HELP!


No, not the Beetles hit, but the flavour of many of the meetings I’ve been attending in recent weeks and will be in the next few weeks.

First was a Guardian ‘roundtable’; this was followed by evidence I was asked to give to the Northern Ireland Assembly Finance Committee; another roundtable, this time organised by Public Finance magazine, last week; this week it is the Public Administration Select Committee in Westminster; and the following week it’s a Demos/PwC seminar.

[BTW: I think I now hold some sort of record, having been called to give evidence in all four assemblies in the UK – NI, Wales, Scotland and Westminster].

I have dubbed these “Help!” sessions because there is a certain air of mild panic about the size of the UK’s annual and cumulative public sector debt, and the assumed need for substantial cuts in public spending to curtail the ballooning deficit.

My first reaction is ‘Don’t Panic’. Yes, the annual deficit is astonishing in peacetime, but then so are the circumstances that produced it. Most of us, faced with a domestic disaster that required urgent remedial action would accept that it had long-term consequences. We can argue about how this particular disaster came about, and who’s to blame, but it happened and if we hadn’t taken action to avoid the worst consequences we would all now be a whole lot worse off than we are.

What is needed is a sensible long-term plan to reduce the annual and cumulative deficit without demolishing important aspects of social provision. It was, after all, the markets that failed, not the provision of collective goods and services.

But don’t hold your breath expecting a sensible debate about how to do this from our politicians. They are into a phoney war over efficiency and bureaucracy bashing, although any objective analysis would show that genuine efficiency improvements can only making a smallish dent in the problem.

The real issues are: first, what are you prepared to stop doing? What services are you prepared to cut, and tell the public honestly that’s what you are doing? Second, what taxes are you prepared to increase?

Any realist will recognise that a combination of efficiency measures, strategic cuts and tax rises are needed to get the deficit problem under control.

But there is a longer-term problem. The size of the deficit – an annual structural deficit of maybe £90bn (15%) and a cumulative deficit of 80-90% of GDP – means that any strategy for deficit reduction would have to cover 10-15 years. This will almost certainly include another recession, or at best another slow-down in economic growth.

Back in the early 1980s Mrs Thatcher’s government stuck to its policy of reducing the deficit, regardless of economic conditions. It certainly worked, but it also accelerated the recession of the early 80s as a consequence. In the next 10 years or so – what will a future British government do?

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About Prof. Colin Talbot

Professor of Government (Emeritus). Universities of Cambridge and Manchester, England.
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