Streamlining government, post-budget


There is certainly plenty to like in the emergency budget, but I was disappointed that George Osborne decided to protect the international development budget and renewed the government’s pledge to increase health spending in real terms.

Both those policies are flawed on their own merits. The target to spend 0.7 percent of GDP on international aid is completely arbitrary target dreamt up by lobbyists 40 years ago, on the basis of evidence that has subsequently been discredited. And as I’ve said before, health spending has doubled in real terms over the last ten years, while productivity has fallen. If any area is ripe for spending cuts – and, more importantly, for far reaching reform – then it is healthcare.

But protecting these policy areas has another effect: it means the cuts elsewhere are going to have to be even deeper. In his budget speech, George Osborne said that unprotected departments would be subject to 25 percent cuts in their DELs (Departmental Spending Limits) over the next four years. The detail how those cuts will fall will be decided in the Comprehensive Spending Review later this year, but my hope is that the government will not simply adopt a cheese-slicer approach to the unprotected departments. Achieving 25 percent savings will very difficult if that strategy is used.

Instead, they should make the CSR a genuinely zero-based exercise, starting with a blank sheet of paper and working out what the purpose of government is in the unprotected spending areas, and how those purposes should best be achieved. Doing this properly could yield some interesting results. An honest assessment of the role of government and the effectiveness of its programmes would, for example, surely conclude that we don’t need a ‘business, innovation and skills’ department at all. Communities and Local Government? Environment, Food and Rural Affairs? Culture, Media and Sport? The list goes on.

Indeed, leaving aside the Department for International Development and the Department of Health, I’d say we could get away with just 9 additional departments, each with a limited purpose and a very small range of programmes:

  • Department of Education: ensure universal access to education, by providing school vouchers and subsidizing student loans.
  • Department of Infrastructure: address genuine market failures in the provision of energy, transport and communications infrastructure.
  • Department of Social Security: provide a much-reduced range of simplified benefits.
  • Ministry of Justice: oversee the justice system, and deal with legal and constitutional issues.
  • Home Office: oversee policing and national security.
  • Minsitry of Defence: protect Britain from external threats.
  • Foreign Office: protect British interests overseas.
  • Treasury: oversee fiscal policy.
  • Cabinet Office: co-ordinate government, and deal with a small number of lingering, miscellaneous issues that don’t fall within any departmental brief.