Here is (what should be) the news

November 12, 2012 by
Filed under: Credit crunch, Politics, Public policy 


As the BBC enters into a tragic process of self-immolation (which seems even to include BBC journalists using their on-line spaces to fight office politics), I offer today’s column for those who find it all either too depressing or too trivial.

Instead I want to focus on a powerful report published jointly today by the Social Market Foundation and the RSA. Given the importance of the research’s conclusions, I predict with total confidence that its contents are more important to you than the question of George Entwistle’s payoff.

The SMF undertook the calculations and analysis that make up the first part of ‘Fiscal Fallout’. It identifies a combination of factors which create a much bigger fiscal hole to be filled than is suggested by current Government figures. First, in the small print of the March budget it had already been recognised that, for the Government to deliver on its fiscal mandate, an additional £26 billion in new cuts would be required. Second, the continued sluggishness of the economy has made that gap bigger. Third, although this point is hotly contested among economists, the model used by the Office for Budgetary Responsibility now suggests that the output gap (which separates the current size of the economy from the size it could be on a sustainable path of growth) is lower than previously thought, which means the structural deficit is bigger than previously estimated.

Putting these factors together the SMF predicts the Government will need to set out an additional £48 billion in cuts. If these new cuts were evenly distributed it would mean a lot of pain, but if education, health and international development continued to be protected, the cuts in the rest of Whitehall would be truly unprecedented; between a third and a half of all spending.

The team in the RSA’s 2020 Public Service Hub wrote the second part of the report. Its key point manages both to be radical and, on a moment’s reflection, obvious. If the fiscal situation is anything like as dire as this we surely need a strategy which brings together the three key areas of domestic policy: economic growth, fiscal policy and the management of public services. Yet, despite the scale and urgency of the challenge, not only are these areas not joined up but there seems to be no sense in Government that they should be.

In essence the report calls for a policy of radical devolution to cities and city regions (to an extent reinforcing aspects of the analysis of the Heseltine Review). It is more likely at this level that better collaboration can be achieved, enabling not just efficiency savings but moving budgets from response to prevention. It is at this level that the links between public services, economic potential and civic capacity can be better understood and exploited in order to boost what the RSA terms ‘social productivity’. Also, public consent for, and engagement in, the kind of radical reconfiguration of services and entitlements needed is also more likely to be garnered in cities than across the whole nation.  Of course, a lot depends on the quality of local leadership but our experience here at the RSA is that many local leaders think and act in strategic, holistic ways far beyond the imagination and capacity of Whitehall civil servants.

Reading the RSA/SMF report has enabled me to put my finger on the ambivalence I feel about a whole range of government polices – such as free schools and police commissioners – which I don’t actively oppose but which also feel somehow misguided. The answer is that the scope and credible impact of these policies is utterly out of proportion to the strategic challenge government now faces. The leader of any organisation facing Whitehall’s scale of crisis would deal ruthlessly with ideas which did not seem powerfully relevant to core strategic needs. But instead it seems that Number Ten seems positively to encourage these irrelevancies, perhaps in the hope they will distract people.

As I have been arguing since even before the credit crunch, government at all levels has to help us, the public, address a capacity gap in society between our collective aspirations and the course on which current attitudes, expectations and behaviours have set us. This is a difficult message and for people to appreciate it they need to hear it again and again, and to see Government being both radical and focused in realigning its own activities and operating systems towards closing that gap. We are half way through this Government’s term of office but we are a million miles from anything even approaching such clarity of mission, purpose and operation (nor, by the way, is there much in the Opposition’s message to show they have grasped the scale of what lies ahead) .

As the ship approached the rocks the crew could be overheard playing charades in the officers’ mess.

Share

Comments

  • Robert Burns

    Matthew,

    I’m not suprised that there aren’t any other responses to this posting.

    The idea that the aspiring Middle Class may have to face up to the fact that the practice of paying them more than they are worth must stop is psychologically and, therefore, politically indigestible.

    My doubts and criticisms of your ideas on decentralisation still stand.

    How will any of the ‘schemes’ and ‘projects’ that get so talked up on this blog deflate the property price bubble that has smothered the small and medium goods and services economy?

    How will any of the ‘schemes’ and ‘projects’ that get so talked up on this blog reverse the trend of exporting jobs that generate the inflowing foreign exchange that actually pays for everything?

    You don’t have any more answers than the people whose behaviour you’re now criticising

  • http://flipchartfairytales.wordpress.com/ Rick

    Great piece Matthew. Agree with most of what you said, especially the bit about government tinkering.

    What did you mean here?

    “government at all levels has to help us, the public, address a capacity gap in society between our collective aspirations and the course on which current attitudes, expectations and behaviours have set us.”

    I presume you are talking about the gap between people’s expectations of public services and their willingness to pay taxes.

  • Pingback: Fiscal Fallout: £48bn extra cuts by 2018 | Flip Chart Fairy Tales()