Boiler makers and bingo players enjoyed Alistair Darling’s third, and probably last, Pre-Budget Report this week. Bankers and public sector ‘bureaucrats’ were less impressed.
More than ever, the politics took precedence over the economics. It was important to bash the bankers and send out a signal to apparently well paid and well pensioned public servants.
So the senior civil service faces a pay bill reduction of £100m within three years, government contributions to public pensions will be cut by £1bn a year from 2012 and pay rises across the sector will be capped at 1% for two years from 2011.
Of course, the consequent savings will be a drop in the ocean compared with this year’s expected deficit of £178bn. Darling did offer some additional efficiencies, but there is still a mountain to climb.
With funding protected for hospitals, schools and the police, other public services will inevitably suffer. A report published this week by CIPFA and council chief executives’ body Solace suggested that individual services could face annual cuts of up to 10%.
Darling was at pains to show that the deficit will be tackled. On the day of the PBR, he published the Fiscal Responsibility Bill, which commits the government to halving the borrowing requirement over four years.
And yet there were no detailed plans in the PBR on how this will be achieved. The chancellor also explicitly ruled out a Comprehensive Spending Review this side of the election.
The pain might be delayed, but it is surely coming. And, as Tony Travers writes in 'A decade in denial', now more than ever, we need to face the facts.
It’s important that the right cuts are made and not just the easy cuts. The CIPFA/Solace paper argues sensibly that the political parties must publish proposals for spending reduction in their election manifestos.
Where deep cuts are necessary, it’s best to make those difficult decisions at a local level having regard to particular circumstances.
A step in the right direction is the launch of the Oneplace inspection website, which potentially puts more power in the hands of local service users and voters (see our news analysis, 'Inspectors online: the new watchdog regime'.)
If politicians want to devolve power to the people, then they need to provide them with the tools to do the job.
Mike Thatcher is the editor of Public Finance
