Do public spending cuts make government more efficient in the long run?

Public entities could emerge from the cost-trimming process less distracted by marginal activities, more focused on their fundamental role, and better structured to deliver what they exist to deliver.

Luke MacGregor/Reuters
A government department employee wears a high-visibility jacket with a crest in London on July 5. Cuts to Britain's public sector are bound to trigger strikes, the nation's biggest civil service union said on Monday, warning the government against taking harsh spending reductions to tackle a record budget deficit. Some argue though, that cutting public spending will make government more efficient in the long run.

Civil service unions find themselves firefighting on all fronts. Microphones are being thrust to record their outrage on the possibilities of 25% departmental cuts, then 40% cuts, then cuts in their pensions and redundancy payments. They've had to search the phone book to find plausible numbers of cuts in front-line policing and nursing. They've been expected to tell broadcasters that our children's future is at risk by stopping the school building programme dead in its tracks. Meanwhile, one minister says that rich over-60s should pay their own bus fares. The RAC says people should pay directly for the roads they use. Even the expense claims of Tony Blair's security staff are under public scrutiny. Where is it all going to end?

The point is that it shouldn't end. The magnifying glass has to be put over every part of the public sector. Do we really need new school buildings? Well, in many places we do, but in others that I know, the local people weren't even consulted, and thought that rebuilding was a complete waste of money. Should taxpayers really stump up for free bus passes, or winter fuel and Christmas bonuses, to wealthy pensioners? Or buy sweeties for Tony Blair's protection squad?

This isn't the usual overspent-government penny-pinching exercise. Sure, many a mickle mak's a muckle, and many a muckle adds up to quite a chunk of taxpayers' cash. But there are limits to what you can achieve by freezing pay or budgets, searching out efficiency cuts or salami-slicing a few percent from every budget: tell managers to make cuts and all that happens is that they tell their under-managers to make cuts, who tell their under-managers, and so on, until the only folk who get cut are the ones actually doing the work. You really do need to look at every job, and programme, and department, and ask whether you really need them at all.

Private-sector companies do this every day; and interestingly, since the election, time-and-motion firms say growing numbers of public bodies are asking their help too. What they will be told by the experts is to forget trying to pinch a penny here, another there. They need to take some time and conduct a fundamental review of what they exist for. Then they need to work out how those aims are best delivered – which might be by someone else – and cut out all the stuff which isn't part of their core purpose. They will emerge from that process less distracted by marginal activities, more focused on their fundamental role, and better structured to deliver what they exist to deliver. As part of that, it is perfectly right that they should think about how they would cope with budget cuts of 25%, 40%, even more, and what of value would be lost. If anything.

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