George Osborne will spend more than ever. Don’t be fooled by his ‘40% cuts’
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Version 0 of 1. George Osborne loves to play the heebie-jeebie who pops up at parties and shouts “Boo!”. But Tuesday’s request for a “40% cut” in government spending looks like cruelty to children. No one believes it will happen. In no year of Osborne’s chancellorship has he actually cut public spending – and only in 2013 was it cut in real terms. Nor did his latest budget aim to do so. Related: George Osborne ruined my yoga retreat | Charlotte Higgins But in terrorising his cabinet colleagues he deployed one significant phrase. He wanted not just discipline but to “re-imagine the state”. He wants what even Margaret Thatcher never envisaged: a genuinely different concept of government. First we should declutter. The 40% cut (or 25% for favourites) does not apply to budgets that Osborne, for electoral reasons, has protected. Forget the “big four” of pensions, the health service, education and defence. But that removes three-quarters of the total. The rest have lost 20-30% since 2010. Departments such as local government, environment, energy, justice and the Home Office have cut staff and services. Local councils have merged functions and sold buildings. They face mass closures of embassies, libraries, sports clubs, day centres, police stations, museums and galleries. Their trouble in defending themselves, Osborne likes to point out, is that surveys show rising satisfaction with public services. Local councils remain a popular agency of government. Croydon council is one of the worst hit by cuts, but the marginal seat of Croydon Central stayed Tory at the election. What Osborne appears to seek is a shift not away from public spending – whatever his austerity rhetoric – but away from public provision. He sees the state as an income redistributor rather than a service provider. The government can take from the rich and give to the poor – more or less – but give in cash rather than services. His is the embodiment of the voucher economy. The classic instance of this has been housing. When Thatcher came to power in 1979, the government was chief supplier of new houses. By the time she left 11 years later, council house building had collapsed and never recovered. Yet the Treasury found itself spending more on housing in real terms than ever before, chiefly through housing benefit and mortgage subsidy. It still is, but delivery has changed from (controlled) supply to (uncontrolled) benefit. Such privatisation has a chequered history. Under the 1993 Railway Act, the Treasury could give cash to railway companies but not to the infrastructure plc, Railtrack. This soon collapsed. Under the private finance initiative, the government would subsidise hospitals and schools, but not their construction, which was financed by the City. It has proved a terrible deal. Pushing services out to Capita and Serco has had mixed results; but in-house services carry overheads, and overheads are ongoing and thus seriously out of favour. The trouble with Osborne’s “transfer-led” public sector is that transfers, like housing benefit, are demand-led. So-called social protection makes up 40% of all spending. Osborne has found tax credits ballooning, with a horrific political cost attached to curbing them. He is thus like a forester who cannot reach the big trees in the wood and must merely hack away at the shrubs around the outskirts. He can remove 40% of them, but the forest still grows. Will he ever get to the trees? Osborne’s mistake before the election was to concede protection for the big five. It infuriates everyone else. And added to this, health, education and defence are among the most inefficient public services, in which professional restrictive practice and therefore cost are most entrenched. Britain’s dire cancer record is a direct result of the division between GPs and hospitals over tests. The barrier between clinics and pharmacists is equally absurd. In the courts, legal costs continue to rise because of the archaic barrister-solicitor split. University facilities are a parody of duplication and underuse. Rivalry between the armed services should be history, rather than present extravagance. These are dragons I doubt Osborne has the courage to confront. He and Cameron remain susceptible to lobbyists. They agree to glamour warships rather than a better army. They agree to a high-speed train rather than better local transport. Osborne has gone soft on the City in turfing Martin Wheatley out of the Financial Conduct Authority. He has yet to show his colours on that most domineering of all cartels, the EU. On the other hand he has liberated private pensions, which Labour never dared touch. He has also undergone a conversion to localism, with as yet uncertain results. It remains to be seen if this shift will ever challenge the biggest monopoly on power in Britain: that of the Treasury. Local government’s contribution to cost-cutting will fail if not accompanied by real fiscal devolution. This is all no longer a matter of ideology. It reflects a move to the state as welfare facilitator rather than corporate provider. This week Liam Byrne and a group of Labour MPs formed “Red Shift” to open the party to “white van man, Uber drivers and mumpreneurs”. It's no longer a matter of ideology. It reflects a move to state as welfare facilitator rather than corporate provider Working for big companies, Byrne says, is on the way out. The future lies with a self-employed, portfolio-tasked, market-oriented labour force. Such a world involves new strains – and poverties – and needs new forms of support. Market fragmentation is the mark of the e-economy. The concept of the hypermarket – be it in the public or private sector – is in decline. People are reverting to high streets. They want to choose their own health tests and therapies, their own housing, their own childcare and help in old age. Uber and Airbnb may need regulation, but there is no going back to nationalised transportation or housing. Taxes should directly help the poor, rather than create more government bricks, mortar, bureaucracy and unionised staff. What price means-tested vouchers one day for schools and the NHS? Osborne clearly means to stir radical argument. But his budget motivations were clear. By the end of this parliament the chancellor intends to be spending more than today, and more than ever in British history. He is not cutting the cost of the public sector. He just wants a different one. |