The leaked 'cuts'

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Westminster is very excited about the recent leak from HM Treasury, which apparently revealed that – despite its repeated statements to the contrary – the government is planning to cut public spending by a cumulative 9.3 percent from 2011 to 2014. But is that really what the leaked documents suggest?

Well, up to a point. It is true that total departmental expenditure limits (DEL) will fall by 9.3 percent in real terms over that period. Look at this in cash terms though, and it just means departmental spending is going to fall from £390.5bn in 2010-11 to £386.3bn in 2013-14. And that's difficult to get excited about.

Moreover, departmental expenditure limits only represent part of public spending – about 58 percent of it in 2009-10. The real story in the Treasury's leaked figures is what's happening to the other parts of public spending. As the Institute of Fiscal Studies' Robert Chote wrote in The Times:

...the Treasury expects debt interest payments to rise by 11.1 per cent a year, social security costs by 1.4 per cent a year and other “annually managed expenditure" (such as public sector pension payments and contributions to the EU) by 3.1 per cent a year.

The result of this is that total public spending – surely the figure we should be most concerned with – is set to rise from £620bn this year to £760bn in 2013-14, when we will still be running an annual deficit of almost £100bn.

Of course I'm happy that politicians are finally talking about cutting public spending, but if they imagine that these so-called 'cuts' will be enough then they've got another think coming. Vince Cable seems to realize this – his recent paper for Reform suggested up to £112bn of cuts over the course of the next parliament. George Osborne and Alistair Darling have some catching up to do.

Public expenditure – identifying the mechanism

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In recent weeks, much political debate has focussed on public expenditure, which – given the unprecedented levels of government borrowing – needs to be cut sharply. However, most solutions being put forward focus on scrapping or cutting spending on individual programmes. Whilst there are compelling financial cases for abandoning the Crossrail project, for substantially reducing the costs of the replacement Trident programme and for means-testing child benefit, this pick n’ mix approach is not analytical.

Instead, the next Government should implement a top-down approach by focussing on the 2009/10 public expenditure projection – before interest – of £671 billion: any Government forecasts beyond the current year carry little credibility. To regain control of public expenditure, ongoing real cuts of c3% per year should be applied to this figure. Hence, for 2010/11, the next Government should aim for a £650 billion out-turn. Subsequently, departmental budgets should be specified by the Treasury to enable such a figure - before any unforeseen contingency items - to be reached. Consequently, major spending departments, such as Social Security, Health, Education and Defence, should be required to operate within these figures.

It should also be made perfectly clear that - like the Chief Executive of any major plc - the Secretary of State is primarily responsible, with his ministerial team, for deciding how the allocated departmental budget is met. Top civil servants, including the departmental Permanent Secretary, should be obliged to play a leading role in ensuring that the best possible services are provided within the budgeted amount.

Any unreasonable failure to deliver should be punished in the same way as applicable to FTSE-100 Chief Executives, whose turnover ratio is high – though still well below that of Premier League football managers.

Of course, there would be political flak but is anything more important at present than regaining control of the UK’s parlous public finances?

Reversing the rise of the surveillance state

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With badly formed and unprincipled policy forming the majority of what leaks from politicians' pens it was with trepidation that I picked up a copy of Reversing the Rise of the Surveillance State. Much to my surprise though, it was clear, practical and thoroughly principled. Provided this paper is acted upon – assuming the Conservatives win the next election – we would see a significant shift of power from the state back to the individual.

Dominic Grieve QC MP and Eleanor Laing MP have set out clear policies:

  1. Scrapping the National Identity Register and ContactPoint database
  2. Establishing clear principles for the use and retention of DNA on the National DNA Database, including ending the permanent or prolonged retention of innocent people's DNA
  3. Restricting and restraining local council access to personal communications data
  4. Reviewing protection of personal privacy from the surveillance state as part of a British Bill of Rights.
  5. Strengthening the audit powers and independence of the Information Commissioner
  6. Requiring Privacy Impact Assessments on any proposals for new legislation or other measures that involve data collection or sharing at the earliest opportunity. Require government to consult the Information Commissioner on the PIA and publish his findings
  7. Immediately submitting the Home Office's plans for the retention of, and access to, communications data to the Information Commissioner for pre-legislative scrutiny
  8. Requiring new powers of data-sharing to be introduced into law by primary legislation, not by order.
  9. Appointing a Minister and senior civil servant (at Director General level) in each Government ministry with responsibility for departmental operational data security
  10. Tasking the Information Commissioner to publish guidelines on best practice in data security in the public sector
  11. Tasking the Information Commissioner to carry out a consultation with the private sector, with a view to establishing guidance on data security, including examining the viability of introducing an industry-wide kite mark system of best practice

There are of course aspects of this that they would be better off ignoring, such as the suggestion that government push for the introduction of an industry-wide kite mark system. And more worryingly is the fact that “A limited exception should be made for those charged with certain crimes of violence and sexual offences. In these cases, DNA on the National DNA Database or the Counter-Terrorism DNA Database may be retained for a period of 3 years, which could be extended to a maximum of 5 years, if approved by a Crown Court Judge", despite the claim that innocent people will no longer have their DNA retained. These people are innocent, until proven guilty.

Yet overall a promising policy paper: a chink of light is visible beneath the smog of oppression.

The BBC has never hesitated to use its tax-funded clout to take on private ventures

Dr Madsen Pirie welcomes Ben Bradshaw’s call to halt the endless and market-distorting expansion of the BBC.

Ben Bradshaw, the Culture Secretary, has stepped into a simmering row about the BBC’s expansion policy. He says it is “at the limits of reasonable expansion.” Set up originally by six private companies to broadcast radio programmes, and nationalised in 1927, the BBC has been a public body ever since. Although it attracted praise for the quality of its commercial-free broadcasting, the BBC has tried throughout its history to monopolise broadcasting by squeezing out competition.

It opposed the introduction of ITV in 1955 and of commercial radio subsequently, following the success of the offshore pirate stations. The BBC has never hesitated to use its publicly-funded clout to compete with private ventures dependent on commercial finance. Local radio stations, set up to fill a gap in the market, soon found themselves in competition with BBC versions, financed out of the licence fee, which cut into their audience and the commercial finance it brought.

The BBC looks at what others are doing commercially, and copies them, trying to maintain its dominant position by undercutting commercial operations with its “free” licence-payer-funded alternatives. The BBC has no need to finance such operations by market share because it has the compulsory licence fee behind it. Everyone who uses a television has to pay it, and bullying big brother tactics and intimidating commercials ensure that most of them do.

Part of the problem is that with media diversification in the internet age, the BBC still wants to do everything. It fears its dominance will be undermined by new technology unless it keeps a finger in every pie. This is very evident in its news services. Seeing the news audience move from broadcast news to internet coverage, the BBC has responded with “free” internet news to compete with and undercut those who need a market share and commercial backing to sustain their own news output.

In response to a proposal to award a small part of the licence fee to local news alternatives, Sir Michael Lyons, Chairman of the BBC Trust, has urged a cut in the licence fee rather than see any of it go to help competitors. Mr Bradshaw’s intervention is timely. Just occasionally, in the way the BBC treats its prima donna celebrities, do people glimpse how their licence fees are splashed around. Less visible is the ruthless way they are used to squeeze out commercial media competitors.

The BBC is rightly praised for some of its output, but it has traded on that goodwill to distort the media market to maintain its own dominance. It is time that its use of licence fees was subjected to close and independent scrutiny, and that alternative funding models were explored.

Published on Telegraph.co.uk here.

The economic facts

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Anyone who thought Gordon was the last person in Britain to recognise the desperate need for cuts should pick up a copy of Wednesday’s Guardian. Yes, there is someone left behind, someone even more deaf to the truth, someone even more pig-headedly allied to their big-state creed, someone even more hopelessly set against the surge of public opinion, and, yes, it’s Polly Toynbee.

Her latest column “Spend now, pay later" (sadly not a DFS advert) tells us that:

  1. “There is no urgent rush to pay down a deficit."
  2. “There is no danger of not sustaining our triple A-rated debt."
  3. “Low inflation makes [the debt] relatively cheap to run."
  4. “Rapid cuts are not necessary, while there are tax rises that would be less painful."

Let’s look at the facts:

1. The National Debt currently stands at £800bn, that’s £32,000 for every family in Britain. It stands to increase to £1,400bn by 2014. We’ve also got £1,120bn of pension promises to pay, and £1,500bn of liabilities through the nationalized banks.

2. Britain’s AAA rating was only saved by Conservative promises to cut spending, and would be in jeopardy if cuts were abandoned.

3. Even at historically low rates, government debt will cost more to service than we spend on education. Given the inflationary time-bomb set by printing £175bn to fund spending, holding interest rates at record lows, and forcing banks to extend credit, this is only going to increase.

4. The average tax burden is already 37% of income. The state spends 44% of GDP and directly employs one in four of the British workforce. Firms and individuals are already fleeing high-taxes to more competitive nations abroad.

The British state is a clumsy giant, suffocating the private sector under enormous taxation and regulation. It feeds its enormous gut by borrowing on our behalf, building up debt for our children and grandchildren, and spewing money aimlessly and unproductively across the economy. It has never been so urgent to cut spending, to let the private sector prosper, to pay off this enormous debt, and to allow the growth that will bring better times.

You can’t borrow your way out of a recession, and you can’t tax your way to growth. The only cure to our economic woes is a drastic reduction in the size of the public sector. Adam Smith knew this, Cameron has caught on earlier this year, and even Brown’s starting to get it. When will Tonybee realise she’s wrong?

UEFA 1 EPL 0

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The English Premier League have shot themselves in the foot using a pistol proffered to them by Michelle Platini. They have agreed to the implementation of a quota system on the number of "home grown" players that a club must have in their squad. Players must have had to be registered for at least three seasons between the ages of 16-21 at an English or Welsh Club to qualify as home grown. That, though, isn't the damaging part. The fact that there must be 8 of these players in a squad of 25 is the significant hindrance.

Football is a competitive sport: there has to be an open market on who you employ, how much you pay and a respect of success. Whining about a lack of young English footballers in the Premier League makes a mockery of the sport. A fair analysis of the standards of many of the players under 21 marks them down as being substandard in quality to those from outside the UK. (A fact backed up by the number of home nation players plying their trade in the lower half of the Premier League and the lower divisions who used to be on the top clubs' books). This isn't a failure of the Premier League and teams should not be punished for this. This is a failure of the FA, for a lack of support of grassroots football, and the government's for their over-involvement in education these past 30 years.

The Premier League has been running since 1992, similarly the Champions League, (the renamed European Cup) both offer adequate incentive to any youngster who wanted to play football professionally. And it has. There are now many who are 'coming through the ranks' at clubs. Most though don't make the grade when compared to others around the world of a similar age (they also tend to be on the expensive side when compared to cheaper talent from abroad). Imposing archaic and illiberal restrictions on the make-up of squads won't solve this problem, it will merely weaken all premiership teams.