The think tanks demand big cuts from Darling (but don't expect them)24 March 2010
Ahead of today's Budget the centre right and reformist think tanks have been lining up to offer Alistair Darling advice. Here's a summary of what they're saying.
There is an air of unreality about the tough decisions that are going to be necessary, according to Mark Littlewood of the IEA:
"Politicians are not talking seriously about the need for dramatic and speedy cuts in public expenditure. A few billion here and a few billion there are nowhere near enough to restore market confidence. We can't be expected to make sufficient savings from so-called efficiency gains; there will need to be major cuts to a whole raft of public services. We also need a radical overhaul of our welfare, education and health systems, to ensure that we don't suffer as easily in future from the sort of reckless and out-of-control spending that has characterised the last few years."
Eamonn Butler at the Adam Smith Institute agrees that spending needs to be cut:
"Public expenditure has increased by a third since 1997 - and has all that bought us anything worthwhile? We need nothing less than a complete re-think of what government exists for, and which parts of it we want to keep and even expand. But there is room for very large savings in departments, quangos and programmes that have simply grown, but which deliver little of value."
Andrew Haldenby of Reform has identified the measures being taken by other very indebted nations as examples of what the UK will eventually need to do:
- Portugal is means-testing more benefits and cutting the costs of the public sector workforce by 1 per cent of GDP.
- Ireland is cutting the costs of the public sector workforce through reductions in both pay (an average 7 per cent cut for all public servants) and headcount and reforming public sector pensions.
- Greece is cutting the costs of the public sector workforce through reductions in both pay (a 10 per cent cut in total public sector pay), reductions in full time civil service headcount through natural wastage and cuts in short term contracts.
- Spain is cutting the costs of the public sector workforce by 2 per cent of GDP through a pay freeze and reductions in headcount through natural wastage and cuts in short term contracts.
He goes on to identify three main tasks for the Chancellor:
- The first is to eliminate the structural deficit in the UK public finances and return them to surplus.
- The second is to secure economic growth and employment so that the cyclical part of the deficit is eliminated as well.
- The third is to reform the UK public sector so that it achieves greater productivity even after the deficit is eliminated, allowing taxes to be reduced.
Matt Sinclair of The TaxPayers' Alliance reminds us of the £50bn list of cuts that the TPA produced with the Institute of Directors.
Yesterday we noted Policy Exchange's pre-budget report and its warning against higher National Insurance Contributions and also higher VAT.
In its advice to the Chancellor the CPS emphasised a bold measures to accelerate economic growth.