Bob Seely is a member of the Foreign Affairs Select Committee, and is MP for the Isle of Wight.
Throughout this coming week, the candidates for the Conservative Party leadership launch their campaigns in earnest.
Whoever wins faces a massive challenge. Not only do we have to deliver Brexit – and until we do Britons won’t listen to us on anything else – but we also need to introduce a raft of domestic and foreign policies to renew us in office.
We badly need new ideas and new projects , some of which will need new cash. We also need to cut taxes. To help with the coming battle for ideas, and to support Liz Truss’ work on the spending review, here below are ideas to save between £50-100 billion. That figure doesn’t include the £39bn from a no–deal Brexit.
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First, some basic facts. Government spending made up 38.5 per cent of GDP in 2017-2018. Departmental budgets set by spending review (DEL) amounted to £358.4 billion in 2017-2018, but the total departmental expenditure, including spending which is difficult to predict, manage or forecast (AME) was £812.9 billion in 2017-2018. Of that, £734.9bn was spent on services.
So where could we save money?
High speed rail
First, scrap the planned High Speed Rail link – HS2 – and save £50-100 billion. HS2 initially cost £33.4 billion, then rose to £42.6 billion. It is now costed at £56 billion. One government-commissioned estimate suggests it could total a breath-taking £403 million per mile. The Institute of Economic Affairs estimates the real cost to be £80 billion, and even that may be too little.
Terry Morgan, former chair of HS2 Ltd, told the Lords “everybody has their own guesstimate” of cost and “nobody knows, actually, the number”. Doug Thornton, HS2’s former Land and Property Director, has said the valuation of properties along the route was “enormously wrong”. The National Audit Office found that the estimated net cost to acquire land and property for Phase One was £1,120 million in 2012 (2011 prices) ,but £4,316 million was budgeted at the 2015 spending review (2015 prices). Every honest review has considered it bad return for the taxpayer. The Lords’ respected Economic Affairs Committee has suggested delaying HS2. Let’s bite the bullet and bin this white elephant.
As with all the ideas here, the money could be better used by giving it back to taxpayers in the form of tax cuts, or supporting local and regional infrastructure projects to counter London’s domination of infrastructure spending, or to right the injustice faced by female pensioners – the so-called WASPI women. Alternatively, the next Conservative Government could pledge to ensure fibre–to–premises broadband nationwide to deliver near unlimited broadband speeds.
The farce of HS2 highlights a wider issue; UK public projects cost much more than in other countries – construction cost per mile of HS2 maybe as much as nine times that of its French equivalent. Megaprojects run over-budget and over-time – time after time.
Cost overruns for the Channel Tunnel were 80 percent and for the National Health Service IT System up to 700 percent. The Scottish Parliament was estimated to cost between £10 and £40 million. It cost £414 million and was delivered three years late. An excellent study by the Taxpayers Alliance found that 57 per cent of over 300 public schemes overran by an average of 33.7 per cent. Another study in 2009 found total net overrun on 240 projects was more than £19 billion. Even by Government standards, these are eye-watering sums. Running public projects to time and budget would allow us to slash taxes and still leave billions for education, policing or defence.
Second, reallocate the 0.7 percent legally defined amount that the UK needs to spend on overseas aid. Many traditional Labour and Conservative voters alike are losing faith with this figure.
Why? Because we now spend more on overseas aid than we do on policing. To keep public support for overseas aid, which is important, and to integrate our overseas policy, we need to change the definition of aid to give us more flexibility in how we spend, as I outlined in a Henry Jackson Society study six months ago.
We should continue and even increase the basic life–saving and humanitarian development aid that we are rightly proud of. But there are other elements of the £14.5 billion aid bill that we can re-allocate to provide much-needed support to the Foreign & Commonwealth Office(FCO), Ministry of Defence (MoD) and Department for International Trade (DIT). The DfID money should fund:
Whilst the above doesn’t offer money back to the Treasury, it effectively gives a spending boost of £85 million to the FCO, £269 million to our Armed Forces and tens of millions to our trade missions, without having to raise taxes or borrowing. In addition, £254 million for the World Service that comes from the licence fee can be returned to taxpayers or reinvested in the service.
Health and social care
Third, integrate health and social care with local government. This has a potential for big efficiency savings, allowing money to frontline services rather than bureaucracy.
Attempts to make this idea work so far have floundered. The Better Care Fund was intended to save £511 million for departments and partners in the first year. It failed. Nevertheless, the idea is a valid, one and the council in my constituency of the Isle of Wight is hoping to win Government support to set up a pilot scheme.
In an increasingly complex world integration, be it in overseas spending, or public services, integration is key to efficiency and delivery. Artificial Intelligence, tele-medicine and better use of big data will support this, especially in more isolated communities such as the Island.
Cut corporation tax
Fourth, cut tax to raise more in revenue. The principle is a sound one – we cut top rate tax in the 1980s and dramatically increased the tax take.
Slash rates of corporation tax to 12.5 per cent. Britain has been willing to give the fiscal firepower to “pull every lever we’ve got” a no-deal Brexit. Down from 28 per cent in 2008, Corporation tax will soon be set at 17 per cent, the lowest in the G20 – yet receipts have never been higher at £56.2 billion. Lower corporation tax would increase the demand for labour, which in turn raises wages and increases consumption.
Winter fuel payments
Fifth, there are more difficult areas to cover. For example means test winter fuel payments would not be popular but could save £2 billion a year. Despite being estimated to cost £1,967 million in 2018/19, these were described by the Work and Pensions Committee (114.) as a “blunt instrument” which “gives a cash payment to many households do not need it”.
According to the Social Market Foundation, pensioners, who are by far the wealthiest age group in society, “are likely to save rather than spend the value of the windfall.” It asked: “Why should older, wealthier pensioners receive more money than poorer, younger ones?”
An estimate for 2012-13 stated if payments were only made to those in receipt of pension credit, expenditure would only be £600 million in 2012-13 (to nearest £100 million). Surely it is better to spend the money on increasing the basic state pension, or increasing the amount that poorer pensioners receive, than giving it to those need is less.
Street and motorway lighting
Next, there are smaller but no less valuable schemes that we could champion. For example, do we need to keep street lighting on overnight in rural areas? There’s no link between having lights off or dimmed and an increase in crime. Do motorways lights have to be on throughout the night? On the Isle of Wight, we can vary our lighting from a central point. That has the potential to save tens or hundreds of thousands of pounds per annum.
Next, why don’t we cut roadside verges less. They represent a natural habitat for wildlife, but often the way they are cut today during flowering season kills wildflowers and replaces them with thick grass which need more cutting. There are parts of verges, in roundabouts, on curves, which will need very regular cutting, but if we adopted verge cutting to encourage wildflowers and pollinators such as bees, we would beautify roadsides AND save money. Dorset saved £93,000 by ‘greening’ their verge cutting, and Monmouthshire County Council estimates it has saved £35,000 annually from reducing verge mowing. For councils’ up and down the country, every little helps, especially if it has an environmental and quality of life benefit.
Sixth, there are other potential tax streams which have not been examined. Should we examine legalising cannabis, for example, especially weaker strains of it, not only to raise tax but also for reasons linked to mental health and crime reduction.
Colorado, with a population of under six million, raised $247 million in 2017 alone from marijuana tax. One of the most comprehensive studies into legalisation estimates that between £397 million and £871 million, could be raised annually. A US-style system here could generate up to £2.26 billion a year from tax and fees.
n addition, there is money saved. The Taxpayers Alliance estimates that by legalising cannabis, the UK could save at least £891.7 million a year in reduced spending by police, prisons, courts and the NHS through pain relief treatments. Do we need a Royal Commission on this subject? Should we be treating cannabis, especially in mild form, as yet another sin tax, like smoking and alcohol?
Doing things better
Seventh, we need to do simple things better. There are more prosaic aspects of best practice, such as procurement.
Procurement amounts to around one third of public spending in the UK. In 2016/2017, the UK public sector spent an estimated £355 billion with external suppliers. Efficiencies, such as buying common goods and services on behalf of the whole government, saved £255 million through the Crown Commercial Service and £879 million through specialist commercial expertise.
We need a systematic method of driving procurement best practise across all of Government, from paperclips to tanks, and supporting new, smaller entrants into a market dominated by bigger players who too often bid, take their cut and sub-contract.
Finally, by leaving the EU we will have more power over procurement, buying locally as far as free markets allow. Some organisations believe that EU regulation costs the UK as much as £33.3 billion per year, potentially more. By taking a common sense attitude to regulation post Brexit, we could save Britain billions.
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These ideas are just a start. Ensuring a Conservative Government after the next General Election requires two things. First, we must deliver on Brexit, second, we need to produce ideas and policies that renew in office.
This is a contribution to the debate. Let’s see what the candidates offer in the week ahead. I wish them well.