Is Reeves doomed?

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Starmer’s initial response yesterday to the question about whether Rachel Reeves will remain Chancellor for the whole term of his government was to say that she enjoyed his full confidence, a line which he repeated several times before, eventually, one of his spokespersons gave the requested confirmation. As promises go, it’s about as trustworthy as his manifesto for the last election, and the Chancellor could be forgiven for feeling a bit like a football manager who knows that the club’s owner only has to declare his complete confidence twice more before the inevitable sacking.

She may be able to defy the laws of political gravity for a while longer, but four years is a long time, and in any event defying the laws of basic arithmetic will inevitably prove to be beyond her capability. Her claim that she could repair and sustain public services, not increase taxes or borrowing, and at the same time reduce the government deficit (which is what her entirely arbitrary but ‘non-negotiable’ fiscal rules say must happen) always depended on the assumption that the UK economy would grow such that tax revenue increased without changing tax rates. And not just grow, but grow in a way which is unprecedented in recent history and for which there is no basis in policy to justify. Reality and wishful thinking aren’t the same thing, no matter how hard the spin doctors might try to convince us otherwise. Something will have to give, and the easiest thing to change, politically, is those fiscal rules. There’s nothing strange in that – they invariably change when the Chancellor changes; and even Starmer will eventually work out that that is the cost he will have to pay.

The question is about how much damage is done in the meantime, since it is becoming increasingly clear that her response will be to stick by the rules and cut spending instead. She will claim – indeed, the government is already claiming with its target of a 5% spending reduction – that this will be achieved by cutting out ‘waste’. But defining ‘waste’ isn’t as obvious as it sounds: for most politicians, ‘waste’ is any spending with which they disagree. Whether school breakfast clubs, keeping libraries and theatres open, or even implementing reduced speed limits are wasteful or not depends on your political perspective. About the only thing we can say with certainty is that an imposed budget cut – whether of 5% or any higher figure which Reeves will announce in the next month or two – is rarely effective at reducing what the average layman would call waste, and invariably ends up with cuts to services. Calling it ‘fiscal prudence’ rather than austerity is a bit like calling a hungry tiger a big cat. Big cat sounds more friendly, but it will still be happy to eat you.

Pots claim kettle is "just too black"

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I’ve referred previously to the confidence trick which the words ‘efficiency savings’ actually represent.  Whilst all organisations always have some potential to improve their efficiency, unless the savings are specifically identified, an imposed target for efficiency savings is merely a euphemism for a budget cut.  In many cases it will result in cuts to services in one way or another.  Even if those ‘savings’ are re-invested elsewhere in the same organisation, arbitrarily imposed ‘efficiency savings’ are still cuts in the parts of the organisation where they apply.

There was a spat between the parties this week on the subject.  Labour, who are currently implementing an arbitrary requirement for a 3% level of ‘savings’ in the NHS, the Lib Dems, who want a further 3% ‘savings’, and Plaid, who want a further 4% of ‘savings’, ganged up on the Tories who want a further 14% of ‘savings’ with all three claiming that the Tories’ proposal amounts to a vicious cut to budgets.  All of the figures seem to have been plucked from the air, and all of them seem to be saying that they wouldn’t cut the overall total budget; they’d simply redirect the money elsewhere in the NHS. 

But if they’re all going to pull arbitrary figures out of the air, there is no way of knowing whether any of them are right.  And there’s an argument which says that if you’re going to do that, you may as well be ambitious about it.  Especially if you have zero expectation of having to deliver.

Digging an efficient hole

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I’ve referred to the question of “efficiency savings” in the past.  It’s invariably a political euphemism for “budget cuts”, because it’s a top-down exercise telling people what they must save rather than a bottom-up exercise based on real identified savings.  I’ve also previously referred to a report by the Auditor General, which highlighted concerns that 'efficiency savings' have all too often resulted in cuts to services rather than any real improvement in efficiency, and to a report which identified that one of the outsourcing companies more honestly explained how efficiency savings wouldn’t affect profits, because they’d just cut the services.

It’s not that I don’t believe that large organisations can always find ways of running themselves more efficiently – I’m convinced that they can.  (Whether that’s always a good thing or not is another question – getting the cheapest supplies from elsewhere may look like ‘efficiency’ but may not be the best thing for the local economy.)  It’s more that I don’t believe that simply imposing cuts to budgets and telling managers to do more with less will achieve that aim without affecting services in any way.  To pretend that it will is to be blind to the way things will actually happen as a consequence of demanding such savings.

It was disappointing this week to see Plaid joining the “efficiency savings” bandwagon.  For sure, assuming efficiency savings of £300 million makes the figures add up; but it doesn’t make them actually happen.  One person’s £300 million of unidentified savings is another person’s £300 million of budget cuts.  I can’t really blame Plaid’s opponents for jumping on the figure in the way that they have (although it’s totally disingenuous from parties who’ve done exactly the same on a regular basis); and I find Plaid’s defence of the figure no more convincing than the arguments put forward by other parties in the past.  In a manifesto which contains many good things (and I’ll probably come back to manifestos when I’ve had time to read and digest them), it’s an unfortunate hole to have dug.