What impact will the recession have on the long-running battle for public sector reform? Yesterday’s pre-budget report suggests its all rather up in the air. In the short-term public sector spending will be maintained, and go up in some areas – fueled by spending increases to stave off a slump. But, in the medium term, the government needs to claw the money back, with a mix of tax rises and efficiency savings. Meanwhile government welfare and PFI reforms, which rely heavily on private companies for funding and delivery, look less healthy as the corporate sector retrenches. What prospect, then, for reform?
In the latest Prospect David Walker, formerly an editor at the Guardian and now plying his trade at the Audit Commission, wrote “Out with the outsourcers?”, arguing that the recession may derail some cherished public service reforms. Today, replying to David, we are publishing a web exclusive from Andrew Haldenby of the independent (but free-market friendly) think tank, Reform. Haldenby thinks, contra Walker, that the recession could lead to a boom in out sourcing, as the need for new savings bites:
The point Walker’s piece failed to grasp, however, is that the credit crunch changes all of this. The government and the Bank of England are trying to stave off a recession. The pre-budget report cut VAT by 2.5%, and lowered other taxes on consumers in the short-term. But everyone knows this won’t work on its own. Borrowing will eventually have to be brought under control. The only way to do this will be to make public spending more efficient.The recession will ultimately re-focus Whitehall’s mind on the need to tackle the basic inflexibility in public services, in particular, the workforce agreements for public sector staff.
Read the article here, and, if you feel like it, reply to Andrew and David in the comments below.