NEWS Keith Boyfield Tim Ambler Liam Ward=Proud
the USA, the BRIC countries and the EU. The size and scope of our government would be better modeled on culturally similar but smaller countries such as Ireland or the Netherlands. The highest tier of the government of any EU country has much the same things to do (policies, laws, regulations, negotiations) irrespective of the size of the population.
Some additional potential savings have not been included in this summary table and should be worth at least another £10bn p.a.: • IT. This has been a continuing area of waste and it seems likely that about five percent of annual IT spending, i.e. £3bn. p.a. at current expenditure levels, is available from better IT management, itself linked to the reduction in central bureaucracy.
• Regulators. The numbers employed by the offices of the regulators grew over the first six years of the Labour administration by 157% and direct costs by 261%. Simply returning regulators to the 1997 headcount would have saved £0.3bn. p.a. in 2003 figures and at least £0.5bn on 2010 figures. The FSA alone is costing £455m this year, an increase of ten per cent while the headcount has risen by over 12% to about 3,500.
• Other regulation. Reducing the general burden and cost of regulation on the private sector. The burden of regulation since 1998 is about £11bn p.a., of which £6bn is the responsibility of the EU. Reducing the UK only regulation, i.e. the gold plate, should add about £2bn to government finances through the tax system.
• Advertising and ineffective projects such as paying for buses to run empty. Government advertising was about £250m in 2008/9. In 1997/98 it was £111m.
• Consultants. One of the Sep/Oct 10
dangers of making payroll cuts is that those made redundant are immediately re-employed at higher rates as consultants. In 2006, the National Audit Office reported “We estimate that spend across the Public Sector increased by 33% between 2003-04 and 2005-06, taking it up to £2.8 billion, largely due to a rise in spending in the National Health Service.”
• Transferring more public servants to areas of high unemployment. A number of departments already have large numbers of staff outside London, e.g. DWP in the North East. We have not been able to quantify the potential for savings under this heading but departments with large numbers of core staff, e.g. the
• Home Office, are prime candidates especially those where the numbers employed need to be reduced.
Some may dismiss the savings from reducing the public sector headcount of as being an insignificant part of total public expenditure. The key point, however, is that pushing through urgently required savings in stemming the remorseless rise of a bloated bureaucracy should have a positive multiplier effect on the economy overall.
Some strategic issues are: • The numbers around the Cabinet table have grown with the years. The Coalition has a particular difficulty in that they need to make space
for the political leadership of not one but two parties. Yet ‘smaller’ government can be delivered by fewer departments and Cabinet members.
• According to the Cabinet Office, on 31st March 2009 there were 766 NDPBs (quangos) of which 192 were executive bodies employing 111,129 staff. The total expenditure of Executive NDPBs was £46bn, the vast proportion of which - £38bn - was borne by government. Few, if any, of these quangos have quantified goals to be met by a determined date, e.g. the FSA. One approach that could be adopted by the Coalition government would be to serve notice on all Executive NDPBs that they will be closed down in one year’s time if they fail to justify their existence, or that of some similar body, in the next nine months. To be re- instated, a five year plan with budgets would be required along with a statement of objectives, what goals will be achieved by the end of the five years and an annual measure of performance. Thereafter sunset clauses would be agreed of suitable length so that each NDPB’s existence could be reconsidered at due intervals.
• UK governments have seen Britain as leading and policing the world. The reality is that we are merely a constituent, and not even the main constituent, of one member of the global triumvirate, namely
• The 27% headcount reduction suggested above, as well as increasing taxpayer value in the short term, would have a huge impact on government pension liabilities and thus increase Taxpayer Value in the longer term.
• Under pressure from newly joined EU members, who wanted to know why “they” should pay for Britain’s rebate, Tony Blair’s administration relinquished this significant refund. The pain is only now beginning to be felt because it was given up on a deferred basis. Britain’s net contribution needs to be re- negotiated.
Shrinking the size of central government is a worthwhile prize in itself as it should reduce meddling, regulation and bureaucratic procedures. Power should be transferred to the front line. Public servants are, by and large, dedicated to doing their best for the taxpayer. They need fewer goals and the minimum of supervision; not a mass of targets and ever- changing rule books. The public deserves better services; this way they will get them.
Tim Ambler and Keith Boyfield are senior fellows of The Adam Smith Institute
Liam Ward-Proud is an intern at The Adam Smith Institute
“Central government’s use of consultants,” NAO, HC 128 Session 2006-2007 | 15 December 2006
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