Merryn's Blog

How to cut £70bn out of the UK's public spending bill

With an economy incapable of producing growth, the only way out of this mess is by making real cuts to public spending. But where to start? Here are a few ideas.

I've covered research from Tullett Prebon here before but, their Tim Morgan has now produced all three parts of what he calls the 'Reform Trilogy'.

It is impressive stuff so much so, that when I was interviewed for Panorama last week almost everything I said could be traced in one way or another back to their work.

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The first part of the trilogy explained why it is that our economy as it stands is not capable of delivering growth. It suggested that the way to go might be with a core strategy of cutting spending and handing cash back to working people and businesses via tax cuts.

The second went into considerable detail on how "reversing a large part of the last decade's vast increase in public spending need not harm the public services, front line public sector workers, or those in genuine need."

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It asked how much government the UK can really afford. It asked where given the recent 50% real rise in public spending in the UK all the money has gone and whether it really needed to go there.

The Brown Bonanza showered money all over the place. In real terms, healthcare spending rose 89%, transport rose 87%, education went up 60% while welfare spending rose 45%.

Some of that money is surely well spent, but does it really make sense for the number of managers in the NHS to have risen by 77% when the number of nurses is only up by 23%? And should real term procurement costs in the NHS really have risen by 80% over 10 years?

Probably not. The last ten years have been a story of rising spending, but also of rising costs and falling productivity. You can read the full report on thishere, but the key point Dr Morgan makes is that much of the rise in costs has been down to the nonsense of attempting to introduce private sector competition into organisations in which there is no place for it.

It made sense to privatise BA in the Thatcher years, but not to attempt to introduce "pseudo competition and spurious choice" into the NHS. It worked better as a command structure than as a series of hospital and primary care trusts. Instead of increasing efficiency it has simply produced layers of expensive administration.

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Undoing it all could save billions (£10bn from dumping the managers and £30bn-40bn from savings in procurement).

Add that to means testing for currently universal benefits; some tightening of eligibility for benefits; a cap on the total amount of benefit any one claimant can get to around £20,000; and the savings here, says Dr Morgan, could be another £12bn.

His total saving? £70bn. Any other ideas to add to the total below please.

The final part of the trilogy focuses on how to hand these huge savings back to ordinary and increasingly impoverished working people the ones that all our parties say they so want to help. It is here and, like the other parts, worth reading.

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