WEHT "efficiency savings"

There’s one aspect of the Con-Dem cuts announced yesterday, the implications of which are not fully appreciated - that these are not pure efficiency savings.
The cuts in the Future Jobs fund, child trust funds and in 10,000 university places are policy cuts. And a further chunk of the cuts will come in local government and the devolved administrations. This is not the pure attack on Whitehall waste we were promised. For example, in March Osborne said:

We are expecting [government departments] to find, together, £6 billion of savings from the waste that even the government now admits exist - and which the government's own efficiency advisers tell us can be found.
And let me be clear - not a single penny will come from the front line services that people depend on.

And the Tory manifesto said:

We will take immediate action to start cutting Government waste, with the plan to spend a net £6 billion less in 2010-11 than Labour would

In this sense, yesterday’s cuts were a failure - as the Treasury admits.
But why? It could be that Osborne just hasn’t had time to identify waste - though this raises the question of what the hell he was doing before the election*.
There is, though, another possibility. The idea that waste can be identified well by a top boss is deeply dubious. It ignores two central facts of economics: the importance of limited knowledge and of incentives. The true knowledge of where waste lies is fragmentary and dispersed across millions of public sector workers. A Chancellor cannot aggregate this knowledge. Nor can he rely upon civil service managers to do so; these do not have incentives to cut their own departments or jobs. The upshot is that, as I’ve said, top-down management is a terrible way to cut waste.
The question is: did Osborne know these problems, in which case he used talk of “efficiency savings” as a smokescreen for genuine cuts - and remember, there’ll be many more to come? Or was he unaware of them, in which case he’s just stupid?
Either way, I’m with Tom:

Cutting spending is harder than you think. It’s harder for them, and it’ll be harder on us.

* Actually, he was running the Tories’ campaign, as if shadow Chancellors didn’t have other things to do.

Comments

[Neil Harding]

Absolutely, these cuts are actually more regressive than I thought even the Tories at their worst would attempt - this is pure redistribution from poor to rich - the polar opposite of their social democratic rhetoric before the election - child trust funds and children's services abolished or slashed. With a choice between employee NI freeze or employers NI, the Tories revert to form in choosing the latter. There are no cuts to waste at all here, it is all front-line service cuts. A pound on a packet of fags would sort the structural deficit of £40bn a year. I am not suggesting that smokers fund all the deficit gap, just give this as an example of how little tax increases would be needed if spread over a few areas. Instead, hundreds of thousands, perhaps millions are going to be put on the dole. How will this help the recovery. £6bn of cuts may not be a lot on its own, but the public sector job losses will impact on the private sector as well and with the private sector not hiring, these unemployed could become another workless generation, just like the one created by the last Tory administration.

[Quinn]

Also, isn't one of the cost-cutting plans to freeze civil service recruitment? Which *is* a way to cut waste; as long as civil servants only resign from wasteful departments and remain at efficient departments. Otherwise...

[Ivan Pope]

Exactly. Freezing recruitment is a random arbitary set of cuts, depending on who leaves and doesn't get replaced. Hardly efficient unless only the inefficient workers leave, more likely the other way round.

[gordon]

Jeez, guys, I don't even live in the UK and it was pretty obvious to me that "cutting waste" was pure PR. This Govt. is the Govt. of Maggie's Ghost.

[Luis Enrique]

So how can waste be identified in the public sector?

If top-level management can't do it and workers aren't going to volunteer to make themselves redundant, how can we do it?

It's tricky because the line between "inefficiency" and "the government doing something we'd be better off if it didn't do" is hard to draw. A government department funneling taxpayer money to experimental dance troupes might be very efficient at doing that.

What's the right way to think about waste? Is some constant proportion of government activity wasteful, or is waste additive, in that wasteful activities are added, but fewer removed (because they cannot be identified).

perhaps the best we can do is from time to time for politicians to look at departments and specific activities they think we can do without (so that's "policy cuts" but perhaps still eliminating "waste" in the "govt shouldn't be doing this sense") and then top level politicians issuing edicts like "your budget is being cut by 10%" and leaving it to the department in question to decide where it wants to cut.

[Bruce]

As Clegg said numerous times before the election - we're not going to get many savings from cutting paper clips and pot plants in Whitehall.

What is 'waste' anyway in this context? Maybe a university education would have been 'wasted' on that additional 10,000 students. Equally, First Class travel may be essential to civil servants in order to do their jobs well. I don't know, but that's the point; these are judgement calls, so a matter of policy.

Personally, I cannot disguish between "waste cuts" and "policy cuts". What you call it probably depends on whether you agree with the cut or not.

[Martin Wisse]

You see the same sort of rhetoric going on in the Dutch elections, to be held next week, with all the parties having "cutting unnecessary civil servants" as their first response to managing government debt. The idea that this was not an apolitical choice and that this means decisions have to be made which programmes to cut to get rid of these people was never acknowledged...

[ian]

The same point was made by Leslie Chapman years ago in his book 'Your Disobedient Servant' - the people who actually do the job know where the waste and inefficiencies are and should be given the chance to tackle it. Confrontational micro management and attacks on front line posts as if they were the cause is just arse covering by the real culprits.

[Karen]

I hjave had this plan for years by which I would recruit a small band of largely ladies of a certain age (people talk more freely to them) and send them into hospital and school staffrooms etc and they would soon find from the front line where the waste really was, accurately and well identified. Then one could move against it.

[Bialik]

Typically, in my experience, the civil service cuts (redeploys) the first three administrative grades while the top managers are unscathed. Having worked as one of the former for one of the latter, I cannot actually say what managers do other than go to meetings where they invent unnecessary work for others and further reasons to meet.

[Bialik]

Luis: "If top-level management can't do it and workers aren't going to volunteer to make themselves redundant, how can we do it?"
I see no problem with workers volunteering their managers for redundancy, first-class travel, conferences an' all.