DAVID Cameron's insistence that sticking to the Government's austerity plans is the right course to help families and businesses country is in danger of sounding more dogmatic than carefully reasoned against increasing support, not least from Vince Cable, for more investment in infrastructure to boost growth.
In the light of the Public Accounts Committee's (PAC) report on government budgeting today, it is apparent that, since 2010, the political imperative to reduce public spending has too often been followed without regard for the economic consequences. In a damning analysis that portrays a civil service lacking commercial nous and riven by inter-departmental competition for funds, the PAC concludes that the Government does not fully understand the impact of cuts as it focuses on short-term priorities rather than the longer term view. The political divergence over the wisdom of borrowing to finance capital projects to boost growth has been well-rehearsed and Mr Cameron took the opportunity yesterday to ridicule the idea of a magic money tree. But the Coalition appears to have ignored the risk to economic growth in favour of a concentration on what could be cut quickly, without assessing the likely impact of reducing capital spending from £60 billion in 2009-10 to a planned £38 billion in 2014-15.The chairwoman of the committee, Labour MP Margaret Hodge, does not mince her words in accusing the Government of not fully understanding the impact of the spending cuts it is making. The examples unearthed by the PAC, however, demonstrate an alarming disregard for the impact of decisions made in one government department on the working (and expenditure) of another. When the consequences are as obvious as the impact of a proposal for higher rents on the housing benefit bill, it is difficult to avoid the conclusion that the lack of communication between departments is part of a damaging turf war.
The need for joined-up thinking has become a cliché but that should mean it is now embedded in the culture of public service. In local government, professional rivalries and geographical boundaries are now being recognised as barriers to the best provision. Central government must catch up.
It is necessary for competent government for the Treasury to have an overview to ensure the best outcomes for spending decisions. On the evidence given to the PAC, the Treasury is so hampered by a high turnover of staff and a lack of commercial skills that its ability to scrutinise departmental budgets effectively has been jeopardised, enabling some departments to play games with the Treasury by deliberately holding back information. This would be unacceptable at any time but when unprecedented cuts are being implemented across government spending, it is likely to have disastrous consequences. An ability to measure the cost-effectiveness of all spending is a basic requirement and has never been more necessary than in the current economic situation, yet is still lacking. Greater scrutiny is overdue.
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