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Public spending: Vince Cable has answers

Today Think tank Reform publishes a new pamphlet by Vince Cable MP, Liberal Democrat Treasury Spokesman, arguing that cuts in public spending are essential to tackle the UK’s fiscal deficit. The paper is available at

Getting serious on spending

  • Vince Cable claims that the situation is more serious than the Government’s proposals for a fiscal tightening of 6.4 per cent of GDP over eight years suggest. He argues that a fiscal consolidation of 8 per cent of GDP – around £110 billion – over five years is more realistic.
  • The emphasis should be on controlling public spending, not higher taxes.
  • Dr Cable argues that there should be no “ring fenced” areas of spending and that all existing spending should be justified.
  • He said that “the priority is to move the economy out of recession but there is also a need to restore fiscal credibility and to allow Government to focus its resources where are they are most needed” and argued that politicians must be “upfront from the outset about what Government should and should not be spending its money on.”

The savings

Vince Cable identifies nine specific areas of potential savings as a start to a radical programme of reform. The main proposals are:

  • Zero growth overall for public sector pay (saving £2.4 billion a year), a 25 per cent reduction in the total pay bill of staff earning over £100,000 and a salary freeze and end of bonuses for the civil service (saving £200 million a year).
  • Tapering the family element of the tax credit – saving £1.35 billion.
  • A radical review of public sector pensions with the view to moving to higher employee contributions and later retirement ages. There is currently a £28 billion subsidy to unfunded schemes.
  • Scrapping several major IT systems including the ID card scheme (£5 billion over 10 years), Contactpoint (£200 million over five years), the NHS IT scheme (£250 million over the next five years) and the proposed “super database” (£6 billion).
  • Curbing “industrial policy”, including scrapping Regional Development Agencies (£2.3 billion annually) and ECGD subsidies (£100 million annually) and reducing (by at least half) the Train to Gain and Skills Councils budgets (£990 million together a year).
  • Reforming the National Health Service, by reducing the centralisation and over-administration – starting by scrapping Strategic Health Authorities (£200 million a year) – by strengthening commissioning and with “supply side reform” – in particular tariff reform could save around £2 billion a year.
  • Curbing the centralisation in education, by cutting national strategies and scrapping quangos – saving around £600 million a year.
  • Reducing the amount of waste in the defence procurement process, including scrapping the Eurofighter and Tranche 3 (£5 billion over 6 years), the A400M (total cost £22 billion), Nimrod MRA4, the Defence Training Review contract (£13 billion over 25 years) and the Trident submarine successor (£70 billion over 25 years).
  • Examining possible future public sector asset sales, including some aspects of the Highways Agency (land value of £80 billion) and intangibles such as spectrum, landing rights and emissions trading.

The pamphlet was launched at an event at the Institute of Chartered Accountants in England and Wales. Vince Cable said that the key was to review the “big ticket items” in public spending and to set out a “credible plan” for reducing the UK’s fiscal deficit over a number of years.

Michael Izza, chief executive of the ICAEW, said that politicians should look to the “opportunities” provided by the fiscal crisis. Jeremy Browne MP, Liberal Democrat Shadow Chief Secretary to the Treasury, reiterated the important point set out in the pamphlet that as the second biggest budget in government, the NHS cannot be ring fenced.