Wednesday, April 22, 2009

The Billion Pound Budget Cut

Peter Black was probably right when he urged caution about the Western Mail’s ‘billion pound budget cuts’ in yesterday’s paper, after Alistair Darling announced an intended £15bn cut in public spending.

The devil is in the detail, suggested Peter – no doubt upset that the Lib Dems new narrative of attacking Plaid already looks wooden and clunky.

Fortunately, in the name of open government, the Westminster government has released their ‘Operational Efficiency Programme: final report’ in time for the Budget so that we can analyse in detail those £15bn cuts in public spending.

Darling’s £15bn is best explained as:

• £4bn saved in back office operations
• £3.2bn in IT
• £6.1bn saved in extended collaborative procurement
• £1.5bn on the public sector property estate

The report also investigates asset management and sales, and local incentives and empowerment.

The detail, though, is highly uninformative for what interests Peter and myself – some vaguely wafted figures based upon case studies and examples.

Wales does play a walk-on role in the report, which notes on page 8 that “the devolved administrations...are free to use the findings and recommendations of the Operational Efficiency Programme to inform their progress on efficiency.”

Which is lucky as repeating the whole exercise for Wales or Scotland alone would surely otherwise have gone against ‘extended collaborative procurement’, no?

The most important facet of the report in the short term for Wales is probably the decision to ‘vest’ the Royal Mint into a company, i.e. set it up as a corporate organisation, with the presumable end-game of privatisation.

In that management double-speak that makes no real-world sense, the case study (on p48 of the report) explains how a previous ‘vesting’ in 2004 had been ended in 2006 because of the need to tackle the performance business, but now that the business’ performance had improved significantly, this could go ahead.

So, keep the Royal Mint in public ownership when not performing well, but sell to the private sector when making a profit for the taxpayer?

With that sort of thinking, is it any surprise we’re in the economic mess that we are?

A happier Welsh case study is used in the section on procurement.

Value Wales frameworks are used as an example of how Welsh public sector organisations are delivering better arrangements through economies of scale across the entire Welsh public sector.
Examples noted include savings of 39 per cent on IT equipment and services, 30-35 per cent on stationery and paper and around 26 per cent on computer consumables, including printer cartridges.

But that success brings the whole project back into stark reality.

As a journalist put it quizzically, when discussing the alternative Plaid People’s Budget yesterday morning, doesn’t it all come back to the Barnett Formula?

Well, yes. The Welsh budget will be affected by cuts or savings (call them what you will!) in the budgets for UK departments that have devolved sectors.

The Welsh budget will be affected, irrespective of whether we have already implemented these savings or whether these savings cannot be delivered in Wales because of different structures.

It’s like being told that your salary and living conditions are dependent upon a friend’s well-being. If he (or she) gets a rise then you get a rise, irrespective of whether or not you deserve one. If they have to take a pay cut then you have to make cutbacks, even if you’ve already made them.

He might cut back voluntarily as he has enough food for a nice meal. We still have to make the same cut back, even if we have a bare larder.

The savings suggested in the report are cross-cutting savings with no specific target (like, say, Trident or ID cards which I would scrap at a moment’s notice) which means that there will be no major announcements, but a lot of backroom organisation that will probably go un-noticed by the public at large, and possibly most politicians.

It is likely that many of these savings will come in devolved areas like health and education and that they will affect Wales very strongly – as we already are by the English NHS capital spending changes already announced.

But even if they're not, as these are public service efficiency savings rather than a culling of major projects such as Trident or ID cards, then Wales may find itself in a worse situation - as with the closure of around 50 DWP offices under the Gershon Review and the proposed closure of HMRC offices throughout West Wales and the Valleys.

What’s worrying is that, as with Value Wales, an example in the area where the biggest savings are suggested, if we’ve already taken the chaff out of the system, then where will we cut?

The Lib Dems don’t have to worry about these sort of decisions – Kirsty and Peter took the ‘gutless’ route out of government two years ago.

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