21 Jul 2015

Is George Osborne changing the shape of the state?

The Treasury is considering a radical re-think of how it manages government-owned property to force departments into re-thinking how much land they own and whether they really need it.

The plan, known as “hard-charging”, which has been pondered in the Treasury in the past, is back under serious consideration.

Departments would find that their property assets could be sequestered to a specially constructed entity and they would have to lease them back at plausible market rates.

Some in the Treasury think that seeing their property costs eat into their spending allocation would make the departments re-think what they hold and radically alter senior civil servants’ whole approach to the department’s property empire.

There’s a different example of “hard-charging” discussed in the Treasury’s Spending Review document: charging a market-based fee to those parts of the public sector which use part of the electromagnetic spectrum (presumably including the emergency services and the Ministry of Defence).

The Treasury enjoys the land sales idea being at the centre of media coverage. It is eye-catching, it can play into the narrative about a decadent public sector.

But these sorts of sales deliver only some of the cuts and they bring one-off benefits, briefly flattering the nation’s accounts.

Recurring savings are achieved through re-thinking “the shape of the state”, a phrase used on page 5 of today’s document but not, you might think, much used in the general election campaign. “Ah”, say Treasury aides, the chancellor did say there would be big cuts.

A la carte cuts

So what might re-thinking the state mean?

George Osborne‘s team points to the Ministry of Justice under Michael Gove as an example of a ministry delivering money-saving ideas that range wide and free, taking on regulation and re-thinking core activities as well as flogging property.

But the reforms already announced would not get the department a long way towards 25 per cent, let alone the 40 per cent cuts in budget that the Treasury is demanding departments bring forward.

Treasury officials emphasise this doesn’t mean they want to shave 40 per cent off a department but they want a menu of options: compartmentalised cuts they can choose from in an a la carte consolidation, as happened in the 2010 spending review.

The Treasury document speaks of wanting “options to reform the markets that deliver public services”, “increasing competition” and allowing “more providers to enter the market” for some services.

But it’s not clear where these changes will happen in a major way.

The chancellor appears to have nudged the door shut on road pricing with his vehicle excise duty changes in the last budget.

Hiving off the cost of apprenticeships to employers seems more of a direction of travel he’s wedded to, a bill passed on to others in return for (corporation) tax forgone.

Other areas of cuts announced today are the complete abolition of “progression pay” across the whole of the civil service, more pressure on public sector pensions and basic pay plus a review of overseas development spending.

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5 reader comments

  1. Philip Edwards says:

    Gary,

    You miss the point.

    The overall target is to eliminate the principle of a fair society. Or what’s left of it.

    In the shorter term tories will enrich yet further their chums and themselves. It’s the only reason they exist.

    Land theft is just one more econofascist robbery.

    And it’s going to get worse. Much worse.

  2. S.B. says:

    The Tory majority was Christmas come true for them and like Billy Bunter locked in a sweet shop they are gleefully demolishing all and sundry; however it is the rest of us getting sick and not them. As Margaret Thatcher demonstrated they are ideologically opposed to the state and any sense of ‘society’ or government moral responsibility. For them it’s the law of the jungle where the sick, the weak, the unemployed, the mentally ill and the working poor are to be cast aside. It’s no surprise!
    The Tories are controlled by the City of London, big business and the venture capitalists and the irresponsible, immoral and no doubt criminal behaviour at times of some of these people is being sidelined as usual as those at the bottom are easier targets. I watched a programme last week about the British dominions and off shore tax havens of the Caymen Islands, British Virgin Islands and Bermuda where billions, possibly trillions, is flushed through and little, if any, tax comes back to the British Exchequer. The Tories are in hock to this crowd and will never make them accountable as their political funding largely comes from these same elements. It is the priviliged, public school brigade and class driven British Establishment all looking after their own.
    The terrible and possibly most shameful part of all this is that the English electorate, frightened and brainwashed by the right wing,Tory press, were fed scaremongering, nonsensical stories about the ‘bogeyman SNP’ possibly controlling future Labour governments. Well I am sure this political coalition, even containing the most die hard Scottish Nationalists, would not have inflicted upon the English public what theTories are doing to them now. Even more worrying are the rumblings coming from Northern Ireland where the DUP and Sinn Fein are alarmingly stating that the Peace Process is on the verge of collapse because of this draconian Tory austerity. It seems that Cameron and Osborne are even prepared to sacrifice the gains of the past 20 years in Ireland on the altar of Neo Con policies; now that should really worry us.

  3. Philip says:

    These vast cuts demands are nothing new. It’s part of Treasury machismo going back at least 20 years. They also tend to fall away quite quickly when Ministers contemplate axing programmes which they favour or which have significant political downsides. Selling off land & property is, as you say, a one off….selling the family silver. Like PFI, you can’t guarantee that what you end up paying for property in future won’t be more expensive than hanging on to it. There are doubtless support services that could be centralised, as Civil service pay, for instance…Though it’s worth remembering that agencies were set up, and pay & support services were devolved in the 1990s because the Treasury believed it would save money. In addition, many current big ideas (like “big data” or customer self-service) generally require up-front investment, which pushes back the benefit of any savings several years…and may run into the IT problems suffered by many Government Departments.
    Another big area of cost is the vast number of functions which have been “outsourced”, including much Government property, property management & IT services. Cutting Civil Service numbers has also required the Government to make up the shortfall in expertise through hiring consultants. In many cases, these are more expensive than the previous arrangements and have to go through bureaucratic procurement hoops. Other Government policies add to costs – e.g. the fact that large swathes of education are now effectively managed only by the Department of education by way of Ofsted.
    If they really wanted to make this work, the Treasury would say (a) these functions are going to be run centrally and (b) these are the departmental budgets that can be afforded for the next 4 – 5 years, on the basis of decisions on political priorities. This exercise is the faffing around version of that.

  4. Incredulous says:

    It seems that Giddyman Osborne is determined to sell off any state assets which produce revenue. Any surplus land should be used to build council houses and, if the land is in unsuitable areas, then sold off and the proceeds given to the councils. I never was happy that the rates and taxes which I paid to build and maintain council houses was, effectively, given away to profit the tenants and property speculators.
    Apprenticeships should be paid for by companies if they want to stay in business. Unfortunately, too many companies seem to be run on the basis of obtaining trained staff from other companies which have carried out the training. This just results in none of them bothering to train people which means the government will have to reinstate technical schools or provide free skills training paid for by a levy on all companies.
    The elimination of “progress” pay is another stupid idea. Pay increments were given to people who increased their efficiency as time went by. It meant that people started on a low salary when young and increased their income as their needs grew. This meant that the workforce was more contented as they could look forward to a future, the wages bill was lower as it would be at the middle of the range whereas without progression everyone will want to start at the top. No doubt the Chancellor would argue that the way to go is a low wage and a bonus. However, this too is open to abuse. Anyone can sit and do nothing all day and still share in the profits generated by others. The original bonus schemes made payment for items manufactured and as people became more proficient the more they made and the more they earned: Surprisingly similar to pay increments, isn’t it.
    I get the impression that the whole of CONservative policy is is geared to eventually selling off the country to spivs, charlatans and carpetbaggers.

  5. Andrew Dundas says:

    Why not create regional ‘Public Finance Initiative’ landlords that would gradually takeover all public buildings and rent those out to user departments? Good sense includes raising departmental budgets to cover the amount and location of the space needed.
    Because those would be wholly owned in the public sector they would not be a ‘privatisation’ process. All tenants would pay market rents for the space they occupy where the Public FI would be responsible for the fabric of the building and raising finance. In principle, that Public FI would be similar to Housing Associations: public bodies that provide needed building space. The Public FI is also similar to the way several PLCs that are property owners. Separating property ownership from service provision would focus the users’ minds upon the most economic use of the buildings we own. And cost them dear if the retain valuable & under-occupied buildings and land that they’re not using.
    I’ve been promoting that Public Finance Initiative approach for years. If George Osborne’s scheme is similar, I’m for it!

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