing savings and the other half one-off savings accounted for over periods between 5 and 25 years. Though of course some of the savings would probably incur additional spending elsewhere (for example, they include nearly £3bn a year from cancelling the Trident successor but, unless the party is committing itself to no successor at all, some of that £3bn would have to be spent on something else).
So this looks pretty much like the £20bn (or equivalent) of savings the party has been trying to identify for several years. Originally it was to be diverted to other spending priorities. Then part of it – even the “vast bulk” of it at one stage – was to go into “big permanent tax cuts”. Now, apparently, it’s to be used for “fiscal consolidation”. (Though I thought point 2 had been earmarked for increased education spending earlier this year?)
Surely what Vince is trying to do is set out the overall approach, backed up by some specific examples.
Overall I think he is right, some of the specifics will need a lot of work.
Of course, as to whether “he is right”, that’s bound to be a matter of opinion.
But I think it’s safe to say that an indefinite pay freeze coupled with higher pension contributions isn’t exactly going to have public sector workers dancing in the streets.
Vince has set out what the problem is, what the solution is, and how to implement the solution.
The paper is a tour de force.
This pamphlet is indeed a tour de force. We LibDems don’t set our official Party policy through dictatas from our leadership; but we do look to our leadership to show the way. This paper does that – it opens a proper debate amongst us, and gives very good material for all of us to chew on.
It’s timing is terrific. It puts Labour and Tories on the spot just before their party conferences. They must come up with clear ideas of their own; which neither wants to do, or look inadequate.
@Herbert Brown
In the spot that New Labour has got us into, there is no sensible policy that is going to have public sector workers – or taxpayers – dancing in the streets. But a great many of all groups will vote for a policy which offers solid hope for the longer term.
Brilliant!
(That was all I was going to say but apparently comments have to be a bit longer than that – as this one now is).
I am disappointed that we are following the same line that seems to please the media. Sure we need to assess the value of some of the programs and indeed get rid of some that have achieved nothing or those like Trident, which are a ‘luxury’ we cannot afford. I am still unhappy that we are not identifying Tax evasion and higher taxes for the super rich as targets for reducing the deficit. Cuts in Public spending affects the less well off far more than the rich, I think it would be right to spread the burden more equitably.
Roger.
I may be wrong but I think this paper is solely concerned with the issue of public expenditure. I too hope that the party has not gone cold over closing loopholes used by the super rich but I think that is another issue.
“I may be wrong but I think this paper is solely concerned with the issue of public expenditure. I too hope that the party has not gone cold over closing loopholes used by the super rich but I think that is another issue.”
Isn’t that already policy, as part of the package already agreed, originally intended to fund the lowering of the basic rate of income tax, but now to be devoted to raising allowances instead, if I understand correctly? (Admittedly it’s a bit difficult to keep track of all these different proposals.)
This bit suggests that Cable now sees the priority as cutting expenditure rather than raising taxes:
“He argues that a fiscal consolidation of 8% of GDP over five years is more realistic, with the emphasis on controlling public spending, not higher taxes.”
“Tour de force”? Over de top. Yes, our government may well need to carry through something like this programme of devastation, and I suppose it is good to see someone bold enough to produce a list of specifics, rather than just waffle. However, it’s not going to rake in a huge harvest of popular votes!
I also worry that it is a list of all the things that superficially sound bad or boring, rather than the things we can actually cut effectively. For example, we can scrap a load of IT schemes which have over-run their budgets, but what are we going to do then? Discover that those darn computers still need replacing before they stop working, and start up a whole load of even more expensive IT schemes!
But last year Vince was saying we would find cuts of £20bn to fund our (then) spending programmes.
Now, in what is pretty much an emergency situation he can only put forward items costed (by Liberal Future) at £14bn or (by Herbert Brown) at £16bn – and which include Trident which policy last Autumn was to renew so couldn’t have been in the £20bn.
That should barely get him an E for effort. Instead people are so in love with Vince that he’s praised for a “tour de force”!
A speedy and sustainable recovery is just not possible without a substantial switch to economic rent as the basis for government revenue. For all Vince’s wise words, he barely nods in that direction. History repeats accordingly.
Shame.
@Herbert Brown – has he proposed a ‘pay freeze’ on the public sector? I think what he has said is that the overall pay bill shouldn’t rise – which is very different.
@Hywel – there may well be a list of things we will switch to bigger priorities and a list of things we would cut to reduce the deficit.
@Roger – our leadership has consistently identified reducing tax evasion and cutting loopholes as ways of bringing in money. Nothing in this paper changes that.
I read the document and I was particularly interested in public sector pay. He recognises that a lot of public employees are low paid, yet he does not offer them any reassurance at all. Remember how our tax cuts were going to help these people pay their rising utility bills? Any gains from tax cuts will be offset by below inflation pay increases, or so it seems.
I do appreciate the difficulty of the task, and as Hywel points out, Vince was unable to find the £20Billion cuts we were confidently informed we could easily make, despite our policy then of replacing Trident. In addition as is also pointed out, there is a price to be paid by not implementing IT projects, the whole point of which is to improve efficiency. Surely the aim should be to improve the efficiency of running IT projects rather than stop them altogether?
I think it is clear that as Nick Clegg said before, abolishing student tuition fees will have to remain an aspiration. it is very unsatisfactory that it was unsustainable debt that brought us this financial crises, yet currently students are also forced to go into debt if they want higher education. A further paradox is that a recession that imposes this policy on us is also likely to deliver poor returns in debt being paid off as well. The policy could well cost more than intended.
I think we should make clear that we will not replace Trident, AT ALL. And we should stop pretending we are a superpower and remove our troops from Afghanistan – a war that shows no sign of ever ending.
“@Herbert Brown – has he proposed a ‘pay freeze’ on the public sector? I think what he has said is that the overall pay bill shouldn’t rise – which is very different.”
Thank you for picking up on that important point. What the document actually says is this:
“A zero growth assumption is not the same as a pay freeze since some groups would get more or less depending on decentralised bargaining and independent pay reviews.”
In other words the groups fortunate enough to be covered by independent pay reviews – and those with the muscle to negotiate a favourable settlement – would continue to receive pay rises, while the less fortunate would actually have their pay cut – not just in “real terms”, but in terms of the number of pounds in their pay packet.
I would be interested to know whether what Vince Cable is proposing for public sector pay has ever been achieved – or even attempted.
“Tapering the family element of the tax credit – saving £1.35bn”
As I thought, this has already been put forward, as a means of funding the education proposals published earlier this year:
“The majority of extra funding [for the Pupil Premium] would come from taking those above median earnings out of tax credits.”
[Equity and Excellence: Policies for 5-19 Education in English Schools and Colleges.
http://s3.amazonaws.com/ld-migrated-assets/assets/0001/0387/89_-_Equity_and_Excellence.pdf ]
If that money is going to be used for “fiscal consolidation” instead, where does that leave the Pupil Premium?
“I would be interested to know whether what Vince Cable is proposing for public sector pay has ever been achieved – or even attempted.”
I share the scepticism. You can’t buck the market. If public and private sector pay are forced to move in different directions, powerful market forces will very soon pull them back into line.
None of this is to denigrate Vince. We are streets ahead of our competition in openness and willingness to engage with reality. Streets ahead – but also, not far out of the starting blocks!
Working in the pubic sector isn’t just about the remuneration; there are other issues just as important (pension, working hours, holidays, stress levels, security of employment, contribution to social conscience etc).
Er, are we still on Mark Oaten?
Let’s assume you meant public sector. True enough comment then! Paying a good pension lets them get away with paying less up front. But that’s the deal. Changing it, and reducing the overall value of a public sector job, is what won’t work to any great extent in practice. The job market will fight back!
But private sector incomes (bankers excepted of course) are already taking a hit and will assuredly do so over the next couple of years, which means that holding down public sector pay will be temporarily more achievable without resistance from the job market.
“But private sector incomes (bankers excepted of course) are already taking a hit …”
I know it’s possible to prove anything using statistics, but it’s a curious fact that the most recent figure for wage inflation in the private sector (excluding bonuses) is 1.8% – for the year to July 2009 – which is identical with CPI inflation over the same period.
When Vince Cable cites in justification of his proposed (overall) public-sector pay freeze the fact that in the private sector “wages have been cut in many industries”, he is very far from giving the full picture.
Malcolm,
I think what you’re saying is that the job market is going to hold down public sector pay quite well without requiring any assistance from politicians. That may well be true, but it follows that politicians can scarcely take any credit for it, and cannot reasonably declare that their policies are anything very diferent from what any other party would do.
Yes, it seems those education spending pledges really have been dropped after only five months:
Mr Cable also appeared to suggest a commitment he made in April to spend £6.7bn on childcare and education was in doubt, as most of the cuts that were meant to pay for it are included in his list of cuts aimed at paying off the national debt.
Asked by Mr Neil how much the party would now spend on childcare and education, Mr Cable replied “it may or may not be” £6.7bn but “there will still be, I’m quite sure, in our final manifesto, a commitment to modest amounts… particularly in education”.
http://news.bbc.co.uk/1/hi/uk_politics/8263813.stm
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