Sir John Redwood is a former MP for Wokingham and a former Secretary of State for Wales.
After the disaster of the tax raising budget crushed the spirit of enterprise and overturned business confidence the Government was left looking around for ways to rescue its growth policy. Several weeks too late they announced a couple of large projects which had started under the last government as if they were new.
The third runway at Heathrow was backed by the Conservative government only to fall foul of the net zero targets. I doubt the government will sweep those away to move in the diggers any time soon. Anyone willing to forecast there will be any construction spend before the next election?
The Oxford-Cambridge corridor was plodding along at nationalised rail speed. The first section of the railway completed in 2016 and the second is expected, somewhat delayed, to arrive this year. Labour have said they will do the planned third and fourth sections, which were awaiting the money and the go ahead. How will they pay for them?
The important new road between the two great university cities remains cancelled and we still await any planning decisions on where new villages and towns will be allowed. None of this will move the dial or give us any growth before 2028. Indeed, if they do not let a contract for the third rail section there will be a fall in construction output as soon as the second section completes.
All this leaves the Chancellor looking down the barrel of the OBR forecast gun. She will be told she needs to raise taxes or cut spending to hit her easier and revised fiscal targets. It looks as if the Government, after hitting pensioners with the fuel allowance cut, are now eyeing up disabled people to slice into their benefits.
These are not the kind of policies most MPs get elected to support. So what could and should she do?
The answer is staring her in the face. She needs to launch a major drive to cut losses, improve efficiencies and raise quality throughout the rambling, overextended, and badly performing public sector. The Prime Minister and the Cabinet Office need to be equally committed to making government work better and cost less.
Start with the disgraceful Bank of England. Incapable of controlling money growth it lumbered us with a savage 11 per cent inflation at worst and then imposed austerity to correct its errors. It has sent the Government a bill for an astonishing £30bn to cover its losses so far this financial year to December. It is even more surprising that successive chancellors have simply paid without complaining, without demanding a change of policy and without debating it in Parliament.
If the Bank were told to follow European Central Bank policy on how to deal with an overlarge bond portfolio that they paid too much for, these losses could be brought down substantially. They could probably be halved. There is no need to sell bonds at big losses when you can wait for their repayment at a higher price. You do not have to pay the full base rate as deposit interest.
Move on to the heavy loss of productivity. The public sector has lost ten per cent of its 2019 levels of productivity by recruiting too many extra people to do the same amount of work. Put on an immediate staff freeze for all admin posts in the civil service, NHS and wider public sector, then get on with the detailed work of amalgamating and abolishing posts, and amalgamating and abolishing quangos that overlap with departments that could fulfill the functions.
End the crazy idea of a football regulator. Have just one body supervising all the nationalised industries and investment funds and banks the government operates. Change the management of the Post Office, who have lost £1.8bn in recent years and sent the bill to taxpayers, whilst receiving large bonuses. There is £30bn of lost productivity to recoup; you can get back to 2019 levels without extra computers and AI spend.
Then the government needs to put in place policies to improve on the restored 2019 levels at the pace of two per cent a year increase the government says it can do. Why hasn’t the Chancellor announced a proper plan to get the two per cent per annum growth in productivity she forecasts? Why should we believe she can achieve it? If she doesn’t then it will mean more cuts and more tax rises to make up the gap.
Recognise that the crazy net zero policies are both very expensive and self-defeating. Closing down our own oil industry to import instead raises world CO2 whilst losing us billions of tax revenue. Sending most high energy using industry abroad has the same destructive impact. Spending nearly £20bn on carbon capture and storage annoys the Greens as well as the rest of us. Other countries are not rushing to put in this extra cost on energy production.
All of this can add up to a huge programme of savings: it would yield at least £40bn in the first full year. That is enough to reverse the damaging tax cuts, allow a bit extra for core services and keep some control of borrowing.
I am not expecting or recommending that Reeves to do the full Trump (though she has recently signalled a little in his direction). He has not only imposed a staff freeze but offered all civil servants the option of voluntary redundancy. He is scything through Net Zero subsidies and costs. He is clearly aiming at a much slimmer and lower cost government.
Why cut disability and pensioner benefits when there are so many easier and more popular targets? The British State worked fine in 2016 with 130,000 fewer civil servants. Time to slim the state to make it fitter and better. We need private sector led growth and investment. Cutting taxes as spending on government falls could help bring that about.
The Conservatives as His Majesty’s loyal Opposition, should champion these causes. That would show they have learned from their bruising experiences in government and want to help get us out of this present disaster.