What difference does it make having Lib Dems in power? How are Lib Dems actually making cuts “fairer”? One example is what we have done in Bristol, when we reviewed redundancy terms. The statutory redundancy payout is a week’s salary – up to a cap of £380 per week – per year worked. Bristol Council had a much more generous scheme: twice the weekly salary, with no cap.
This sounds great until you look at the effects of this a bit more closely: at the bottom of the officer pay-scale the Bristol scheme was about twice as generous as the statutory scheme, but at the top of the officer pay scale it was about 10 (yes, ten) times more generous than the statutory scheme. In other words it benefited the “rich” vastly more than it benefited the “poor”. (You’ve got to be a bit suspicious of the vested interests that created a scheme like this in the first place.)
Associated with this was a problem of public perception: in recent years, rapidly increasing top-tier officer salaries had often carried severance payments into six-figure sums. Public anger at their taxes being used for “golden goodbyes” for top managers made redundant was palpable.
With savings needing to be made from redundancy costs, the Lib Dem solution was to bring all of these strands together in a way that would a) protect low and middle earners from any changes, b) eliminate “golden goodbyes” and c) free up cash that could be diverted back into protecting front-line services and front-line jobs.
The answer we settled on in Bristol was to bring in a new cap on redundancy pay at £700 per week. This would mean that people earning under £700 per week wouldn’t be touched and that the maximum redundancy payout would now be a still generous £42,000. In fact, this policy change only affects the top 10% of earners in Bristol Council, but because of the huge amount of money those top managers were costing to lay off, it would save 30% on the redundancy bill. All those savings can go back into protecting public services, which as we know are most heavily used by the poor.
This is how to cut fairly – you take more from those who have been doing well and will get by adequately, and you leave those who haven’t and wont. Something you would expect Labour to back? To my surprise Bristol Labour were hostile to this and voted against it – claiming it was “an attack on workers”.
It would seem that they were so intent on opposing absolutely everything Lib Dems do that they would rather top managers got massive pay-offs than see that pay-off money be better used to protect services. That’s a shame, but it didn’t top us introducing the new system.
Cllr Mark Wright is Cabinet member for Efficiency and Value for Money on Bristol City Council
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10 Comments
Labour don’t care about value for money or even really the “progressive” nature of spending. They are just for statism. They never met an expansion of the state and public spending, no matter how un-progressive or plain ridiculous, that they didn’t like.
We should be looking to make the necessary national savings from just this sort of imaginative solution done on the merits of specific situations; the overall potential is easily big enough. Trying to make cuts top-down as the Coalition is doing is a recipe for disaster.
Well done!
The problem is that the softer the redundancy package the more it costs, irrespective of how it is distibuted. The result is the less spent on the poorest people in Bristol, those whom the Council is there to support. the treouble is the unnecssary ideologically driven small state big society lib dem/Tory cuts. How can you honestly argue proudly about a small detail when the big picture is that the balance is 80% hitting the poorest and 20% made up of tax increases, ie the richer. And I still dont know why everything has to balance within one parliament. What happened to Keynes? and look what is happening in Ireland
alan: The “lib dem/Tory cuts” you refer to will see the UK state sized at 41% of GDP – the same as it was in 2005. Do you honestly think that the Labour Party was running a “small state” in 2005, or are you just parroting their propaganda?
@Mark Wright
Fantastic to read a specific example of a progressive cut. I’m sure it won’t have been easy – I’m sure there will have been some people seriously angry at seeing their generous redundancy terms cut – but money spent in one place means vicious cuts elsewhere.
@alan
” I still dont know why everything has to balance within one parliament.”
A good question. For me, the main argument is that we may not have enough time to cut it over two parliaments. We’ll be fine if we repeat the sixteen years of uninterrupted growth had since the early nineties. But that was an exceptional situation, partly brought about by deliberately feeding a bubble, the bursting of which is a big reason why we have such an awful deficit.
Previous experience is that recessions come around once every ten years. Imagine if we still have a structural budget deficit going into the next recession, and a massive public debt. Would the financial markets be willing to fund a stimulus package in those circumstances? If not, there could be a new budget crisis, with the government forced to make cuts while still in mid-recession. I shudder at the prospect.
I would favour reducing the pace of deficit reduction a little, but I would strongly oppose slowing it significantly. I’d be a little more hawkish than Darling, but not dramatically so. Labour’s main argument that we should delay the pain is undermined by their record. They would have credibility if they’d followed Keynes, and not run large deficits over six years of boom. But, like too many politicians of all parties in the past, they’ve followed the political principle that it’s better to delay the pain today, to the election tomorrow, even if it means much more serious problems in the long term.
Besides, let’s face it, is it necessarily any kinder to delay cuts a couple of years, especially if that leads to higher interest rates and more borrowing, which mean even greater cuts in the end?
I hope (to get back on topic) that when the public spending review is announced, as far as it is possible, the cuts follow the principle Mark Wright outlines in his post.
I would favour reducing the pace of deficit reduction a little, but I would strongly oppose slowing it significantly. I’d be a little more hawkish than Darling, but not dramatically so.
George, What about the split between tax and cuts? Why have the lib dems changed that formula to more cuts. Labour was a third, two thirds, halving the deficit. Not altogether convinced of that either
alan: The “lib dem/Tory cuts” you refer to will see the UK state sized at 41% of GDP – the same as it was in 2005. Do you honestly think that the Labour Party was running a “small state” in 2005, or are you just parroting their propaganda?
Cllr, I fear that it is you that is spouting their propaganda. I am told it is increasingly likely that Picklies will go for the discrtionaly grants such as those that fund refuges for women escaping domestic homicide, the mentally, ill, the homeless etc etc. If you deoubt this councillor find out what is happening to programmes such the Supporting People programme in your area.
Sorry my last post made no sense with the quotes, I will try again
“I would favour reducing the pace of deficit reduction a little, but I would strongly oppose slowing it significantly. I’d be a little more hawkish than Darling, but not dramatically so”.
From George Kendall, What about the split between tax and cuts? Why have the lib dems changed that formula to more cuts. Labour was a third, two thirds, halving the deficit. Not altogether convinced of that either
From Cllr Mark Wright “alan: The “lib dem/Tory cuts” you refer to will see the UK state sized at 41% of GDP – the same as it was in 2005. Do you honestly think that the Labour Party was running a “small state” in 2005, or are you just parroting their propaganda?”
Cllr, I fear that it is you that is spouting their propaganda. I am told it is increasingly likely that Picklies will go for the discrtionaly grants such as those that fund refuges for women escaping domestic homicide, the mentally, ill, the homeless etc etc. If you deoubt this councillor find out what is happening to programmes such the Supporting People programme in your area.
@alan “From George Kendall, What about the split between tax and cuts? Why have the lib dems changed that formula to more cuts. Labour was a third, two thirds, halving the deficit. Not altogether convinced of that either”
I agree that’s an important issue, and one that hasn’t been discussed as much as it probably should be.
Regarding the Lib Dems, the obvious answer is that the coalition involved compromise, and the Tories, with far more seats, pushed for more cuts and fewer tax rises. The Lib Dem influence increased the proportion of tax rises a little, but not much.
But, personally, I’m not so interested in what the parties said at the election. Frankly, I don’t think any of the parties were completely honest. We Lib Dems identified more specific cuts than the others, but, as the IFS said, we may have been more honest, but only marginally so.
What I’m interested in is: what is the best policy to get us out of the mess we’re in? And, regarding what the proportion should be for tax rises, I’m still undecided.
In the early years of Labour, though a Lib Dem member, I cheered when Labour started spending more on public services. But when that spending increase become a flood, I was worried that it wasn’t sustainable. I feared we would spend too high a proportion of GDP, and, I’m afraid, that is what has happened.
Some on this site argue that if Conservatives under Thatcher sometimes spent a high proportion of national income, why can’t we do so now? I don’t think they are comparing like with like. Those high spending figures were while the Conservatives were recovering from recession, and from the mess created in the seventies by the Barber boom under the Tories, and the various crises under Labour. Government spending in recession is always a higher proportion than when the economy is booming.
In my opinion, as a country, we face huge challenges in the coming decades, such as an ageing population, the ever-increasing demands of health provision, our under-funded pensions, global warming, ever-increasing competition from the new economies for raw materials, peak oil production. In the face of those challenges, as well as ensuring our finances are in order, I think it’s vital that our public services are at a level that is sustainable, with a big enough private sector to fund them.
On the other hand, I’m doubtful that the 25% cuts proposed are realistic. I think I’d probably favour time-limited short-term tax rises to take a bigger share of the burden. Time-limited, so that when the economy grows sufficiently, and the budget allows, they’d automatically be cut back. Although this isn’t current coalition policy, I think it’s quite possible the government will u-turn at some point.
The problem with tax rises, both for the Tories and Labour, is their commitment not to raise income tax. Without income tax rises, where would you get the additional income? It’s not an easy question to answer, and I suspect it’s one Ed Miliband is going to be asked a lot in the coming years.
I’m also opposed to ring-fencing of Health. Health has had a huge increase in its budget in the last few years. Surely there is some room for savings, such as the outrageous increase in GP salaries?
@alan – you didnt answer whether you thought Labour were running a “small state” at 41% of GDP in 2005…….