John O’Connell: To ensure efficient government spending, we need a new Parliamentary Budget Committee

24 Nov

John O’Connell is the Chief Executive of the Taxpayers’ Alliance.

Although the Comprehensive Spending Review will only set out plans for one year, rather than three, it’s still an important moment for the Government. It was of course elected on a Conservative manifesto pledging to spend more money, so no one should be surprised by a big overall boost on Wednesday. All eyes will be on exactly what the Chancellor spends more money on, and where the benefits will accrue.

While there will be a deluge of important data, it will be quite difficult for taxpayers to gauge whether the relationship between spending and outcomes is as efficient as it could be. In one sense, that seems like an unfair barb – after all, spending data is pretty transparent these days. But one thing is missing: government spending plans are not robustly scrutinised for economy and efficiency. That’s why the TaxPayers’ Alliance supports the creation of a new Parliamentary Budget Committee. Parliament could and should play a greater role in focusing government attention on efficient spending.

The detailed reports of the OBR allow taxpayers to assess the big picture. The Treasury Select Committee also does admirable work scrutinising public sector spending in terms of fiscal aggregates. So for example, it may flag up the dire long-term spending implications of continued low productivity growth in the NHS, but it does not scrutinise the causes, or compare performance with alternative healthcare models. It has neither the mandate nor the expertise to conduct such scrutiny. Departmental select committees are preoccupied. The fantastic Public Accounts Committee only looks at spending after it happens, not before.

Far better than stretching the remits and resources of these bodies, we should instead accept the central recommendations of the Leigh-Pugh report and implement a dedicated committee focused on scrutinising the economy, effectiveness and efficiency aspects of future spending plans. Australia and New Zealand already have similar models to examine and take lessons from.

There is always a difficulty in measuring the value of public service outputs provided free at the point of use. But much work has already been done both within Whitehall and outside (for example the Office for National Statistics’ work on public sector productivity). And the committee’s key purpose would be less about coming up with a definitive single measure of overall efficiency, than focussing departmental attention on improving efficiency as part of the routine planning and budgeting process – with a long-term view, in place whoever is in government.

Getting maximum value for every pound of taxpayers’ money is always important, in and of itself. But the imperative is perhaps even greater now. Even before Covid, the pressure on public spending was intensifying. An ageing population meant that spending forecasts were already gloomy. The 2017 Fiscal Sustainability Report from the Office for Budget Responsibility forecast that spending on healthcare would be £88 billion higher, in real terms, by 2066. The same report found that annual spending on the state pension would be 6.9 per cent of GDP by 2070.

Add to that the Conservatives’ manifesto pledges, such as 50,000 more nurses, maintenance of the pension triple lock and 250,000 extra childcare places, which will not come cheap. Then, pile on the enormous sums of money spent in response to the pandemic – the latest OBR estimate is that spending decisions will amount to almost £180 billion. It’s not hard to conclude that we face a serious fiscal crunch.

There is also a dangerous narrative developing, at least in Westminster and media circles. The culture of Covid seems to dictate that enormous sums of money are actually just “rounding errors”.

Well, as for these rounding errors, it was recently reported that the Government may reduce foreign aid spending such that it is 0.5 per cent of national income, down from 0.7 per cent. In pounds and pence, that is a saving of £4 billion. It was called a rounding error by some – but £4 billion is close to the equivalent of a 1p increase or decrease in the basic rate of tax; it is more than a quarter of the police budget; it’s 10 per cent of the tax hikes that the Resolution Foundation seems to have convinced the Government we must have

In other words, it’s a lot of money. What’s more, the logic suggests that we approve every single pet project or scheme that gets enough retweets – what does it matter, they’re all rounding errors.

We know Rishi Sunak is going to spend more money, Covid or no Covid. But for the long-term health of the public finances, our system must ensure that we work to get value for every single pound before it is spent. A Parliamentary Budget Committee can help root out waste before it happens.

David Gauke: Next week’s spending review – and why our holiday from spending restraint is coming to an end

21 Nov

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

For reasons that some readers will understand, the departure of Dominic Cummings from Downing Street was not a source of great sorrow for me. It appears that I am not alone. Nonetheless, Cummings’ resignation/dismissal makes the Prime Minister’s job much harder in at least one respect.

We are already pushing the limits on when a free trade agreement with the EU can be agreed in order for it to be in place by the end of the year. Boris Johnson continues to appear to be undecided as to whether he is willing to make the necessary concessions in order to get a deal (thus upsetting hardline Brexiteers) or leave without a deal (wreaking further damage to the economy and the integrity of the United Kingdom).

Both options have been apparent for some time, and they are sub-optimal for the Prime Minister and the country. Now he really has to choose.

If he compromises, some people will say that, without Cummings, the Prime Minister lacks a spine. Cummings may well be one of the people making this point.

If he does not get a deal, the Prime Minister’s strategy must be to convince the Leave half of the country that the ensuing mess is the fault of the European Union (it will be a hopeless task to avoid the blame with the other half of the country). To do that, he will need a communications strategy that is ruthless, aggressive and lacking in self-doubt, entirely untroubled by the overwhelming evidence pointing to a different interpretation of the situation. These are exactly the circumstances in which Cummings has a track record of success.

This is a bad time for the Prime Minister to fall out with his most influential adviser.

– – – – – – – – – –

Anyone entering politics will be aware that there may come a moment when there is a conflict between what one perceives as the national interest and the furtherance of one’s career.

We can currently see this playing out in the United States, as Donald Trump continues to refuse to accept the election result. With a few honourable exceptions, most senior Republicans have gone along with this nonsense. Presumably, none of them believe the election was rigged in favour of Joe Biden, but they dare not say so because of the fear of offending the Republic base.

Although not as egregious, there are similarities in the UK. Fear of offending the Conservative grassroots has inhibited too many senior Tories in setting out the realities of our departure from the European Union for far too long.

At this particular time, the talk of Westminster and Whitehall is that the overwhelming majority of the Cabinet favour a compromise with the EU because they are conscious of the consequences of failing to get a deal. But the ambitious amongst them know that to be seen to be associated with compromise on Brexit is a career damaging move.

As a consequence, they keep their heads down, content to let others challenge the prejudices of their party’s more extreme supporters. If things ultimately go as badly as they might, history will not judge kindly.

– – – – – – – – – –

The Prime Minister’s announcement of an ambitious green agenda will, we are told, help create thousands of green jobs. The increase in defence spending will, we are told, help create 10,000 new jobs. Such announcements are always treated as being good news – a further justification for a policy.

There are good arguments to be made for reducing carbon emissions and improving our defence capabilities but, while the fact that pursuing these policies requires the employment of more people may be good news for the individuals concerned, for the Government and society as a whole, this is a cost not a benefit. Employing people is expensive. And if they are employed to do one thing, they are no longer available to be employed to do something else which society or the economy might value.

I do not always agree with everything Nigel Lawson says, but he has a point when he states that “a programme to erect statues of Boris in every town and village in the land would also ‘create jobs’ but that doesn’t make it a sensible thing to do”.

To give an equally absurd example, it is not a cause of celebration that, from January, the country is going to require an additional 50,000 customs agents because of increased bureaucracy involved in trading with the EU. I repeat, this is a cost not a benefit.

– – – – – – – – – –

Wednesday will see the Spending Review, albeit one that is less comprehensive than first intended. I suspect much of the focus will be on the Office for Budget Responsibility’s assessment of the public finances, which is likely to be ghastly.

Borrowing this year will certainly be a peacetime record and might not be far behind a wartime record, either. To some extent, that does not matter as much as it might do – we can get our debt away easily and cheaply enough in a world where markets are much more forgiving of high levels of Government debt than they were even a few years ago.

But the worry will be that, even a few years down the line when the virus is behind us, we will still be borrowing very large sums of money. Exceptional borrowing in an exceptional year is one thing, but one cannot expect to get away with that forever.

Something will have to be done – but when? One of the many challenges for the Chancellor is that the political and economic cycles are misaligned.

Politically, he would want to get tax rises or spending cuts (and it will be mainly the former) in place early in a Parliament so that the pain is well out the way by the time we get to 2024.

Economically, the consensus view is that early tax increases might choke off a recovery so better wait a while. On that basis, even with the recent good news on vaccines, 2022 would be the earliest point for tax increases (and plenty would argue for later).

The politics of tax increases also appears to be immensely difficult. The Prime Minister seems dug in on the tax lock (preventing increases in the rates of income tax, national insurance contributions and VAT, which between them raise two thirds of Government revenue) whilst the back benchers also appear squeamish about any kind of fiscal consolidation.

As a country, we have given ourselves a bit of a holiday from thinking about the public finances. This coming week might indicate that this holiday will soon be coming to an end.

– – – – – – – – – –

Should we relax Covid-19 restrictions to save Christmas? It would be lovely to have a normal Christmas, but I am not sure proponents of seasonal break in restrictions have thought this through.

There is every reason to believe that Christmas would be a super spreader event, resulting in the deaths of thousands just weeks before we will have vaccinated the vulnerable.

For too many families, making the wrong decision about Christmas 2020 could mean that all future Christmases will be tinged with sadness, loss and guilt. Just be patient; we are nearly there.

Profile: Liz Truss, Perky promoter of free trade with Japan – and, like Johnson, a disruptor

29 Oct

Liz Truss, the International Trade Secretary, proclaims the brilliance of the free trade agreement she has just signed with Japan. According to a video posted by her on Twitter, the deal, the first of its kind since Brexit, is “a win-win” and “just a glimpse of global Britain’s potential”, for it paves the way to other deals.

Experts observe that the economic benefits of the first deal are likely to be “very small”, and mockery erupted when the Department for International Trade tweeted, during an episode of The Great British Bake Off, the questionable assertion that soy sauce from Japan will become cheaper.

Nonetheless, it’s worth remembering that opponents of Brexit lauded the EU’s trade deal with Japan, while taking side-swipes at the UK’s “untested, yet still somehow flailing, negotiating team”.  Truss has delivered a trade agreement which some Remain supporters said wouldn’t happen before a trade deal was complete with the EU.

It is extraordinarily difficult to sing the praises of a trade deal. Rosy assertions about future prosperity have yet to be confirmed by events, and are countered by grim forecasts from depressed Remainers, while the voluminous details of what has been agreed are deeply technical and strike the public as intolerably dull.

In the present Cabinet, only Boris Johnson, Michael Gove and perhaps Rishi Sunak could give a speech about trade which would raise people’s spirits.

Like most of the rest of her ministerial colleagues, Truss is a dull speaker who never seems to get much better.

But she has the virtue of never appearing to get downhearted. She possesses a seemingly invincible perkiness.

Last summer, while contemplating a bid for the Tory leadership, she told The Mail on Sunday that as a woman in politics, “you have to be prepared to put yourself forward because nobody else is going to”.

In her case, this could well be true. A senior Tory this week told ConservativeHome: “Her longevity in Government is a mystery to virtually the whole parliamentary party.”

The senior Tory had perhaps failed to observe that in the most recent ConHome Cabinet League Table, Truss, with a net satisfaction rating of +69.7, was second only to Sunak, on +81.5, with Dominic Raab in third place with +59.7 and Gove fourth on +56.4, while the Prime Minister got -10.3.

At the age of 45, Truss is a veteran, the second-longest serving member of the Cabinet, which she joined as Environment Secretary in July 2014, a record beaten only by Gove, appointed Education Secretary in May 2010.

Perhaps that explains why the editor of ConHome possesses a seemingly inexhaustible appetite for profiles of Truss. The first appeared in March 2014, when she was a rising star of the 2010 intake, a tough-minded Thatcherite northerner who had been educated at a comprehensive school and was tipped by some as a future leader.

The next profile appeared in March 2017, by which time she was Lord Chancellor and Justice Secretary, and the judges were furious with her for failing, as they saw it, to defend judicial independence against attack by The Daily Mail.

Three months later, she was demoted to the post of Chief Secretary to the Treasury. Here she continued to fight her corner, and on occasion to express her disrespect for Cabinet colleagues (including Gove, by now Environment Secretary), as in this lecture, delivered at the London School of Economics in June 2018:

“I’ve never liked being told what to do. And I don’t like to see other people being told what to do. Britain is a country that is raucous and rowdy…

“I see it as my role as Chief Secretary to the Treasury to be on the side of the insurgents – I see myself as the disruptor in chief! Because British people love change…

“And government’s role should not be to tell us what our tastes should be.

“Too often we’re hearing about not drinking too much…eating too many doughnuts…or enjoying the warm glow of our wood-burning Goves…I mean stoves.

“I can see their point: there’s enough hot air and smoke at the Environment Department already…

“we have to recognise that it’s not macho just to demand more money. It’s much tougher to demand better value and challenge the blob of vested interests within your department.

“Some of my colleagues are not being clear about the tax implications of their proposed higher spending.

“That’s why, in next year’s Spending Review, I want to take a zero-based, zero-tolerance approach to wasteful spend.”

In May 2019, while dipping her toe in leadership waters which turned out to be too chilly for her, Truss spoke of “a need to build a million homes on the London Green Belt”. On an earlier occasion, to an American audience, she had spoken with relish of a world in which “no one knows their place, no one fears failure, and no one is ashamed of success.”

This gung-ho side of her, the relish she takes in assaulting the cosy world of received pseudo-liberal opinion, her longing to let the free market rip in order to produce the wealth which alone will rescue the poor from over-priced housing and allow them to feed their children, find a ready assent in Johnson.

He too is a disruptor, who wants to unleash the animal spirits which have been crushed by socialist planning laws, and who favours tax cuts for everyone, including that most despised group, the better off.

Truss became the first Cabinet minister to declare for Johnson, and as Stephen Bush some time afterwards related in The New Statesman:

“During his bid for the leadership, Liz Truss advised Johnson on economic policy, and was the architect of plans to cut taxes for people earning over £50,000. Civil servants dreaded a Johnson government because they found Truss’s tenure as Chief Secretary to the Treasury under Theresa May exhausting, for reasons ranging from her demanding work schedule to her habit of asking officials multiplication questions at random intervals. Few dispute that she would have been able to do the job effectively. But Johnson discarded her as his chancellor-designate in part because of the row the tax plans caused, and in part because Sajid Javid was more willing to spend freely.”

Truss was more suited to the go-getting task of pursuing free-trade deals, as part of a global Britain strategy in which – despite having voted Remain in 2016 – she has the merit of actually believing.

She holds another post, Minister for Women and Equalities, and here too she is of value to Johnson, by holding the line against fashionable opinions which if adopted by him, would destroy his credibility with the former Labour voters in the Midlands and the North who handed victory to the Conservatives last December.

Truss is conducting a review of the whole field of equalities and diversity policy, and at Downing Street’s behest, has already refused to allow self-definition by transgender people under the Gender Recognition Act.

Crispin Blunt, Conservative MP for Reigate, was furious with her:

“Does she appreciate that trans people cannot discern any strong or coherent reason for this screeching change of direction?

“Does she understand the anger at the prospect of them receiving their fundamental rights being snatched away?”

But the Labour Party leadership has declined to pick a serious fight over this issue, for it knows that many old-style feminists are aghast at the idea of trans men being allowed to declare themselves women and enter women-only spaces.

So Truss, with her odd mixture of indiscretion and obedience, her contempt for liberal groupthink, love of freedom and faith in free trade, is in many ways a useful ally for Johnson.

Her detractors will continue to say she has only got where she is today because the Prime Minister needs a reasonably high proportion of women in senior posts. But it would be fairer to say that she has got there because she had the gumption to declare her loyalty to him in June 2019, and is in many respects a kindred spirit.

Profile: Liz Truss, Perky promoter of free trade with Japan – and, like Johnson, a disruptor

29 Oct

Liz Truss, the International Trade Secretary, proclaims the brilliance of the free trade agreement she has just signed with Japan. According to a video posted by her on Twitter, the deal, the first of its kind since Brexit, is “a win-win” and “just a glimpse of global Britain’s potential”, for it paves the way to other deals.

Experts observe that the economic benefits of the first deal are likely to be “very small”, and mockery erupted when the Department for International Trade tweeted, during an episode of The Great British Bake Off, the questionable assertion that soy sauce from Japan will become cheaper.

Nonetheless, it’s worth remembering that opponents of Brexit lauded the EU’s trade deal with Japan, while taking side-swipes at the UK’s “untested, yet still somehow flailing, negotiating team”.  Truss has delivered a trade agreement which some Remain supporters said wouldn’t happen before a trade deal was complete with the EU.

It is extraordinarily difficult to sing the praises of a trade deal. Rosy assertions about future prosperity have yet to be confirmed by events, and are countered by grim forecasts from depressed Remainers, while the voluminous details of what has been agreed are deeply technical and strike the public as intolerably dull.

In the present Cabinet, only Boris Johnson, Michael Gove and perhaps Rishi Sunak could give a speech about trade which would raise people’s spirits.

Like most of the rest of her ministerial colleagues, Truss is a dull speaker who never seems to get much better.

But she has the virtue of never appearing to get downhearted. She possesses a seemingly invincible perkiness.

Last summer, while contemplating a bid for the Tory leadership, she told The Mail on Sunday that as a woman in politics, “you have to be prepared to put yourself forward because nobody else is going to”.

In her case, this could well be true. A senior Tory this week told ConservativeHome: “Her longevity in Government is a mystery to virtually the whole parliamentary party.”

The senior Tory had perhaps failed to observe that in the most recent ConHome Cabinet League Table, Truss, with a net satisfaction rating of +69.7, was second only to Sunak, on +81.5, with Dominic Raab in third place with +59.7 and Gove fourth on +56.4, while the Prime Minister got -10.3.

At the age of 45, Truss is a veteran, the second-longest serving member of the Cabinet, which she joined as Environment Secretary in July 2014, a record beaten only by Gove, appointed Education Secretary in May 2010.

Perhaps that explains why the editor of ConHome possesses a seemingly inexhaustible appetite for profiles of Truss. The first appeared in March 2014, when she was a rising star of the 2010 intake, a tough-minded Thatcherite northerner who had been educated at a comprehensive school and was tipped by some as a future leader.

The next profile appeared in March 2017, by which time she was Lord Chancellor and Justice Secretary, and the judges were furious with her for failing, as they saw it, to defend judicial independence against attack by The Daily Mail.

Three months later, she was demoted to the post of Chief Secretary to the Treasury. Here she continued to fight her corner, and on occasion to express her disrespect for Cabinet colleagues (including Gove, by now Environment Secretary), as in this lecture, delivered at the London School of Economics in June 2018:

“I’ve never liked being told what to do. And I don’t like to see other people being told what to do. Britain is a country that is raucous and rowdy…

“I see it as my role as Chief Secretary to the Treasury to be on the side of the insurgents – I see myself as the disruptor in chief! Because British people love change…

“And government’s role should not be to tell us what our tastes should be.

“Too often we’re hearing about not drinking too much…eating too many doughnuts…or enjoying the warm glow of our wood-burning Goves…I mean stoves.

“I can see their point: there’s enough hot air and smoke at the Environment Department already…

“we have to recognise that it’s not macho just to demand more money. It’s much tougher to demand better value and challenge the blob of vested interests within your department.

“Some of my colleagues are not being clear about the tax implications of their proposed higher spending.

“That’s why, in next year’s Spending Review, I want to take a zero-based, zero-tolerance approach to wasteful spend.”

In May 2019, while dipping her toe in leadership waters which turned out to be too chilly for her, Truss spoke of “a need to build a million homes on the London Green Belt”. On an earlier occasion, to an American audience, she had spoken with relish of a world in which “no one knows their place, no one fears failure, and no one is ashamed of success.”

This gung-ho side of her, the relish she takes in assaulting the cosy world of received pseudo-liberal opinion, her longing to let the free market rip in order to produce the wealth which alone will rescue the poor from over-priced housing and allow them to feed their children, find a ready assent in Johnson.

He too is a disruptor, who wants to unleash the animal spirits which have been crushed by socialist planning laws, and who favours tax cuts for everyone, including that most despised group, the better off.

Truss became the first Cabinet minister to declare for Johnson, and as Stephen Bush some time afterwards related in The New Statesman:

“During his bid for the leadership, Liz Truss advised Johnson on economic policy, and was the architect of plans to cut taxes for people earning over £50,000. Civil servants dreaded a Johnson government because they found Truss’s tenure as Chief Secretary to the Treasury under Theresa May exhausting, for reasons ranging from her demanding work schedule to her habit of asking officials multiplication questions at random intervals. Few dispute that she would have been able to do the job effectively. But Johnson discarded her as his chancellor-designate in part because of the row the tax plans caused, and in part because Sajid Javid was more willing to spend freely.”

Truss was more suited to the go-getting task of pursuing free-trade deals, as part of a global Britain strategy in which – despite having voted Remain in 2016 – she has the merit of actually believing.

She holds another post, Minister for Women and Equalities, and here too she is of value to Johnson, by holding the line against fashionable opinions which if adopted by him, would destroy his credibility with the former Labour voters in the Midlands and the North who handed victory to the Conservatives last December.

Truss is conducting a review of the whole field of equalities and diversity policy, and at Downing Street’s behest, has already refused to allow self-definition by transgender people under the Gender Recognition Act.

Crispin Blunt, Conservative MP for Reigate, was furious with her:

“Does she appreciate that trans people cannot discern any strong or coherent reason for this screeching change of direction?

“Does she understand the anger at the prospect of them receiving their fundamental rights being snatched away?”

But the Labour Party leadership has declined to pick a serious fight over this issue, for it knows that many old-style feminists are aghast at the idea of trans men being allowed to declare themselves women and enter women-only spaces.

So Truss, with her odd mixture of indiscretion and obedience, her contempt for liberal groupthink, love of freedom and faith in free trade, is in many ways a useful ally for Johnson.

Her detractors will continue to say she has only got where she is today because the Prime Minister needs a reasonably high proportion of women in senior posts. But it would be fairer to say that she has got there because she had the gumption to declare her loyalty to him in June 2019, and is in many respects a kindred spirit.