Dashboard
Monday 21st September 2009 | 13:02
Vince Cable's speech to Liberal Democrat Conference 2009
But once recession recedes we have to tackle the next big challenge: managing the massive and unsustainable public sector borrowing.
We should not be taken in by the hysterical nonsense about the country being bankrupt. It isn’t. But there is a big problem. The public doesn’t need George Osborne’s imaginary, secret documents or conspiracy theories to work out that the public finances are in a bad shape. The government is living beyond its means and has absorbed the massive cost of the financial collapse. Government tax receipts as a share of national income, have collapsed to a level lower than at any time since Harold Macmillan was Prime Minister half a century ago. The enormous budget deficit isn’t just because of recession. There is a structural problem. Public spending expanded on the back of tax receipts from financial services and an inflated housing market: temporary windfalls which were treated as permanent. The Government deficit will need to be cut substantially. If it isn’t there will be a risk of escalating borrowing costs and a debt trap.
Spending first. If public spending is cut in the usual way – slash and burn – there will be great damage to local and national services. Good will be cut with bad. Front line services will be butchered and lower paid workers will bear the brunt of cuts. There will be particular damage to public investment in areas like social housing which we need desperately to rebuild houses to rent. So what are the alternatives? So, we have to set priorities and decide what government should and shouldn’t do. I don’t pretend that the task will be easy or popular. But I have a few ideas as to how we would start.
We must stop civil service bonuses and the culture of massively inflated salaries. A freeze in the total pay bill is better than cuts in services. There are far too many government officials and quangos overseeing local government, the NHS and teachers. There is no need for the vast central government databases, like the ID card, the so called ‘super database’ and the NHS scheme. Tax credits extend too far up the income scale. There are too many unaffordable defence commitments and procurement contracts including new Trident submarines. Civil service mandarins – and MPs – enjoy very generous subsidised public sector pensions which desperately need reform. This system is grossly unfair when the basic state pension is less than the poverty level; when the pension age is to rise to 68; and occupational pensions in private firms have been cut to shreds.
Then the industrial welfare state absorbs billions through Regional Development Agencies and other quangos of questionable relevance. And we all love the NHS but no-one can seriously claim that it couldn’t be better run. All aspects of public spending have to be looked at critically, as our councils have to do as a matter of course.
There is no credibility and no future in being the last of the big spenders. Don’t get me wrong. I can, personally, think of lots of things that it would be desirable to spend lots of money on: mental health, adult education, childrens’ hospices - and bee research and science in general - are things I have campaigned for. But economic reality means that if more is spent on some items there is less elsewhere. Politicians offering their expensive freebies will be treated with the same contempt as bankers lapping up their double cream bonuses, year after year, succeed or fail.
No-one does political cynicism better than the Tories. They pose as tough guys cutting spending sooner and deeper than anyone else. But we have just exposed them as committed to a massive £53 billion of extra spending - more than the total defence budget. If we did that we would be accused of being fantasists or dishonest or indisciplined. But these people are so arrogant they think they can cruise into Downing St without anyone noticing.
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