James Moore: Osborne's chance to tackle stupidity in public sector

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The Independent Online

Did George Osborne just get a little bit of breathing room? Yesterday's public sector borrowing figures contained some welcome news for the Chancellor. January is traditionally a month in which the Government pays back a bit of what it owes, but the £7.75bn returned to creditors this time around was better than most expected and well ahead of the £5.2bn surplus from January 2011.

Hooray! Britain's public sector debt has fallen back below £1trn and, while it is dangerous to read too much into a single set of numbers, it now seems a racing certainty that Mr Osborne will undershoot his stated borrowing target of £127bn this year.

Lucky us. And "yah boo sucks" to Moody's and its decision to put Britain's credit rating of AA1 – or whatever it uses as code for the AAA favoured by Standard & Poor's – on negative outlook. Moody's might be lagging in the credibility stakes, but what prompted its action were fears that the UK's torpid growth will knock the Chancellor off course.

Mr Osborne may be inclined to pay lip service to that issue in his forthcoming Budget, but don't hold your breath. His Prime Minister David Cameron's favourite blue sky thinker, Steve Hilton, once came up with the idea of suspending consumer rights laws as a way of encouraging that elusive commodity when even the business lobby might balk at such a move. It has heard of the phrase "counter productive".

A better idea would be to look at how the cuts programmes in operation might save money rather than cost it.

The Coalition's Tory ministers are constantly banging on about the need for the public sector to learn from the private sector. Yet they appear to have failed to pay heed to how sharper businesses dealt with the last recession.

One of the few welcome surprises to emerge was that job cuts were not as severe as many feared. Part of the reason is that the smarter, more forward-looking businesses got creative. In addition to doing deals on things like pay (cut or frozen) they used measures such as short-time working, or sabbaticals with a job to return to at the end to keep hold of their best staff.

This saved both on redundancy and the cost of hiring recruitment consultants to get the same person back 12 months down the line. It is a lesson the public sector seems incapable of learning, as managers spend gazillions on redundancies only to find that they've gone too far and need agency staff to keep services going while the recruitment consultants get to work.

Perhaps the best way for the Chancellor to make use of that breathing space is to conduct a careful review of what has been done so far with a view to eliminating such stupidity.

That's not least because the £1trn I mentioned excludes the banking sector's contribution to the national debt. If it were included (as it should be) the figure might read "just under £2trn".