ShareShare on LinkedIn

Cutting Remarks - November 2010

 

Public service cuts will be “really tough” and “ugly” and Scotland’s politicians will need to pull together in the face of the reductions, the Auditor General for Scotland warned last night. Robert Black, who oversees public spending in Scotland, said cutting public expenditure was like taking a car “from fifth gear to reverse”.


Speaking about how well prepared Scotland was for the cuts, he said: “It’s never too late to start but I do wish that perhaps a few years ago all of us in Scottish society thought more seriously about where we were going as a society with the public services. It’s too big an issue to be seen as a purely party political issue.” The Scotsman, 30th September 2010

By the time you read this, the date of October 20th, 2010 will have come and gone and we will know the scale of the UK government’s plans to cut public expenditure, as well as the consequential impact on Scotland. We’ve been softened up to expect the worst for a while now, certainly since the May election, so what actually comes out of the comprehensive spending review is  likely to be either ‘as expected’ or ‘better than expected’. If the coalition government were to deliver cuts that were ‘worse than expected’ they should expect a tough time in the media. The coalition government was clearly testing the waters with the announcement of the cuts to ‘family allowance’ during the Tory conference.

Of course, all opposition parties in Scotland, will seek to make as much political capital as possible from the pain inflicted by Westminster. The plea from Robert Black that we all have to pull together is (on past evidence) likely to fall on deaf ears. This close to next year’s Holyrood elections, the political parties in Scotland are likely to want to use the cuts to position themselves to advantage on the starting line. The announcement could well fire the starting gun for the election, and if so, most of us will be fed up with it by next May.

Taking my cue from Robert Black’s request that we “thought more seriously about where we were going as a society with the public services”, here’s my ten penn’orth for what it’s worth.

Change the trend.
Firstly, the threat of cuts has exposed the dependence of Scotland as a whole on the public sector, which stands at well over 50% of GVA. Here in the North-east we are sheltered from this, as our regional economy has a very different structure, with far more than 50% of GVA generated by the private sector. The main challenge will be to get short-term expenditure habits contained, and then shifted to delivering a better-balanced economy over a generation. It would be much better to achieve this by growing the private sector over time and containing the public sector, rather than cutting the public sector too far and too fast. Do we have the luxury of the time and space to do this, and where can we find the leaders with the strength to follow through?

Stop spending more.
Secondly, in part as a result of the phenomenon of ‘career’ politicians in all parties, many of our potential political leaders have no or little experience of real commercial life. This tends to deliver with solid skills in controlling an expenditure budget, but little experience of the income side of the national equation. It is time that politicians and senior civil servants made every penny a prisoner, and stopped automatically increasing expenditure without reviewing what is already being spent. If they keep adding to the burden on business, dependence on the public sector will grow to unsustainable levels and the economy could implode. As Dennis Healey said, “when you’re in a hole, stop digging”. Even more importantly this is not a time to increase fees and charges. These are costs to everyone else.

Credit where it’s due.
Everyone knows tales of waste in the public sector, but they will be less aware of the many clever and effective initiatives undertaken by the best public sector organisations, and we have many examples of this in the North-east. As a result of the unfairly low levels of funding to the region, our public bodies are used to making do, and therefore have plenty of experience in managing challenge. We should all support them to cut as carefully and cleverly as possible to avoid making matters worse.

Cut the right things.
Keeping the ‘need to’s’ and cutting the ‘nice to’s’ is a phrase that makes it sound very easy, but it is not. As a society have we grown too used to getting support for things that should be our personal responsibility? Many believe so, and over time, cutting these areas could breed self-reliance, resilience and initiative. Three characteristics of the North-east which make us better able to deal with the challenges thrown at us.

One thing is clear – to be able to re-balance the economy we need to keep the investment in infrastructure and business-support which will be critical to growing the private sector which in turn will deliver sustainable jobs and economic success.

This time round, as Robert Black says, we’re all in this together.