Observations

An efficient debate?

Date: 08 April 2010
Authors:
Publisher: IFS

As we watch the parties squabble over how much can be achieved in efficiency savings this year, it is worth remembering that we will not be able to judge with confidence which was right even after the event.

 

The National Audit Office has been highly sceptical of the Government's claimed efficiency savings in the past. And, while the Office for National Statistics has improved its measurement of public services output, its estimates of the bang we get for our buck are nowhere near accurate enough to verify the claims the parties make.

 

For what it is worth, Labour said in the Budget that of the £35 billion in efficiency savings that it planned to deliver between April 2008 and March 2011, it had managed to achieve £10.8 billion by autumn 2009. Barely two weeks later, it now feels confident enough to assert that it has achieved £20 billion, leaving £15 billion to be achieved in 2010-11. They point out that for the Conservatives to achieve another £12 billion on top, within the current financial year, would be quite an ask.

 

Does this mean that if the Conservatives cannot achieve the efficiency savings they claim, they would not be able to use £5.6 billion to avoid the bulk of the planned National Insurance rise for April 2011? No. The key point is that the Conservatives have said that they will cut public services spending outside the NHS, the Ministry of Defence and overseas aid by £6 billion this year, compared to Labour's current plans. Whether they could achieve efficiency savings that would make this feel painless is, from the perspective of the management of the public finances, a second order question. The same was true when Labour announced a £5 billion cut in public services spending for 2010-11 in the November 2008 Pre-Budget Report and claimed that that would be painless too.

 

We will never know for sure if efficiency savings deliver the additional bang for the buck that is claimed for them. And if they do, we might hope that most of them would have been achievable even if we were not cutting spending.