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Fear of spending cuts prompts radical thinking

This article is more than 15 years old

Although Gordon Brown thinks he has shut down debate on cuts in public spending, within Whitehall there are Treasury seminars and thinktanks deliberating hard on the years of fiscal tightening ahead.

That there will be cuts is a given, it is their scale and form that is the focus of every conversation. The Institute for Government, Demos, Reform, the Royal Society of Arts, PricewaterhouseCoopers and the Institute for Public Policy Research all dread "salami slicing" - the Treasury taking a chunk out of everything. What they want instead is the "scalpel".

"The future has got to be about better services and less cost," says Sir Michael Bichard, a Treasury adviser and former permanent secretary at the then department for education and employment.

Bichard, along with Tony Blair's former adviser David Halpern, runs the Institute for Government which is an independent charity aimed at improving government effectiveness. They say most politicians have not conveyed the scale of the problem.

"The debate about public spending is pretty undeveloped," Bichard says, "but you've got an election in less than a year and there aren't many politicians who want to be seen with an axe in their hand."

There are some potential "quick hits". The government is being goaded to target unpopular projects such as the £5bn ID cards programme, the £6bn super database, and the £25bn Trident.

And then there are more radical ideas, outside the left's comfort zone. Guy Lodge of the Institute of Public Policy Research and Julie Mellor of PricewaterhouseCoopers believe the government should raise the retirement age. For each year it is extended it could bring in £5bn.

One former Labour special adviser working on a report to be published the day after a general election is likely to suggest the wide-scale roll out of ''co-payments" – those who can pay more being asked to do so – for services such as road tolls and possibly even GP appointments.

Mellor and Lodge agree the government should consider means testing child benefit, which costs £10.8bn.

.The experts agree on one thing – no area should be ringfenced.

Halpern says there needs to be a sense that everyone is bearing the pain. "If you ringfence a huge swath of sections of public spending it's really hard to go to the others and say 'You lot bear all the costs'."

The Tories are pledging to meet the UN target of 0.7% GDP on international development and a real terms increase for health. The government has said it will at least protect defence, the 0.7% development target, schools and health.

Halpern is particularly sceptical that health should be protected. "A lot of health professionals feel the system has been let off the hook by both parties."

Mellor and Lodge agree, saying evidence from Italy suggests savings of nearly two-thirds could be found in the cost of caring for the elderly and frail at home rather than in hospital, but it would require the full integration of social and health care.

For reformers this type of integration is the real prize. Bichard cites evidence that there are some 290 different agencies working with those out of work; and in some areas of the country as many as nine different agencies administering as much as £250,000 on the same family, without reference to each other.

He said: "Are we saying that we can't deliver that more effectively? What we hear from people on the front line is that we could run more effectively if the policy was not made in separate departments. There are quite a lot of ways in which departments could work together better, if central government changes the way it operates."

The prototype is how the Dutch and Finns deal with issues which spread over different departments. "They have seven or eight cross-cutting themes and effectively departments have got to join up in order to access the budget. Why couldn't we think of something similar here so that the budget is allocated to the priority. No one gets money until people are satisfied that they have produced a joined up plan for spending it. A future government of whatever colour has got to be more radical."

Both warn that without this policies such as the £1.3bn Sure Start which falls between departments will perish during a recession.

Genuine decentralisation would go hand in hand with this, and is also being considered by the Treasury. Bichard points to an experiment, Total Place, begun in Cumbria and now being rolled out across the country.

"All the local agencies came together to see whether or not they could provide services more effectively to clients. And they said to themselves if we just found a 1% improvement on a budget of £7.1bn then that's £70-odd million a year. And it seemed to me they were right," he says.

Ben Lucas of 2020 Public Services Trust goes even further, suggesting a referendum on elected mayors be held on the day of the next general election to create accountability for local funds.

But for all these ideas, Bichard is not holding his breath.

"One of the things that depresses me — we've been having these kinds of conversations ...for 15 years now, but not much has really happened. You've got to jolt the machine and the experience of the Netherlands and Finland is a way of jolting the machine, of saying 'you ain't going to get the money guys until you show you are going to behave in a different way'.

"Recessions and crises are terribly difficult but they do force you to really change. Therefore maybe it is an opportunity."

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