Government in the UK has not been re-invented. Pamela Meadows, former chief economist at the employment department, says that the public sector still operates largely for its own benefit, beyond Treasury controlby Pamela Meadows / December 20, 1996 / Leave a comment
Even after 17 years of Conservative government, the fundamental problem of public expenditure-its tendency to spiral out of control-has yet to be tackled.
The challenge of public expenditure control is often presented as analogous to that confronting every household or company in the land. A family must live within its available resources. Furthermore, it must balance competing demands: for rent, food, fuel, clothes, toys, cars, books, CDs, beer, holidays and so on. The Chancellor of the Exchequer is likened to a frugal and prudent housewife.
But the analogy is bogus in two respects. First, most households have some control over their income. They have the choice at the margin of working extra hours, taking casual work, or changing jobs. Second, households that are having trouble making ends meet are generally prepared to take quite radical steps to eliminate unnecessary expenditure. They often sell their cars, stop eating meat, share bath water, or heat only one room. What they do not do is trim across the board. It would not occur to them to attempt to follow the Treasury approach of aiming to cut 5 per cent off expenditure in every area.
Similarly, if we look to companies for a model, we find that each set of costs is reviewed regularly for its contribution to output. If the product changes or the technology for producing it changes, then the expenditure on raw materials, equipment and people will be adjusted. No area of expenditure has the right to continue unchallenged, even in large and profitable organisations such as oil companies.
In the public sector, things are different. The Treasury claims that the “fundamental review” process addresses this problem. That is nonsense. Departments treat the review as a sporting contest. The Treasury is the opposing team; the strategy is to ensure that it scores as few goals as possible, while at the same time demonstrating the home side’s sportsmanship.
Take an example. All the evaluation evidence on government training schemes for the unemployed suggests that their impact is at best marginal in developing skills, improving participants’ chances of getting a job, or increasing their earnings. This has been consistently true for some time and is widely recognised by those who are concerned with improving the level of skills available in the economy. Yet when the then department of employment underwent its fundamental review in 1994, there was no question of recognising reality…