Investment

Whoever wins the election, Britain is set to lose its deficit

By: SA Mathieson
Published: Friday, January 9, 2015 - 09:26 GMT Jump to Comments

All the main parties are committed to ending the UK government spending more than it brings in. Local authorities show that this means more private-sector involvement.

The only thing that is near-certain about the next general election is its date, 7 May, which was set by the coalition agreement in 2010. It seems likely that the vote will fail to produce an outright winner, but the make-up of the resulting government is anyone’s guess. What is clear is that it will have to make massive cuts – and that the private sector will help it make them.

Another Conservative-LibDem coalition is possible, although both parties are likely to lose MPs, particularly the Liberal Democrats who are likely to get a much lower share of the vote than in 2010. It is hard to imagine Ukip MPs joining it, unless David Cameron stepped down for someone more right-wing. However, Labour might try combining the SNP, which could take a couple of dozen seats off it in Scotland – although including a party that aims to break up the country it is helping govern could be a bit of an ask. Northern Irish MPs could be co-opted by either big party.

But as long as a stable government can be formed, it doesn’t matter that much, as all the main parties have the same key policy: end the deficit. Chancellor George Osborne repeated this in his autumn statement of 3 December. LibDem Treasury secretary Danny Alexander later criticised the chancellor, but primarily in what to do after the deficit is eliminated. In a speech on 11 December, Labour leader Ed Miliband stressed that he too has the same aim.

The deficit is not the national debt but the speed of its increase, the difference between government spending and income. Individuals that run big ‘deficits’ go bankrupt, companies get taken over or liquidated. Because the UK government has the reserve option of taxing its people until the pips squeak, it can get away with a substantial deficit, but not forever.

And the deficit remains substantial, even after a parliament of austerity. Mr Osborne boasted to the Commons that this government has reduced it from £150bn a year (£2,300 per person, more than the NHS) to £91.3bn in 2014-15. But that’s still £1,400 more debt this year, for everyone in Britain.

If re-elected the government plans to achieve a very small surplus in 2018-19, while Labour wants to get there by the end of the parliament, which would be at latest in May 2020. The obvious consequence is that this will mean severe cuts in government spending in areas that aren’t protected – healthcare and overseas aid, with Labour wanting to add education.

Local government, which across the UK gets most of its funding from national government, is at the forefront of this brutal process. Councils aren’t able to run deficits and have limits on how much they can increase taxation, so are making severe cuts in budgets. In general, they are doing so by making greater use of the private sector.

In some cases, they are doing so by transferring functions and staff to new entities, with Northamptonshire County Council planning to move 4,000 staff to four new organisations, leaving as few as 150 working for the authority itself. In others, contractors will help find the efficiencies, such as Amey identifying £514,000 in savings for its client Slough Borough Council or Kier being the likely choice to market under-used buildings owned by Staffordshire County Council and Staffordshire Police.

Local devolution is also a way to save, as groups of councils merge functions. It won’t just be city regions: December has seen Lancashire’s county, district and two unitary authorities pressing ahead with plans for a combined authority, as well as a request from 10 councils in south-east Wales to do likewise – despite the fact that the Welsh Government doesn’t have any legislation for this.

Unless the next UK government decides to stop doing things – such as providing free healthcare or defending the country – it’s hard to see how it can do other than follow suit nationally. That means organisations that can help government do the same for less are set for rich pickings over the next few years.

The recent articles below have all appeared in Council News Monitor, which watches devolution as it happens: subscribe now and get a free copy of Public Service Intelligence’s new report, Devo-City: a short guide to Britain's devolving city regions in words and data

Northamptonshire County Council redeploying 4,000 staff (BBC News)

Amey contract review identifies £514k savings (Slough Borough Council)

Staffordshire police and council leaders set to sign property deal with Kier (The Sentinel)

Councils set for further talks on a combined authority for Lancashire (Lancashire County Council)

'Combined authority' plan for 10 south east Wales councils (BBC News)

Developers with plans for Council property must tread carefully (The Information Daily, November)

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of The Information Daily, its parent company or any associated businesses.

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