Does anyone in government actually know how to cut spending?

Andrew Rawnsley has a piece in today’s Observer covering similar themes to my post last week; that whoever wins the next election will have to make savage spending cuts, that it makes no sense to ring-fence the NHS from these cuts and that politicians are terrified of telling the voters these self-evident truths.

He also points out that few MPs in any party have experience of such drastic cuts. Most of today’s leaders have risen to power during the good times. Only Ken Clarke, says Rawnsley,  knows what it is really like to take a hatchet to public services.

The former chancellor knows of what he speaks when he warns his colleagues to steel themselves for a grisly experience. Ken Clarke was a member of the Thatcher government when it came to office in 1979 and simultaneously slashed spending and put up taxes to try to get control over the deficit. The shadow business secretary tells colleagues that Tory ministers had to put up the collars on their coats in the hope that it would make them less recognisable in the street.

The deficit is now soaring towards £1 trillion. Everyone, except, apparently, Gordon Brown, understands that a squeeze on public spending is coming, the like of which has not been seen since Thatcher’s first term. No one now active in the front rank of British politics, with the exception of Ken Clarke, has any concept of the excruciating levels of pain that will be inflicted on spending departments.

But it’s even worse than that. Nowadays many MPs are career politicians. Few of them have worked in business so they have no idea what re-structures and downsizing programmes look like. Most MPs will never have fired anyone in their lives. They have no experience of handling large-scale job cuts, or of the resulting impact on morale and employee relations.

The same is true of the civil servants. As Andrew Rawnsley continues:

Senior Treasury officials whisper that their current Labour masters, their anticipated Tory ones and Whitehall as a whole are all in denial. In fact, even those Treasury officials have yet to get their heads round it. There is no institutional memory within the Treasury about what it is like to have to conduct spending negotiations which impose real cuts on departments. The civil servants are all too young. None of them has ever done it. Nor is there any experience in the rest of Whitehall of how to shrink a budget. They only know how to preside over growth.

He’s bang on there. With a few exceptions, there is no sense of urgency in the public sector about the looming budget deficit. In central government, especially, public spending cuts are discussed in the abstract under Any Other Business. It’s as if people know a spending squeeze will happen but they assume the axe will fall somewhere else. Maybe I have been looking in the wrong places but I have yet to see any public sector organisation actively preparing itself to deliver services with drastically reduced staffing levels. It feels like the phoney war.

If done properly, it is possible to cut costs in an organisation while minimising the impact on the operational functions. If done badly, a cost reduction exercise cuts into muscle, often before it has cut out all the fat. I have a nasty feeling that today’s denial and lack of planning will lead to tomorrow’s spending-cuts fiasco.

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3 Responses to Does anyone in government actually know how to cut spending?

  1. Nick Funnell says:

    “Nowadays many MPs are career politicians.”

    Very true (in fact I’d say ‘most’ rather than ‘many’)- but the bigger problem is that nowadays most civil servants are consultants, just looking to move on to the next lucrative post with no long-term interest in whatever department they’re in. The very worst environment for tough & well-considered choices to be made.

    Check out Ferudi’s analysis in Spiked:

    http://www.spiked-online.com/index.php/site/article/7042/

  2. Pingback: Does anyone in government actually know how to cut spending? » Dig for Leadership - Stories that try to make the world a better place.

  3. Bina says:

    I disagree – most people employed within the public sector know only too well what cost cutting involves. A good proportion of them have to deal with constantly moving goal posts as well. The trouble is league tables and performance indicators are cobbled up measures of ‘worth’ in the public sector and compiling the data uses far more of the resources than the actual work. Yes, real muscle will be cut into and services will be affected but there will still be all that useless data.

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