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August 28, 2007

Timid Tories

John Redwood's on The Telegraph explaining how the (very) modest tax cuts being proposed can be paid for. He's certainly right about this:

There are five ways of paying for tax cuts. A government could, as Labour say, cut teachers and nurses. It could borrow more. It could increase other taxes. It could cut wasteful and unnecessary expenditure. It could use the proceeds of growth.

He's suggesting using that last (and no, it's not a function of the Laffer Curve here, it's more a combination of fiscal drag and the increased size of the economy) and fair enough. However, why so timid? What about the fourth, unnecessary and wasteful expenditure?

We'll never actually get to a lower tax burden unless we have a smaller State. This isn't just about how efficiently some tasks are currently undertaken: it's about whether some tasks should be undertaken at all. Again, it's not just about cutting out nonsenses like ID cards, of the NHSW Spine, things that clearly are a) not needed and b) aren't going to work anyway.

No, we need to look at entire swathes of the spending departments. The Arts Council, for example. What is this except a bribe to the upper middle classes and the luvvies to support the redistributionist State? Away with it, in its entirety. Agricultural supports (yes, I know this is EU): now that they're a flat payment they are simply an increase in the rental value of land and thus push up capital values. Abolish them, tout sweet.

We've renamed the DTI but not abolished it....nor the regional subsidies to business which do so much harm. We could hack 10% out of the budget in this manner without even breaking a sweat. £50 billion....that's a third of the income tax take.

Far from "sharing the proceeds of growth" we should be working out which accretions of the past half century to the State we can and should be doing without: all corporate, farming and artistic subsidies as a start. Any further offers?

August 28, 2007 in Taxes | Permalink

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Comments

The problem, Tim, is that people don't believe politicians when they say they can, or will, cut 'unnecessary' waste (as if there were any other kind) from the budget. They judge that if doing this were 'easy', it would have been done already - after all, didn't GB pledge to become the scourge of the quangos, even as he's allowed them to mushroom?

They don't pledge to slash waste and bureaucracy because no-one will believe them, and because they'll get slaughtered if they promise to do these things and then, once they're in power, they don't do them. Which they probably won't.

Posted by: Mr Eugenides | Aug 28, 2007 10:33:50 AM

Surely a good candidate for pruning to cut wasteful government spending comes from today's news:

"A £3 billion series of policies designed to boost the achievements of pre-school children has had no effect on the development levels of those entering primary school, a study suggests.

"Although there have been big changes in early years education, children’s vocabulary and their ability to count and to recognise letters, shapes and rhymes are no different now than they were six years ago.

"The results of the study from the University of Durham will come as a huge blow to the Government after a string of initiatives that have cost more than £3 billion since 2001 and that include the early childhood curriculum, the Sure Start programme, free nursery education for all three-year-olds and the Every Child Matters initiative."
http://www.timesonline.co.uk/tol/news/uk/education/article2337386.ece

Posted by: Bob BBob B | Aug 28, 2007 10:47:55 AM

"sharing the proceeds of growth"


I would like to see "paring the ill-gottens of sloth", i.e. restricting the flow of nutrients to the tumour that the State is.

Posted by: Roger Thornhill | Aug 28, 2007 10:59:52 AM

We could hack 10% out of the budget in this manner without even breaking a sweat

Well said, totally agreed.

As to Bob B's comment, see today's post on my blog, it's far worse than this.

Posted by: Mark Wadsworth | Aug 28, 2007 11:00:02 AM

Next, following the splendid, cost-effective suggestion made below here, we should subtitute Super Tucano attack planes for the costly Eurofighters:
http://eureferendum.blogspot.com/2007/08/we-are-not-wrong.html

BAE trades unions and shareholders will surely cheer with delight at the great news for British taxpayers about substituting Super Tucano trainer-ground attack planes - which look like derivatives of Mustangs from WW2 - from Brazil for the extravagantly priced Eurofighters and note with exquisite pleasure that Shorts already have a licence to build trainer versions of the Tucano for the RAF in Belfast:
http://www.raf.mod.uk/equipment/tucano.cfm

The Russians will look really sick when they compare the cost of SU-35/37s against the ultra cheap Tucano:
http://en.wikipedia.org/wiki/Sukhoi_Su-35
http://uk.youtube.com/watch?v=upYX_SISZ84

A different kind of arms race by weapons cost.

Btw archers have great cost-kill ratios and we were decisive at Crecy (1346), Poitiers (1356) and Agincourt (1415).

Better still:

"Cause public proclamation to be made," declared an Act of 1369, "that everyone of said City of London strong in body, at leisure times and on holydays, use in their recreation bows and arrows." Popular amusements such as handball and football were banned on pain of imprisonment.
[See entry for "Archery" in Weinreb and Hibbert (eds): The London Encyclopaedia (1993)]

Posted by: Bob B | Aug 28, 2007 11:07:40 AM

Agricultural supports (yes, I know this is EU): now that they're a flat payment they are simply an increase in the rental value of land and thus push up capital values.

I wonder if it would be against EU rules for the UK to tax all farmland the same amount that it gets in CAP subsidies?

Posted by: Philip Hunt | Aug 28, 2007 4:25:26 PM

Direct and indirect subsidies to the rail industry. Billions "invested" every year + cheaper fuel than that available to coaches (who can still run a cheaper service, and make a profit).

Posted by: Tim Almond | Aug 28, 2007 9:50:24 PM

The Cabinet should be no more than a dozen strong. DEFRA's out. Can the FSA, the PWLB and most of the OFXXX regulators. Shut down International Development (aid does more harm than good). DCLG, DCFS, DCMS, DIUS - all gone. The Home Office should be restricted to prisons and coppers. Scrap the Barnett formula. Sure Start: kill it. Abolish LEAs and introduce vouchers. Break up the NHS purchasing agency. Implement a hiring freeze and a ban on advertising in the Guardian. Privatise the BBC and abolish the license. Raise the public sector retirement age to 65 and make pension schemes defined contribution like everyone else's. And of course go through the list of quangoes and defund every single one of them. If this means having to revert to funding things like healthcare direct from Whitehall then so be it. Remove all government funding from higher education while allowing the universities to charge whatever fees they like and select whichever students they want. Unilaterally remove all tariiffs, duties and subsidies. And finally, leave the EU and pass umbrella legislation revoking every law that has come out of that malign body.

There, I've just saved £250 billion. That was easy, wasn't it?

Posted by: David Gillies | Aug 28, 2007 11:58:32 PM

It's more than just timidity. What really worries me about the juxtaposition of the Tories' claims that they're going to cut government waste, but that they're not going to use that to cut taxes, is that the only way to square these positions is for the Tories to find other ways for government to waste our money. Do we really think that the problem is simply one of priorities and competence, and if so, is it really credible to imagine that the solution to a competence deficit is to bring in the Tories?

Posted by: bruno | Aug 29, 2007 2:17:00 AM

Becky Norton Dunlop tells the story of when her husband worked for the Reagan administration. On meeting the President, he assured him that he would do his best to make his department as efficient as possible. Reagan's reply was "Gee, George, don't make it too efficient. Imagine if we got all the government we pay for." Possibly apocryphal - I see this has also been attributed to Milton Friedman and Will Rogers - but it makes the point. Government efficiency without savings (even if deliverable) is bad not good news - pity there are few in the modern Conservative party that understand this.

Posted by: bruno | Aug 29, 2007 2:33:03 AM

"There, I've just saved £250 billion. That was easy, wasn't it?"

I know you're not entirely serious, but not that easy. To take one example, this idea you have of not advertising in the Guardian for public sector jobs means that you'll either have to go down the Tim route of setting up a new government-ran firm (not historically a recognised route for saving money) to advertise its jobs, employ a similarly expensive private-firm, albeit one with less reach, or employ very expensive private-sector search consultants. I think, most likely, you've just added to government spending. And that's before you have to raise government spending to pay for your new defined-contribution pensions.

Posted by: Matthew | Aug 29, 2007 8:34:58 AM

IIRC Tim was on the sensible side about the 'government-run recruitment firm' plan - that was George Osborne's plan, as endorsed by loons like The Daily Pundit.

I'm also sceptical that abolishing the NHS procurement agency would save money compared with the man-hours and higher retail prices of everything being purchased locally, and *incredibly* sceptical that education vouchers would deliver any cost savings whatsoever (the majority of schools are state sector; wholesale privatisation would be unviable not least because no bugger would buy 'em; therefore either the voucher value would need to be set at the current cost of delivering state sector education, or we'd need to keep subsidising the state schools in addition to the voucher system).

It's precisely the kind of 'something for nothing' monkeying about that the Tories are proposing. Simply put, the only way to significantly reduce government spending is to significantly reduce the services that government provides. Anyone who thinks that substantial (rather than a couple of percent, which would be nice to have but not transformational) savings can be delivered through efficiency improvements is frankly deluded.

Tim adds: Quite. That's the argument for taking an axe to what government tries to do, of course.

Posted by: john b | Aug 29, 2007 11:22:25 AM

No, Tim was 'Bring it On', unless GWB's use of that means it is only now used ironically, but the comments suggest it wasn't.

http://timworstall.typepad.com/timworstall/2006/12/interesting_new.html

Posted by: Matthew | Aug 29, 2007 11:43:56 AM

There is a great deal of confusion about this notion of cost-saving by cutting government waste. We can remove unnecessary obstacles ("cutting red-tape"), and gain two advantages: (a) marginal savings immediately from doing without the bureaucrats that implement the obstacles, and (b) greater savings over time from increasing the efficiency of the economy. But we should remember that not all red-tape is harmful - some of it is essential to preserve competition, for instance.

Most of the money, though, that is being spent by government is in doing things that need to be done. The advantage of removing them from government control, where appropriate, is not that you "save" the cost, but that you gain the benefits of competition and economic calculation that are not available in the public sector. With the right institutional setup (e.g. plenty of competition, no distortion of incentives through government intervention, and as little regulation as is compatible with preserving competition) this should, over time, deliver greater efficiency and responsiveness to demand.

Cutting government waste is vital, but not in the simplistic sense that it will "save" tens or hundreds of billions of pounds.

Oh, and by the way, government-run businesses are always a bad idea. Never generalize, but I think this is an exception to that rule.

Posted by: bruno | Aug 29, 2007 1:00:54 PM