Looking for cuts in all the wrong places

Surprisingly, we didn’t see the real extent of the coalition’s plans for budget reduction during the budget.  In fact it’s been an ongoing series of small announcements that has shown the full extent of the cuts that they propose.

Much has been written (And very well written) in other places regarding whether these cuts are even necessary, and at base many of them have a point.  It is ideological from the Tory side to reduce the size of the state and favour the private sector.  My problem is that this ideological crusade for “Small state” is blinkering them to better ways at promoting recovery and saving money.
I’m going to try and stay off the “Evil Tory” narrative and portray this purely as how I see it, bearing in mind that I’m an engineer not an economist.

During the election campaign Cameron talked about reducing council wastage, seemingly a war on glossy leaflets and expensive police cars.  (The police car story in question was pretty well debunked) At the time I wondered if there were really enough savings in this area to hack chunks out of the deficit.  Now, I understand every little helps, but, like the police car story I think much of this has been based on a perception of reality rather than reality, namely that councils are full of jobsworths who haemorrhage money in pointless projects.  No where is this clearer than in Eric Pickles recent idiotic crusade against “Unnecessary” road signs.  There he was, on BBC breakfast wondering around London pointing at signs asking “Why is that there” or declaring “That’s totally pointless”.  As I said previously, I’m an engineer not an economist, and so as an engineer who has studied highway engineering I can tell Mr Pickles that the road signs are there for one of two reasons, first, and by far the most prominent will be because the signs presence is stated in the Design manual for Roads and Bridges, which states, amongst many other things, what signs must be placed where and at what intervals.  As the representative of the council said on the same BBC breakfast news, if a sign warning of a speed limit or parking restriction isn’t where it is legally prescribed then enforcement of any charges there is impossible. 

The second reason is that there has been a reported need for such signage, this could be questioned but is quite often borne out of accident black spots, say a one way street which is hard to identify, may well have increased signage.  The only other signs are ones directing you to places.  Now here’s a wee contrast.  Drive through Glasgow, particularly the south side, not many road signs; now try to find the M8, The science centre or the Burrel collection.  All are badly signposted with some roundabouts being completely unsigned.  Compare this with Dundee, loads of sign posts but finding your way around is easy as signs are placed in advance of turnoffs allowing you to find lanes etc.  I did laugh when the council official challenged Eric Pickles to take a trip around his borough with a camera crew and point out what signs he thought were surplus to requirements and the council official would explain why it was there.  Sadly I fear that uninformed blowhards making opinionated judgements will be a sad hallmark of the coalition’s cuts.
The second place where “Wastage” will be cut from the public sector is in staff.  This is based around the narrative that public services are filled to the gunnels with “non Jobs” and that this was a handy way for Labour to appear to reduce unemployment figures.  This approach has two problems.
First, assuming that the staff cuts are these non-jobs, and I accept some of these do exist, although like the savings Cameron said he could get from glossy leaflets I suspect far fewer than are needed to make the numbers talked about, the government is going to be paying these people one way or another, they might as well be recouping some of the money as tax, be it income, NI, VAT or any other tax.  Cutting their jobs means you pay less, but both government and the private sector get less out of them in the long run.  Still at least this one I would concede is arguable and depends on your opinion.

When asked about cuts it is always stated to come from wasteful “Backroom” posts, to you or me this means, admin.  I’ve previously posted on how underappreciated admin staff are, and this is the same thing writ large.  The Coalition is sadly filled with managers, they’ve never done admin, and they don’t understand it or indeed see the point of it.  Whenever admin is being cut anywhere what you have to remember is it needs to be done.  An administrator will do it efficiently, sack the administrator and suddenly doctors, engineers, managers and everyone else has to cover that work.  It means either record keeping becomes sloppy, and this can have serious consequences, or that the people covering admin have less time to do their actual job.  Either work falls behind causing problems or more expensive professionals have to be hired to balance the workload of a relatively cheap administrator.

The third is the daily mail favourite, Benefit fraudsters.  Yes the damnable scroungers who take from taxpayers like you and me to buy their big tellies and tasteless trainers.  Now I’m not a fan of benefit fraudsters, ideally I would like to see them all stopped, but is it really as big a problem as something like Tax evasion.  Well, financially speaking benefit fraud costs us around 1.6bn, quite a bit (I won’t go into the 5bn odd bandied about which actually lumped in errors) tax evasion, and this is evasion rather than all the people doing perfectly legal avoidance, is worth 15bn in unpaid taxes.  So, if you were looking for some quick cash and wanted a group to pursue, which would you pick.  I don’t buy the argument that tax evaders are harder to catch; the actual hardcore fraudsters are every bit as skilled as the accountants working for tax evaders.  I would guess that going after “Scroungers” is a good headline grabber when in reality all that will happen is more difficulty and pressure on legitimate claimants, after all they provide details and so are the easy target.  In fact they recently told the FT that they should be less black and white on tax evasion, could you imagine the uproar if someone said that about benefit fraud.  It would definitely be a better use of scarce resources to go after tax evaders and closing tax avoidance loopholes.  I did like some of the suggestions on the spending challenge website.  These included anyone involved in UK politics or the running of the country must be a taxpayer, and anyone running any news media in the UK must also be a taxpayer.  Can’t see why either of these would be unpopular with the public so I expect to see these go ahead soon, unless Mr Osborne can come up with a reason why not.

The final miss-step I will look at is the seemingly ever-present thought that farming things out to the private sector will always save money.  This is one of the places where the Tory Private Sector good, public bad dogma rears its ugly head.  They won’t consider, despite the evidence to the contrary, that privatisation is not always the answer.  At a basic level it seems simple; you pay a company to undertake running a utility or service at an agreed cost.  The up side is that the company may well already have staff on its payroll and an admin department to save the trouble of running one yourself.  Also, private companies have to make a profit and so will run at maximum efficiency.  This assumes that public run organisations can not run efficiently because of the lack of a profit motive.  While I would agree that many don’t I reject this.  There is no reason why a non profit public utility can’t run as efficiently as a profit chasing company.  Particularly undertaking public services.

Second problem, regulation.  If you take anything out of public ownership it requires independent regulators (Public run organisations are regulated by govt departments) which equals expensive Quangos.  Sadly this is directly tied to the profit motive mentioned earlier.  Regulators are required to ensure private firms provide the contracted services to the agreed standard.  Without regulation the government would be faced with constantly pursuing companies for breach of contract, and anyone following the Edinburgh trams farce can see how easy that is.  Or indeed, to take the example of the East Coast train provider Stagecoach, there came a point where the fines for reneging on their contract were less than the losses they were incurring on running the service.  This was in a regulated industry and net result was government having to take back control, effectively paying for the running of East Coast trains twice.  I suspect that the same thing will happen when Connaught finally fail.

I hope this hasn’t come across as Tory bashing; my problem is that the coalition is trying to solve a huge problem by only considering the world through their narrow ideology.  It is blinding them to other solutions and that can only be a bad thing.  It’s never good whey party dogma interferes with dealing with a problem.  George Osborne has recently said that he wants to see £4 public sector cuts for every £1 tax rise and what occurred to me is that he wouldn’t even consider that the other way around.