By Elliot Keck, investigations campaign manager
Ahead of the bread and circuses of the spring statement, the chancellor announced a new efficiency drive. The Efficiency and Value for Money Committee - which he will chair and which will be specially tasked with rooting out wasteful spending - apparently meets for the first time this week.
In the context of a disappointing spring statement, which we described as “taking with one hand to give away with the other”, the announcement of this new Committee could prove significant. The chancellor used plenty of tax-cutting rhetoric on Wednesday, but many of his headline policies were smoke and mirrors for a relentless rise in the tax burden, now at a 70 year high. The truth is that high spending continues to drive rising tax rates. Given the extraordinary levels of spending during the covid pandemic, getting a grip on government waste is one of the biggest challenges for ministers who want to cut taxes.
Yet the statement was light on spending control. There were some welcome realities acknowledged in the small print, namely that higher inflation will check departmental budgets which were set in cash terms in October's spending review. The plans also implied public sector pay restraint. But more will need to be done, not least on the key issues of public service delivery and workforce.
The chief secretary, Simon Clarke, spoke to the Institute of Economic Affairs on Tuesday to put meat on the bones. He offered positive rhetoric, but added little concrete detail on how to achieve a smaller state. Clarke spoke of a “quiet revolution underway at HM Treasury and beyond to improve how we spend every penny of taxpayers’ money.” He made welcome announcements on combating fraud and (re)addressing ballooning exit payments to public sector workers. Requiring a “commensurate reduction in headcount” in departments hiring contractors is sensible.
Now all eyes though will be on the Committee to see substantive proposals for reform. It’s encouraging that Rishi Sunak himself is fronting the effort. As George Osborne found out, cutting spending doesn’t make you many friends. The chancellor has enjoyed a media honeymoon by indulging his boss’ instincts to spend, spend, spend. He has overseen debt reaching 95 per cent of GDP, the largest it’s been since 1962-63. Rishi will now have to be serious about getting Boris’ fiscal agenda back on the straight and narrow, and prepare to become unpopular in the process.
It’ll be no easy task. But there are plenty of savings available which are both good for taxpayers and the Committee’s credibility with Tory colleagues.
An obvious example is quangos. The upcoming Arm’s-Length Body review, noted by Simon Clarke in his speech, will be their first foray and they shouldn’t hold back. The treasury press release suggests:
The Arm’s Length Body Review will see savings come from better use of property, reduced reliance on consultants, increased digitisation and greater use of shared services, as well as the use of benchmarking to drive efficiencies.
All well and good - but unlikely to send much of a signal to Whitehall. The savings are estimated to amount to around £800m. According to the Cabinet Office, there were 295 quangos as of March 2020, employing nearly 319,000 officials at a cost of almost £224bn. These reforms, welcome as they would be, are a drop in the ocean. What is needed are bold, simple policies which change the underlying assumptions for Britain’s ever-growing and all-powerful quangocracy. Such as a sunset clause.
There are other options too. The NHS savings target is set to double to 2.2% a year - or £4.75bn over the next three years. That’s to be welcomed. But according to NHS England accounts 2020-21, the salary bill is £50.5bn - meaning a 3 per cent rise over those three years would cost around £4.69bn, immediately wiping out any savings. In this context, savings to the NHS wage bill would be understandable. Rishi could reduce the headcount of highly paid managers, divest trusts of diversity managers or even take any potential pay rises from generous pension arrangements.
All of these things might not go down well with the endless-spenders (including at No 10 Downing Street), but they would mark out Rishi as meaning business as a fiscal conservative.
So the Efficiency and Value for Money Committee shouldn’t pull its punches. The announcement that £3.4 billion was saved in 2020/21 (through cutting losses from fraud and debt, improved buying decisions and a more effective use of digital services) is a strong start. But if the chancellor and co want to cut taxes properly - deliver on the promise of the spring statement and go further - then savings must be deep, ambitious and meaningful. And the TaxPayers’ Alliance has plenty of ideas!