Dennis Hewlett at AccManPro has been seeking to engage me on the issue of government spending. I have been reluctant to respond as he would wish. The reason is simple. He seems willing to promote websites that have a view of government that is, in my opinion, critical and unhelpful.
I do not share that approach, even if Dennis has sought to call my own 'lop-sided'. Since I start from the premise that the market has an essential role within the economy, and that there are great many activities for which it is the obvious or only economic supply mechanism I clearly do not have the biased view of those sites he has sought to reference which appear to only be capable of abusing government and all engaged in its service. The fact that I also believe that government alone is the best, or on occasion the sole able supplier of some other services suggests, I think, that mine is not a lop-sided starting point, but one that is balanced. I hope so. I genuinely feel that the mixed economy works best.
That being the case, I have refused to engage in debate with those who seek to abuse government for one simple reason. I think it extraordinarily unhelpful. It is my experience that quite extraordinary people work for both government and business. And each have their fair share of both dullards and laggards. Inspiration is common to both. And so are mistakes. In fact, it's quite easy to find matching pairs. In the case of the NHS IT system debacle just look at Sainsbury's distribution IT fiasco, which left one of the largest supermarket chains in the UK with massive gaps on its shelves whilst product rotted in warehouses and you'll see the similarities.
As I have explained here before, I find this easy to explain. Large organisations operate almost independently of their ownership structures. As a consequence what is noticeable about the state and large companies private sectors is what they have in common and not what divides them. That is the premise from which I might start any consideration of state spending.
After which I would seek to objectively determine how big the problem being addressed might be. Recent reviews have put varying values on the degree of inefficiency in the UK state sector. The Gershon Review estimated this to be £21 billion. The Conservatives James Review estimated waste to be £35 billion. Some, such as the Taxpayer's Alliance suggest the sum might be £80 billion, but their methodology is so flawed that their work could not be taken seriously by anyone. Including all spending by Quangos as being, by definition wasteful (as they do) really does not result in credible conclusions.
A serious estimate of waste might therefore be in the range £21 - £35 billion. Let's call it £28 billion. In 2006/07 total government spending is estimated to be £552 billion (source: March 2006 Budget Report). That means 5% of government revenue might be saved by judicious reviews of spending by government.
Now let's put this in context. First of all, as almost any procurement specialist will tell you, there's almost no person or company in the UK (or elsewhere) who could not save 5% of their current budget by more judicious management. I've certainly never arrived in a company as a consultant where I have not found that to be possible. So I'd actually suggest government, whilst not being as efficient as it could be (which is, of course, always going to be a statement of fact) is doing pretty well overall on this basis. 95% right is a good score.
Secondly, if I have a choice as to where I think my activity could be focused I can either look at the income or spending sides. With the resources I and my colleagues have available I doubt we can seriously cover both right now. And the losses on the revenue side from the combination of avoidance and evasion are clearly much larger. The VAT gap was, for example, hoped to be no more than 12% in 2005-06. Given the rise in carousel fraud it was probably more. But let's stick with 12%. That means in relation to spending the gap is about £75 billion (£552 billion x 100 / 88 - £552 billion). There are plenty of estimates that put it higher than this.
So which is more important? £28 billion of savings or £75 billion of extra income? Well both are, but if a choice has to be made it's obvious which to go for if you are interested in spreading the burden of taxation fairly and in cutting it for everyone. I'll be sticking to the Revenue side and in the meantime might ask the obvious question, which is why are those on the right emphasising the less important one? What is their agenda in doing so?
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There will always be argument about the numbers Richard – and as I said – they can be 50% adrift and still be relevant. That’s not the point, even though there are plenty of examples that have demonstrated that Gershon for example was miles adrift.
Regardless of whether you think the methodology is flawed or that the political agenda is away from your leanings, I see it is a matter of principle.
Taking your argument to its logical conclusion, does that mean ‘officially noted’ waste and loss would have to be of the same order of magnitude as the Tax and VAT Gaps for you to agree that it is worthy of attention?
You have to ask whether what Gershon and others have estimated is the tip of some iceberg. Take the failure of government departments to recruit appropriately qualified FDs. Take the fact HMRC can’t balance its books. Take the fact that £500 million is regarded as a rounding error in at least one department. To my mind these are all pointers to government that wants to play by a one sided set of rules. That cannot be right and that is what I see practitioners resenting more than anything else.
You and I both know that relatively small amounts of money can have a substantial impact but it seems that in the UK, there is a culture of ‘it’s not our money so bugger it.’ Stuart Jones correctly points out time and again the effect this has on his corner of the country. It doesn’t stop at the waste but the decisions made as a result.
We all spin things to suit our agenda but I’m thinking much more about how complementary agendas can come together for the combined common good. That escapes everyone’s notice when it comes to these debates where the tendency is to concentrate on the politics of the person concerned. In this case I’m only speaking to the issue of tax adminstration – in the interests of justice for all.
Dennis
I\’m not for one minute saying that waste is not important. I\’m saying that faced with scare resources, I think it less important for me to tackle than the issues I am already addressing.
Second, I\’m saying that if the issue is tackled it has to be done objectively. And I don\’t agree with your premise about the attitude of government. Nor do I agree with Stuart\’s premise either.
Of course annoying decisions and errors are made. But berating all people in the public sector for those relatively minor events makes no sense at all if one wants to effect change.
I\’ll stick to effecting change.
Richard
PS As my wife puts it: it\’s odd how no one complains about the NHS when they call her out as a doctor in the middle of the night. At that moment they only have gratitude for a state that provides such a service, free of charge to the end user. In the middle of the night sick people have a sense of proportion. Most of those who are writing the blogs you refer to have not. Which is why I\’m not interested in their opinions.
Richard, I think we agree more than we differ but my attention tends to be focussed on waste because I think I speak more authoritavely on this subect. However, I am more than happy to join with you in the additional income theme by suggesting that the black economy must be dealt with as a matter of urgency.
In Cumbria I see a well paid local authority and quango workforce prospering at the expense of their paymasters – the general public.
Hi
I wasn’t aware that the Taxpayer’s Alliance had said anything quite as radical as all spending by quangos is wasteful. I can’t find this on their site. Could you possibly provide me with a link?
Thanks
Stuart – as I said (sort of) in private comments with Richard – X-billion may be a rounding error in Richard’s eyes but as a ‘man on the ground’ the relatively petty cash amounts to which you have pointed would make a huge difference to the local economy.
I also believe that on principle Stuart and Richard agree. If both can get past the politicking (I’m not pointing fingers please) then the mutual arguments amount to the same thing – justice for all.
IMO.
Thanks for your comments Dennis. The trouble is all these matters are under the control of politicians of one sort or the other (and I mean that in the widest sense possible).
Bishop Hill (whoever you really are, as I suspect this a pseudonym)
Try http://www.taxpayersalliance.com/news/individual_blog.php?post_id=154 and their Bumper Book of Government Waste. Both mention £22 billion of tax wasted on Quangos so I presume they plan to abolish them all.
As an example of unreasoned comment it takes some beating.
Richard
Stuart
I note with interest that the nub of your argument is ‘In Cumbria I see a well paid local authority and quango workforce prospering at the expense of their paymasters – the general public.’
I guess that Cumbria, much of Wales and most of Scotland are the areas of the country where this is true. Around where I am (and it is a reason for living here) those in public and private employment are probably on a par. When, as my wife is, you’re an employer in the public sector it’s good to have staff (like nurses) who can actually afford to live in houses.
Contrast this (and Cumbria’s situation) with London. There public sector staff (like nurses, teachers, dammit head teachers in some cases) live a shadow existence struggling to afford anywhere to live in an economy that simply does not care about them. These people are in relative poverty because of the indifference of that powerful part of the public who drive much of the public agenda – the rich of the City of London who prosper at the expense of their paymasters – the general public.
In other words, I don’t buy your argument that Cumbria is so hard done by. The reality is that Cumbria, like most rural and holiday areas is a tough place to live if you actually want to live there rather then weekend occasionally whilst denying local people property. The result is that with national pay scales locally employed pubic employees look well paid.
But let’s get matters straight. 80% or thereabouts of the local employed staff will be financed by central taxation. In other words, there’s a net real inflow into the Cumbrian economy from these people and the fact that they are relatively well paid wensures they can support all local business and economic activity in the area. That’s deliberate. That’s called regional policy and is designed to make sure that life is not so tough for those who try to run real businesses in the area by denying them a market for what they have to offer.
So sure, some of them might not do a good job (mind you, I thought that of the local tourist board around here until I actually engaged with them from the marketing committee of Ely Cathedral of which I was a member for some time, and then changed my mind). And some will not be as efficient as you would like. And some will share your staff’s ability to knock off at 5. But so what? Without them your economy would be well and truly stuffed.
How do you get round that one?
Richard
Why dont politicans step back and say-Why do we need that spend? Zero based budgeting.?
Why am I intefering in peoples lives unneccessarily? Every year the total tax take keeps increasing is there any justification for this?
Give free money to someone what do they do but spend it and bulld their own empires.
Richard
Thanks for the link.
As far as I can see, the post you have linked to refers to the cost of quangos as being £22bn – not that this is all waste. Perhaps it is in the Bumper Book, which I don’t have.
You say in the body of your piece that the Taxpayers Alliance is saying the figure is £80bn though. Where does this figure come from.
The chap from Burning Our Money was on 18 Doughty Street yesterday. He referred to a European Central Bank report which said the figure is 16% (IIRC) of government spending. This would be in the region of £80bn, so perhaps this is where the figure came from. But you can’t blame the TPA for that, I guess.