There is one small consolation for Gordon Brown if, as is now widely predicted, he is no longer Prime Minister after May 6th. This comes in the form of the widely reported remarks attributed to the Governor of the Bank of England, Mervyn King, that whoever wins the next election will be “stuffed” by the electorate when they are up for re-election because of the massive cutbacks that will have been made in the public services. In other words, whoever gets in will have to sort out the mess and take the rap for the very painful austerity that is to come.
None of the political parties vying for office at this election have been really honest with us about the extent to which cuts in public spending will have to be made and what that means in real terms for front-line services. Probably the most honest politician in the whole campaign has been the Chancellor, Alistair Darling. He has stated openly that the cuts to come will be far worse than those under Mrs. Thatcher in the 80s’. Darling has form in this area. At the beginning of the current recession when Gordon Brown and other Government ministers were claiming that it would be short-lived and not too severe, Darling was candidly declaring it would be the longest and severest economic downturn since the 1930s. And he was right despite having the “hounds from hell” unleashed on him by Downing Street. So I would be fairly confident that the Chancellor is an authoritative source for telling it as it is about to be.
Though the figures vary by a couple of billion pounds here and there, the government’s total debt amounts to nearly £180 billion; the cost of bailing out the banks, saving the financial sector as a whole and rescuing the UK economy. In addition, there are the sustained costs of the massive expansion in public expenditure from the early years of the last decade. Mr Brown’s much vaunted reputation for ‘prudence’ and financial rectitude really stems from Labour’s first term in office. Thereafter, spending rose significantly in every year until the recession hit. The belief was that continued economic growth would provide the tax receipts to maintain increased expenditure in the economy, which in turn, in classic Keynesian fashion, would stimulate the economy. Led by a dynamic private sector, in particular the finance and service sectors, this sustained growth would result in a further increase in tax receipts engendering more growth in the economy and so on in a continuing virtuous circle. Brown and his cohorts deluded themselves as the economy boomed for much of the last decade that they had transcended the economic cycle of boom-and-bust which had bedevilled capitalist economies from the onset of the industrial revolution. Even the continuing decline of Britain’s manufacturing industry was regarded with equanimity, almost with disdain as a necessary price to pay for continued growth.
The recession has put paid to the delusion of virtuous and sustained economic growth and highlighted how shallow and exposed an economy based largely on selling financial services and encouraging debt really is. Now the bill for all this is well and truly in the post. The question now is who is best to administer the sharp pain and adjustments that are required to get us out of this mess and with the least amount of long-term damage?
There are a number of ways the massive public debt burden can be cut back, none of which will be pleasant. Taxes can be raised such as the government’s proposal to raise national insurance for both employers and employees from next year. Or indirect taxes such as VAT or duties on alcohol, tobacco or fuel could be increased as the Tories and Lib-Dems seem to be hinting at. One thing is certain, any suggestions for redistributing income by imposing severe taxes on the rich are firmly off the agenda at this election.
Another way to pare back the debt would be to cut benefits. Welfare payments are the single biggest item of government spending. Over the past 15 years the numbers of people in receipt of such benefits as Disabled Living Allowance have increased markedly and this and similar benefits would be a likely target.
The size of the public payroll will come into focus. In Scotland 25% of the workforce are employed in the public sector, while in some parts of the country such as Ayrshire that figure rises to nearly 60%. If you allow for the fact that one job in the public sector probably supports two-or-three in the private and voluntary sectors, then the actual numbers of people dependent on the public sector can be increased by a factor of at least two. Cutting the number of people in the public sector could have tremendous consequences in parts of the UK outside the south-east (and even here, such as in parts of the London boroughs there are enclaves of public sector dependency approaching that of Scotland). Not only would this impact severely on local communities, but the quality of public services would inevitably deteriorate with less people to deliver them. Another option likely to be deployed here will be to freeze public sector pay and change the (comparatively) generous terms and conditions for public sector employees including sick pay and pension arrangements. The public sector is probably the last bastion of strong trade unions and they will resist such changes vigorously; expect a full-scale assault on those unions.
There may even be direct cutbacks in public services. Thus far all three parties have maintained steadfastly that services such as health, social care, education, police, criminal justice and the armed forces are sacrosanct. However, more objective bodies such as the Institute for Fiscal Studies and the Audit Commission in Scotland have warned that the level of public services in all the aforementioned areas cannot be sustained at their present levels; some cutbacks in these services will be unavoidable.
One way to try to get round this and a possible fifth option is the stealth tactic of continuing the momentum of privatisation. More and more central and local government services will be outsourced or directly privatised. This, from the perspective of central government and local authorities, has the twin benefits of keeping services going in some form while cutting back on spending. The tendency will undoubtedly continue whereby the public sector is reduced to a small cluster of bedrock core services with an oversight or contractual remit over vast swathes of services it formerly ran in-house.
These then are the most likely options facing any of the political parties who ascend to office after May 6th in dealing with the public sector debt mountain. Superficially, there would appear to be major differences between the parties over how to proceed with this. But on closer inspection, these differences are more of emphasis, even of nuance, than of substance. Labour will somehow cutback slowly and not deflate the economy savagely while safeguarding public services. The Conservatives place the emphasis on the role of voluntary services and the private sector in taking up the burden of providing public services, but the details of this beyond a vague populism and much talk of ‘efficiencies’ remain hazy while the dangers of a collapse in the quality of services and the abandonment of entire areas of public service provision have not been addressed. The Liberal-Democrats, for their part, mention targeted change and adopt the time-honoured position of a half-way house between the other two parties.
The simple fact is all of the parties are being disingenuous about how they would deal with the debt. The brute reality is that all three will have to adopt a mixture of tax rises, benefit cuts, redundancies and pay freezes in the public sector, cutbacks in front-line services and increasing the scope and level of privatisation to an even greater extent than hitherto. However, none of the parties are prepared to spell this out in case the electorate reject them, or having rumbled the fact that all three at the end of the day will end up doing roughly the same course of action (with the Tories putting more emphasis on privatisation and the voluntary sector) they will disengage from the electoral process in their droves. It is easy now to see, against this background, how the Governor of the Bank of England, can talk of the poisoned chalice awaiting the victor on the morning after the election.
To get a view on how close the three main parties’ policies are it is useful to look at what is not being considered and what the electorate are not being given a choice on. For, beyond all the likely targets for cuts or tax increases that have been mentioned so far is a sixth option.
Since 1997 a whole raft of legislation has been enacted either through the medium of British or European laws and Directives or Regulations. This has produced a level of intrusion and direction into both public and private life unprecedented outwith wartime. Laws and regulation on health and safety, employment, anti-discrimination, equalities and diversities and areas of social care such as child protection, while all individually well intentioned, cumulatively place a colossal burden on organisations particularly in the public and voluntary sectors, but also impacts on the private sector. This legislative burden places massive costs on every organisation operating in the UK.
Often the legislation is mutually contradictory, almost schizophrenic, what I have described elsewhere as being ‘bi-polar’: i.e. trying to pursue two inherently conflicting aims or ends simultaneously. Organisations find themselves having to negotiate a virtual minefield in this context and it becomes extremely difficult not to transgress the plethora of rules and regulations out there. Finally, such a legislative burden severely impacts on risk taking and initiative and organisations and the individuals within them become reduced to tick-box, risk averse entities.
There are two further manifestations of this. One is the obsession with targets and performance indicators which is especially predominant in the public sector. The other is the enforcement of all the rules, regulations, procedures and directives by a huge regulatory apparatus. Britain has become a huge quangorcacy where a myriad of unelected and often unaccountable quangos impose themselves on both public and private life. For organisations having to comply with this bureaucratic burden means adding whole layers of management and administration to ensure that polices and procedures are being monitored and adhered to and that targets are being met ; this is particularly marked in health, education and the police but its impacts and effects are pervasive.
This attempt to create a society by legislative and bureaucratic fiat free of any vestige of discrimination, inequality and risk, while leaving its core foundations intact as a private market economy with massive levels of social and economic inequality just doesn’t add up. A product of a unique period in British and western politics, from the mid-1990s until the recession hit in 2007/08, when left/liberal values prevailed in the social, cultural and political spheres while right-wing free market values dominated the economic sphere, the recession has seen the basis of this cohabitation collapse. The new politics and resultant policies which will arise have yet to be articulated and all the mainstream political parties, in spite of all their apparent differences, are still operating as if that cohabitation and left/right consensus was still intact. So we still get an endless stream of government initiatives on health, social policy and criminal justice with no real substance or clout to them and which peter out like a fading starburst, but in the meantime creates yet another layer of bureaucracy and targets to meet before it withers and is forgotten about.
The sixth option, largely unspoken of beyond generalisations about cutting waste and making efficiencies, is to tackle head on this mountain of legislation which is placing such a precipitous burden on British public life (and intruding on the private lives of its citizenry as well). Whole reams of legislation should be closely examined and subjected to rigorous public inspection, scrutiny and discussion. Areas which are currently simply not open to debate and have become sacred cows such as anti-discrimination and equalities and diversities must be opened up and their impact and efficacy thoroughly examined. If need be legislation must be gutted to get to a few core policies and laws which are really cost-effective and beneficial; in some cases legislation may need to be repealed in its entirety.
And with it the whole edifice of the quangorcacy and the monumental, target driven, compliance obsessed inspection and regulatory apparatus that comes with it must be pruned and reduced to a manageable, productive and constructive level. The quantitative benefits flowing from would this would be enormous, freeing up possibly tens-of-billions of pounds that could be spent more usefully elsewhere. There is no question that there will still have to be tax rises, benefit cuts and cuts to public services. But the extent of these can be mitigated considerably and the pain and misery they are likely to cause to the most vulnerable in our society significantly reduced if directed at paring back the voluminous and all-encompassing legislative and regulatory apparatus.
But there would also be qualitative benefits too as the stultifying impact of omnipresent legislation and the burden of the quangorcacy is lifted leading to renewed energy and initiative that will have economic, as well as social and cultural impacts and be of great benefit to the country as a whole.
None of this has surfaced or will surface during the course of this election campaign, but the issues raised by this will break through, post-election as the true costs of what has to be done to get the UK’s public indebtedness under control becomes apparent. All this leads to the conclusion that the best option for this election is a hung parliament. Why? Because if Labour is returned with a majority (admittedly a very unlikely outcome at the time of writing) they will resort to their centralising, target driven, grand initiative obsessed, top down way of working which largely got us into this mess in the first place and will never countenance dealing with the legislative burden and regulatory apparatus. Equally, if the Conservatives get in with a small majority, their instincts will be to cut back savagely and attempt to get public services on the cheap through farming them out to a combination of the private and voluntary sectors with dreadful consequences.
To ensure fairness and an equitable balance of options that includes dealing with the legislative burden and regulatory apparatus we need a government with no overall majority that has to negotiate and take all options into consideration when making policy. Only a hung parliament will allow for the space to explore some really radical solutions, such as those briefly outlined here, that would be of immense benefit for the future governance of the country.
The political and economic landscape has changed. The party is well and truly over and a massive hang-over is about to kick in. A hung parliament is the best way to provide a restorative cure and help us to get back on our feet.