Monday, October 10, 2011

Why state sector budgets rise every year

John Redwood gives us this handy cut-out-and-keep guide—from when he was a County Councillor—as to why public sector budgets rise year on year.
When I first entered the public sector as a County Councillor I was amazed at the extraordinary way the finances of a large public body were organised. It seemed designed to prevent sensible controls being placed on spending.

I joined the Finance Committee. I was working as a finance professional in my main job. I found the very long papers we were sent for each meeting also impossible to understand. They used all sorts of funny numbers to prevent you working out how much cash was being spent. They changed the year base for the budgets, they used inflation adjusted numbers without explaining properly how the inflation adjustment was judged, or where the future forecasts of inflation came from. They assumed that once an item had made it into a budget it would be rolled forward and augmented every year as an inescapable commitment. Figures were in “real terms” rather than cash.

Each year’s budget was an exercise in officer lobbying for more spending. Instead of showing you what was being spent and leaving you to decide what to delete and what to increase, they added all sorts of figures into the previous year’s budget to give you a “New base budget” for the following year. This added in sums for inflation, for “unavoidable commitments”, for “new functions required by Statute”, for “consequences of past decisions”, for “responsibility and age related pay allowances”, for “pension commitments” and the rest. By the time they has finished they normally reckoned that anything less than say a 7% increase would require “cuts”, as you were invited to assume the adjusted budget and then apply the knife at your peril if you were someone who clearly did not understand the remorseless arithmetic of more public spending. If you insisted on a lower budget they would then oblige with the parade of bleeding stumps, offering up a list of cuts that no sane person let alone a politician could possibly approve.

And a shorter guide on how to curb these sly and dishonest measures...
I asked for shorter cash budgets, with clear figures for the main spending heads so we could have an informed debate over what worked, what needed improving, and what could be removed. The officers called that “zero base budgets”, because we refused to accept that anything in the previous year’s budget automatically qualified for the following year. We also wanted to analyse all the so called unavoidable commitments, as these were often judgements or concealed “growth items” which otherwise appeared as a smaller different list for Councillor decision.

"You gotta ask yourself one question..."

Where I ever in such a position, I would announce that any civil servant bringing a first draft budget that was higher than the previous year's would be sacked instantly.

Said civil servant might, of course, calculate that no one would go through all of the trouble of fighting the inevitable union bollocks, and employment tribunals and suchlike.

On the other hand, perhaps they'd like to ask themselves one question...

21 comments:

john in cheshire said...

The simple solution, for me, is to force a cost reducer onto councils, and central government for that matter as was done to the utility companies when they were privatised. Why wouldn't an RPI or CPI minus a percentage (say 5%) be applied to all budgets? It's easy to understand and easy to apply.

the a&e charge nurse said...

There is something plain wrong about well off middle class tories like Spock whining about cuts, sorry, I meant efficiency savings.

Such measures are unlikely to have any impact on HIS quality of life - comfortably ensconced as he is in the typical upper middle class lifestyle.

It is claimed 1.6m youngsters live in "severe poverty"
http://www.guardian.co.uk/news/datablog/2011/feb/23/child-poverty-britain-map
They will feel the pinch - not the likes of our Spock.

Devil's Kitchen said...

A&E,

It is claimed 1.6m youngsters live in "severe poverty"
http://www.guardian.co.uk/news/datablog/2011/feb/23/child-poverty-britain-map


This is a direct consequence of encouraging those who cannot afford children to have children.

What would you do, A&E: pay those who cannot afford children even more money to have children? What possible moral justification can you have for preventing responsible people having children in order that the feckless and stupid should have more?

"They will feel the pinch - not the likes of our Spock."

But what you are saying—right?—is that we should leave the commenting on economics, etc. not to those who are successful, but to those who are not?

I rather suspect that that is how we got into this mess in the first place.

DK

View from the Solent said...

"It is claimed 1.6m youngsters live in "severe poverty"

For a relative value of poverty. Which bears no relation to an absolute value of poverty.

the a&e charge nurse said...

"a relative value of poverty" - the sort of portentous rationalisation that enables the likes of Spock to inflict more misery, while remaining far removed from the direct consequences of such policies.

Some people will not be happy until we have developed our own mini-version of Liberia were people are FREE to live in abject poverty.

Our fiancial problems go way beyond the sort of explanation given by book keepers like Redmond - the only thing for sure is that the rich are getting richer, while the poor, well it's not too hard to figure out what is happening to the poor.
http://comment.rsablogs.org.uk/2010/06/28/rsa-animate-crisis-capitalism/

Devil's Kitchen said...

A&E,

"... the only thing for sure is that the rich are getting richer, while the poor, well it's not too hard to figure out what is happening to the poor."

Yes—they are getting richer too. Because, you see, economics is not a zero sum game.

The poor are so massively more rich than they were even 40 years ago that it's quite marvellous.

DK

the a&e charge nurse said...

"The poor are so massively more rich than they were even 40 years ago" - the poor are 'massively rich' - the sort of phrase that would not sound out of place dripping from the lips Daniel Hannan or Glenn Beck.

Well bask in the illusion that today's poor enjoy a much better class of poverty if it makes you happy, but is there any chance at all the vast wads of cash misappropriated by the rich (thanks to their clever accountants and legal advisers) can be redistributed more evenly?

Cutting from 5 to 4 yachts is not the end of the world, surely?

Devil's Kitchen said...

A&E,

"Well bask in the illusion that today's poor enjoy a much better class of poverty if it makes you happy..."

Thanks—I will.

"... but is there any chance at all the vast wads of cash misappropriated by the rich (thanks to their clever accountants and legal advisers)..."

Sorry, do you mean the money that the rich have earned (by contract) and then quite legally elected to minimise the tax on...?

Money that is—legally—taken out of the grasping, wasteful hands of the taxman is not "misappropriated". Because people's money does not belong to the state—do you see?

"... can be redistributed more evenly?"

And what do you consider to be sufficiently even? Perhaps everyone should be paid the same, hmmm?

"Cutting from 5 to 4 yachts is not the end of the world, surely?"

Who are you to decide?

Making nurses pay something vaguely approaching market rate into their pensions is not the end of the world either—but the public sector do seem to be kicking and screaming about that.

DK

Devil's Kitchen said...

P.S. "Cutting from 5 to 4 yachts is not the end of the world, surely?"

It might be for those who make their living building said yachts.

But I guess they're just not as important as A&E Charge Nurses, eh?

Let's cut those jobs that you consider not worthy enough, so that public sector workers can avoid paying another 3% of salary into their pensions, shall we?

After all, they're only bastard yacht-builders, catering to the eeeeeeevil yacht buyers. Their jobs aren't important—in fact, they are actively evil by association.

Much better to put them on the dole, eh? Or get them to build "affordable" yachts for the poor, perhaps...

DK

the a&e charge nurse said...

"get them to build "affordable" yachts for the poor", well the way the poor are depicted by certain right wing analysts one assumes most already have their own yacht, weighed down perhaps with a wide range of electronic gadgets and naff sportswear?

In fact nowadays the poor enjoy such unbridled luxury some are finding it difficult to know what to spend their next chunky dole cheque on?

Now you might say the rich are earning by contract but I prefer to think of it as shuffling large sums of money around, or rather getting clever brokers, lawyers and accountants to shuffle money about on their behalf, while they enjoy the sort of lifestyle you seem to regard as par for the course for the nouveau poor?

Let's face it the banking world has somehow managed to get by without Fred the shred coining in millions in bonuses - why can't we put a ceiling on the billions paid to the rest of the banking fraternity, few of whom had the insight to recognise a few basic pitfalls with sub-prime lending?

Anonymous said...

"well the way the poor are depicted by certain right wing analysts one assumes most already have their own yacht..."

I doubt that. Only the hard of learning would make such an asinine assumption.

"but I prefer to think of it as shuffling large sums of money around, or rather getting clever brokers, lawyers and accountants to shuffle money about on their behalf...."

Of course you would PREFER to think that. Mandela forbid you might actually think that perhaps some of these people have worked hard and made sacrifices to earn what they have. But then in the world you live in, the only people that work hard are nurses and teachers.

"why can't we put a ceiling on the billions paid to the rest of the banking fraternity.."

Why can't we put a ceiling on the billions paid into the pension funds of fat cat civil servants, GPs and NHS consultants?

the a&e charge nurse said...

"perhaps some of these people have worked hard and made sacrifices" - if you think the reason why so much of the world's wealth is accumulated in the hands of so few is due to 'hard work' then perhaps you need to dig a little deeper before you begin to understand how inequality is REALLY perpetuated, and why societies riven with huge variations in standards of living are seldom happy ones.

In more volatile parts of the world the wealthy can employ tried and trusted methods of maintaining the staus quo by threats of violence or an undercurrent of intimidation - whereas in the West we tend to favour a combination of endless right wing propaganda (epitomised by the likes of the Mail) but more importantly complex financial instruments or contract law, not to mention good old nepotism, or the old boys network (the accumulation and exploitation of cultural advantages).

Stick greedy bastards like Fred the Shred in a paddy field and see how long he lasts - his idea of hard work is phoning up his accountant or lawyer to get a few extra 00's added to his bonus.

Roger Thornhill said...

One less yacht means less jobs for yacht makers.

Less yacht-makers means less jobs for those making, moving, selling and delivering cars, haircuts, TVs, house renovations, nannys, food, less everything. Less TAX even, for all those yacht-makers, hairdressers, TV delivery blokes pay tax to fund the nurses and teachers. And, NO! State-funded teachers do NOT "pay" tax if their income is first derived from taxation.

Buying yachts should be what you WANT, for then the rich are a little less rich and the poorer are a little less poor. "trickle down is fake" you squeal. "Bollocks!" is Thornhill's reply! The rich being relieved of their wealth so that countless people can find gainful employment, making what they make cheaper for the rest of us in the process by expanding the market for it and introducing competition is excellent.

Just imagine if all those 80's yuppies did not have the money for mobile phones as they were taxed so highly. Mobile phones would still be the preserve of the elite, but I suspect the politicians and their lickspittles would be given one, paid for out of OUR money!


As Maggie said and A&E seems to be one of her opponents "you would rather the poor were poorer, so long as the rich were not richer".

the a&e charge nurse said...

There is a basic misunderstanding here.

I did not say less yachts - I said less yachts for the rich (and only a 20% reduction at that).

Even some of the superrich are starting to feel a tad embarrassed.
http://www.i-am-bored.com/bored_link.cfm?link_id=62695

Anonymous said...

"if you think the reason why so much of the world's wealth is accumulated in the hands of so few is due to 'hard work' then perhaps you need to dig a little deeper"

Not really, I just refuse to stick my head up my arse like you do and instead choose to look around at what actually happens in the real world.

"whereas in the West we tend to favour a combination of endless right wing propaganda (epitomised by the likes of the Mail)"


As opposed to the left wing propaganda (epitomised by the BBC and the Grauniad) which continually tell us what a great job the labour party did in drinving the economy of this country into the ground - and please don't bother bleating about the banks - the debt the country is payng off is the handiwork of Gordon and Ed.

"not to mention good old nepotism, or the old boys network (the accumulation and exploitation of cultural advantages)"

Yeah, nepotism and the old boy network, that horrible plague of the right. Never get a Guardian reader involved in such things ...http://www.devilskitchen.me.uk/2009/01/emily-benn-hydras-head.html

"Stick greedy bastards like Fred the Shred in a paddy field and see how long he lasts - his idea of hard work is phoning up his accountant or lawyer to get a few extra 00's added to his bonus".


Stick greedy bastards like NHS consultants in a paddy field and see how long they last - their idea of hard work is phoning up their PA to organise another round of golf or having a 10 course meal at the Ivy with Hamish Meldrum working out how the cunt-fest that is the BMA next fuck the tax payer.

MattG said...

What is it about being a Socialist that makes one completely incapable of learning anything about economics? Is it because all money is considered evil and there is a fear that even looking into the subject might warp your mind and turn you into an evil capitalist? Don't get me wrong, I understand that some Socialists genuinely have a desire to help the vulnerable (just like many Libertarians), but that's not an excuse for burying your head in the sand. The term "Quixoticism" would much better sum up this philosophy.

I had a similar conversation to the above with a woman at work who is heavily involved with the union. She was protesting about the "cuts" and saying how immoral they were.

I asked her how big the deficit is. She didn't even understand the concept. Why would she? Some of the heads of these unions don't even understand something as simple as that. I filled her in on what it was and informed her that the Government is sticking about 150 billion a year on the nations credit card. I also pointed out the public spending was not decreasing, just that the rate of increase in spending is slowing down.

I then asked how she would address this 150 billion shortfall without cutting public services, as even she couldn't argue that this fiscal behaviour was sustainable. "What about the wars in Iraq in Afghanistan?!" she exclaimed. I agreed that I didn't think those wars were necessary but pointed out that Afghanistan costs us around 5 billion a year and the entire defense budget is around 40 billion. So even if we scrapped ALL of our armed forces, it still only address less than a third of the problem, whilst leaving us a toothless nation.

"Well we should tax the rich more!" she said. I pointed out that there are not enough rich people and even they don't earn enough for this to be a solution. Also it would cripple growth, act as entrepreneur repellent and create a "brain drain" effect that would take a long time to reverse. I then quickly googled for a list of the top 100 richest people in the UK, added their wealth together and found it came to 225 billion. So even if we confiscated EVERYTHING they have, it would only buy us 18 months or so.

After that she was all out of answers. Sadly, so am I, as clearly the majority of the people in this country are not prepared to try and understand the shit we are in or the magnitude of measures that are required to sort it. A sovereign default is inevitable. Still, at least the Socialists will have some REAL poverty to moan about then.

the a&e charge nurse said...

"I asked her how big the deficit is" - are you taking about the deficit between the wealth owners and the (lack of) wealth amongst ordinary people?

Capitalism is a system in which the central institutions of society are, in principle, under autocratic control. Thus, a corporation or an industry is, if we were to think of it in political terms, fascist, that is, it has tight control at the top and strict obedience has to be established at every level... Just as I'm opposed to political fascism, I am opposed to economic fascism. I think that until the major institutions of society are under the popular control of participants and communities, it's pointless to talk about democracy".
Noam Chomsky

Anonymous said...

That would be this Chomsky??

http://reason.com/archives/2006/04/01/im-ok-youre-a-hypocrite

Please don't embarrass yourself by quoting things you clearly don't understand. You may think it makes you look clever, but it doesn't.

the a&e charge nurse said...

Things I don't understand - ooh, I love stuff like this, do elaborate?

Does it entail characters like Fred the shred needing a wheel barrow to take his, err, earnings home?

I will concede that masochistic apologists for the rich are not the easiest group to understand - I mean does Fred have to come round and hit in the face with a shovel before you realise you are being pissed on?

Anonymous said...

"Things I don't understand - ooh, I love stuff like this, do elaborate?"

OK. It goes like this. Even Chomsky doesn't believe what Chomsky says - hence the difference between what he says and what he does. How can you understand what he's saying if even he doesn't?

"I will concede that masochistic apologists for the rich...."

So, anyone who has a different view to yours is automatically a "masochistic apologist for the rich"? Maybe they just have a different point of view?

" ...are not the easiest group to understand..."

Probably because you don't bother to listen. Shame, because every so often (and yes it is very rare), you do actually make a valid point that makes me think about things differently.

"... - I mean does Fred have to come round and hit in the face with a shovel before you realise you are being pissed on?"

Pissed on? By who?

the a&e charge nurse said...

"Pissed on? By who?" -those in a position of privilege and power, who understandably do not want too many gate crashers to spoil the party.

If those raised in western democracies are now in a position to point the finger and ask a few questions it is because of a tradition of ordinary people grouping together to demand, education, health services and reasonable working conditions, not to mention the possibility of life amounting to slightly more than the sysphean task of ensuring the fat cats are being adequately renumerated.

Put it this way - what society most closely epitomises the sort of place you would like the UK to mirror?
Because in my opinion the most civilised countries are those with strong traditions of ensuring adequate provision in housing, health, education and decent standards in the work place - while conversely those countries which do little to protect the rights of the poor are generally more oppressive.