As the dust settles on the Pre-Budget Report, one thing is now clearer – the real tough decisions on how to sort out our fiscal mess are going to wait until after the election. What should we think about this?
It was always unrealistic to expect that politicians, from any party, would by themselves face up to the tough decisions six months before an election. A lot of people have been talking recently about how the Canadians successfully sorted out their budget problems in the 1990s. But their pre-election politics was exactly the same – no party put forward concrete plans in their manifestos. Afterwards it was a different matter – within weeks of polling day the markets were eyeing up Canada having just dispatched Mexico. There was no choice but to start making the tough choices.
After the general election, if we get things right, something deeply counter-cultural will happen in the UK. The Treasury may try to convince ministers that they must slash and burn immediately, and produce a ‘made in HMT’ plan to achieve exactly that. Ministers would be wise to think very carefully before acting on such advice. The lessons from abroad are again instructive. The trick is to lock in your direction – the public finances must be sorted – while giving yourself the time to plan properly. Our Canadian friends knew they had to act, but spent nine months very openly engaged in the serious business of coming up with their plan.
You need this space, as we’ve argued in a recent Institute for Government briefing note. Since no-one’s manifesto will go far enough, whoever wins will have to build a new mandate for action. This will mean genuinely involving the public in the problem – which is ‘what do you want to keep?’, rather than ‘what do you want to cut?’ – and figuring out the answers. We have to foster ownership of the detailed plans among the people who are going to have to make them a reality. The only way to do this is to involve those people (not just Whitehall departments, but the professions and local government as well) in the detailed planning. And finally we need to see something we have not witnessed in the UK for a long time – a collective decision by the Cabinet, with all its members signed up to the final plan. Involving the Cabinet, the wider public sector and, heaven forefend, the public in decisions about tax and spend – truly counter-cultural for my former colleagues at the Treasury.
Can we really do this? There are lots of things we can build on. The Darzi review provides a blueprint for involving professions. The momentum generated by Total Place – something the Institute for Government has been actively supporting – is bringing in a strong local dimension. But the sceptics argue that this is no time for taking risks with radical ideas. Play to our strengths – top-down control.
So why do I think these risks are justified? Because of the most important Canadian lesson – they had been failing to sort out their fiscal mess for more than a decade before they got it right. During this time Canada was still making tough decisions but these could not be sustained, as no one could manage to implement them properly, or they rapidly lost the backing of the politicians and the public.
You only get it right on the third attempt – the advice of an old hand in the fiscal consolidation game. We have a pause before the election – we should use that time to figure out how to get it right first time around.
Julian McCrae is a fellow at the Institute for Government and is former deputy director at the Prime Minister’s Strategy Unit. Undertaking a fiscal consolidation – a guide to action is available from the Institute for Government website
