Monster Cuts versus Alien Reforms

All pretence that the Coalition government is merely trying to sort out the country’s public finances is long gone. It is a Liberal Conservative government, in the 19th century sense of wanting a small,  liberal, state with the minimum of compassion for the ‘deserving poor’ and as little socialized provision as possible. It is setting out to achieve what Thatcher tried and only half succeeded in – reversing much of the great liberal-social democratic reforms of the 20th century.

The two central planks of this project are Monster cuts and Alien reforms.

The Monster Cuts have been pretty well explored, although of course we still have to wait the dreaded Spending Review on October 20th for much of the detail – although there’s a fair amount of ‘softening up’ leaking, spinning and even announcements going on beforehand.

But what about the Alien Reforms? There’s lots of baby ET’s, but the three big ones are Health, Education and social security. In each case what is being proposed is a radical shake-up of the existing systems for spending what is, between these three, the biggest chunk of the government’s welfare and services budget.

Which is why the heading of this post is ‘Monster Cuts versus Alien Reforms’. If I was in the Treasury at the moment, I’d be afraid, in fact I’d be very, very afraid.

The wholesale reorganisation of the NHS, with the transfer of major spending powers to untried, untested and GP-based organisations, coupled with the stripping out of layers of organisation and management and many regulatory quango’s, is a recipe for potential financial instability on a gigantic scale. Even with fairly stable systems we have seen how easy it is for the NHS to wobble between billions of pounds of under or overspend. A five or ten percent ‘wobble’ is £5 to £10 billion, roughly. Reorganising how £80bn plus is spend easily creates the conditions in which even bigger swings could happen, all too easily.

And the chances of the NHS really making the £20bn target for “efficiency” savings that are needed to meet the rising costs and rising demands placed on the system over the next 4 years are, to put it mildly, not helped by a massive reorganisation which is being made up as they go along. And don’t forget NHS productivity has been falling in recent years.

Are we really expected to believe that in the midst of the biggest, and most controversial, reorganisation ever it will miraculously turn-around this decline? Even if the new system works, and does produce massive efficiency and quality improvements, it will easily take 4-5 years minimum before the benefits start to come through.

The situation in education may be slightly less perilous, but more by accident than design. The hapless Michael Gove has now been forced to admit that less than 10% of the schools that he was claiming were “interested” in the new academy status have actually applied. Less than 200, instead of 2,000. But imagine it was nearer 2,000. Many of the problems above about the NHS reorganisation would apply with equal force to the Schools reforms, although perhaps not on quite such an epic scale.

And finally social security reform. Again, it has been widely discussed that Ian Duncan Smith’s ideas for simplification – laudable though they may be – require a significant short-term increase in spending to avoid creating massive losers during the transition.

Put these three sets of Alien Reforms together and you start to see why people in the Treasury could well be thinking that their Monster Cuts could be under threat. In the Dreamworks version the Monsters win in the end. But there must be those worrying this will turn into the Nightmareworks version, in which the Aliens triumph.

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