One of the priorities of this end-of-term Government, to be presented in tomorrow's Queen's Speech, is something called a Fiscal Responsibility Act. As outlined by Gordon Brown to the Labour Party conference, it will oblige the Government to cut the budget deficit in half over the next four years.
Now you might well ask, as I do, how a government, any government, can be legally bound to meet such a target, either in the current economic climate or at all. You might also ask, given the scale of the banking crisis, whether racking up the public borrowing really matters quite as much as the fiscal disciplinarians say. After all, individuals have got away with living on credit for a decade and are now benefiting from extra-low interest rates, so why should a profligate government not benefit from its imprudence in the same way?
But the greatest leap of credibility is surely whether it is really possible to halve the deficit in four years, or even eight, without doing serious social and material damage. And here, contrary to what you might think (and vested interests will insist), there is excellent news. It can be done. Indeed, it has been done, and you don't have to think just in terms of halving the deficit, you can eliminate it. Or you can if you really want to.
This was the message that came out loud and clear from a gathering organised by the liberal think-tank, CentreForum, where former ministers and others from Canada, Ireland, Sweden and Australia explained how they had achieved the supposedly impossible. And their collective experience deserves wider currency, for if there is one thing British governments are singularly bad at, it is learning from other countries – except, for some reason, from the US, a society that in many respects least resembles ours.
But there was another, equally heartening, message, too. Despite the many differences between these countries, the ways in which they had approached their deficit-cutting, and the measures that – in retrospect – had best succeeded, bore a remarkable similarity. Together, they offered something like a prescription for the rapid restoration of health to the public finances.
This is how that prescription might read. First and last, there has to be unity of purpose and political will. The whole government has to be signed up to the task in hand – that might include Cabinet members literally signing on the dotted line. Once a decision was taken, dissent became a resigning issue.
Second: the same message has to be pumped out repeatedly to the effect that this is a national endeavour; times will be hard; sacrifice will be required, but the price of doing nothing is long-term decline and worse services, while success will bring tangible rewards – for all.
Third: cuts of whatever kind have not only to be fair, but seen to be fair. The public sector must be required to bear as much pain as the private, including in-job cuts, perks and pension arrangements, and everything must be absolutely transparent. Fourth: if a choice must be made between subsidies for individuals and subsidies for community services – e.g. between childcare allowances and nurseries – the allowances would be reduced to keep, or even enhance, nursery provision.
Seen in this light, the Government's Fiscal Responsibility Act may be more realistic than it seems. But the experience from abroad suggests that no statement of deficit-cutting intent, even if legislated, stands a chance without fervent political will.
This is why a government that starts out with an explicit electoral mandate is in a stronger position than one at the tail-end of its term. Just look how timidly ministers have responded to pleas from former ministers (and parents) not to abolish childcare vouchers for the better-off. This benefit was always ill-conceived. Childcare should either be tax-deductible – as it is in some countries – or a benefit targeted to the worse-off. It should, incontrovertibly, be for the chop.
You don't have to look much further than this to suggest where else the public-spending axe might fall. If bank bonuses are being hacked away, why not public-sector bonuses (an absurdity that should never have come about)? Then there is the yawning gap opening up between public and private-sector pensions. And how about an audit of where the public sector, private sector and Quangos overlap – or simply halt funds to all Quangos and make them justify what they do?
You see, once you begin to look, the cuts just start rolling in. All the deficit-cutters at CentreForum soon developed a taste for their task, easily overshooting their initial targets. And once the health of the public finances improved, so did life for almost everyone. Which is why you have to ask, if the recipe is so well tried and tested, what is everyone waiting for?Reuse content