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Alex Morton is Director of Policy at the Centre for Policy Studies, and was a member of David Cameron’s Downing Street Policy Unit.

The Conservatives are abandoning ‘austerity’

I’ve argued before on this site that simultaneously running loose monetary policy and tight fiscal policy over the medium term is a nonsense, supported only by those who have never met a politician. The latter will always prefer to borrow more at near zero interest rates than to make difficult decisions. Ahead of next year’s Public Spending Review, the National Health Service, defence, education, infrastructure, investment in digital government, the police and almost every other interest you can think of are manoeuvring for more money – almost always supported by its relevant Conservative Ministers.

This push for spending in almost every area goes along with a (laudable) unwillingness among politicians to raise taxes from their current level – one which is, after all, at its third-highest point since the Second World War. The result will be an indefinite continuation of the deficit until the next financial crisis rolls around. This is depressing. However, the coming review can at least start to put in place the long-term reforms that Britain so desperately needs by reviewing how government operates.

Government is still both inefficient and insufficient

‘Austerity’ (and, let’s face it, running a deficit for over a decade is not really ‘austerity’ in any meaningful sense) has failed. In part, that is because it was always the wrong goal. ‘Austerity’ implies suffering, and that spending more is ‘luxury’ – and who would not prefer luxury to austerity? But spending more is not a good thing in itself; nor is spending less always bad.

What was always necessary was reform – so that the burden on taxpayers could be reduced and outcomes for government programmes improved. A CEO is not automatically praised for hiring more people or expanding wage bills. An entrepreneur who agreed to start paying more to suppliers for no discernible reason would be rightly seen as mad. But there is no magic divide between public and private. Doing more with less or the same is always the secret to economic growth.

Often, increasing spending diminishes public sector productivity. Take the NHS. The CPS has done some basic analysis of ONS data that relates to the NHS and, broadly speaking, when spending goes up, productivity tends to decline –  with a strong negative correlation between the two. Obviously, the NHS needs to see some increases in spending each year, but the most important thing is that the NHS becomes more productive, not the rate of increase.

If the NHS saw a three per cent funding increase every year for a decade, but achieved the productivity growth of the five best years from the past 20, it would see ‘output’ go up by 73 per cent, whereas the same funding settlement, with the productivity growth of the five worst years from the past 20 would lead to ‘output’ going up by 20 per cent. ‘Output’ sounds dry but, to take just two examples, it is equal to four million extra cancer treatments or the work of 159,000 nurses. This would mean people treated, lives saved, and families kept together. Those who oppose reform should not be allowed to claim the moral high ground.

Government tries to do too much and often does it badly, while failing to do what it should. Working in government, you can watch a fairly simple policy take months – sometimes years – to grind through, while at the same time fending off attempts to increase government’s powers when it was unable to exercise its existing ones effectively.

This is not just about spending but also issues like immigration

Despite recent criticism and high-profile failings, a poll last week showed that, by three to one, the public support the concept of a hostile environment for illegal migrants. They just want it to be intelligently implemented.

It is not hard to see that elderly people who have a track record of work or NHS treatment, who come from a handful of Carribbean countries that we know saw fairly undocumented migration, who have often lived in the same place for decades, and who have an army of friends (and often family born in the UK) prepared to vouch for them, but who might not have all the required papers, should probably be treated more leniently by the authorities than a recent arrival from the rest of the world with few if any ties to Britain.

The fact is that several billion people live close to Europe and, in an ever-more connected world, can easily see the continent on TV or internet – so the numbers trying to break in will only grow. Enforcing border control is not just an optional extra; it is absolutely necessary for the British state to continue effectively. Yet the civil service machine on immigration, as elsewhere, is less intelligent and effective than it needs to be. A similar problem applies to welfare sanctions. It is implementation, not policy that needs to change.

Politicians need to be made to take responsibility

Civil servants, at all levels, need greater accountability for their actions. There needs to be serious thinking about how the right accountability and incentive structures can be applied, while giving autonomy to achieve the outcomes that the public wants and replacing officials when they fail.

But there is a need for reform even before this. The failure of government begins with failures in the machinery that administers the machinery of Government – the core civil service itself. This must be fixed. Otherwise you lack the tools to reform the public service.

Crucially, politicians are sometimes right to distrust the civil service machine on the ground that it trying to impose its own view (or just minimise its workload). And civil servants are sometimes right to think that their political masters are not properly applying themselves to the task in hand.

The real controversy about the trade expert Shanker Singham’s links to Brexit Ministers, underneath what is largely a concoction of untruths by extremist Remainers, is that Ministers have been using him to do work that they thought officials should be doing, while officials felt he was giving an unrealistic view to their Ministers. Both sides felt (reasonably) aggrieved.

Politicians need to focus on reform. Harry Truman used to have a sign saying ‘the buck stops here’. This is always the case. Politicians ultimately complain about the machine beneath them, but nothing other than their own inertia stops them from reform.

Instead of the current unhappy situation, politicians should have greater power to remove and replace the upper echelons of officialdom. But at some critical junctures, officials should also be able to ask for their advice and political response to be made public – or at least a version the politician feels comfortable with it. There is a need for genuine accountability from both politicians and civil servants for the decisions taken under their watch. Greater institutional memory, multiple teams working on the same area, incentives to hold down spending and improve outcomes are necessary.

As part of the Spending Review next year, there needs to be a serious consideration about how to reform the machinery of government. Thinking about this should start now. Otherwise no matter what spending is announced, we will find Government will ensure that such funding is insufficient, and we will end up wasting money without solving the problems that only Government can.

25 comments for: Alex Morton: Don’t review spending before first reviewing government – and how it doesn’t work

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