Axing quangos is really about political capital

As the spending review approaches, a leaked list of doomed quangos suggests that these cuts are about political gains more than financial savings.

A list leaked to the Telegraph reveals the 177 quangos that are allegedly to be the first on to David Cameron's "bonfire of the quangos".

The full list includes a dazzling array of bodies, with examples as varied and esoteric as the Agricultural Dwelling House Committees (comprising 16 bodies), the Public Guardian Board and the Teachers TV Board.

It's easy to react with bemused horror to the array of obscure-sounding titles. But the list does demand slightly closer scrutiny -- also marked for burning are the Audit Commission, British Waterways, the Human Fertilisation and Embryology Authority, and the Women's National Commission, to name just a few. Baroness Deech has already gone on the offensive this morning's Today programme to point out that much of the £5m budget for the Human Fertilisation and Embryology Authority comes from patients, not taxpayers, and that axing it thus achieves very little in budgetary terms.

As we get closer to October's Comprehensive Spending Review, the debate surrounding the future of these bodies and others is obviously going to intensify. Other high-profile examples, such as the BBC World Service, the British Council, the Office of Fair Trading and the Carbon Trust, are still under review.

But while these bodies await their fate, I thought I'd share a small insight into one of the bodies that is reportedly going to be axed: the Government Hospitality Advisory Committee for the Purchase of Wine. A while ago, consumed with curiosity as to what this committee was actually up to and how much of taxpayers' money it was spending on wine, I put in a Freedom of Information request, and discovered the following:

  • The government calculates that it will use around £90,00-£100,000 worth of stock (wines, spirits, beers, etc) a year for "high-level events".
  • Government Hospitality, the department within the Foreign and Commonwealth Office that administers the committee, spends roughly one-eighth of its £800,000 annual budget on restocking the wine cellar.
  • The committee has five members, who meet four times a year and are not paid for their time (apart from travel expenses). It is chaired by Sir David Wright, the former British ambassador to Japan.
  • According to minutes, tastings take place during meetings. Recommendations are then made about purchases.

None of this is of anything other than passing interest. But it does provide a small amount of background to one of the entries on the baffling list of soon-to-be-extinct quangos. It also raises a bigger point about the motivation behind the coalition's war on quangos.

Wines will still need to be purchased, so it is unlikely that major savings will be made there, and the existence of the committee itself costs almost nothing, so "burning" this quango achieves very little in the way of saving costs. Without having investigated them all, I still would wager that a significant portion of the rest of the list falls into the same category -- fulfilling functions that will go on being necessary, at relatively small cost.

A senior Whitehall source told the Telegraph that "these reforms represent the most significant rolling back of bureaucracy and the state for decades. Our starting point has been that every quango must not only justify its existence but its reliance on public money."

This connection between abolishing quangos and "rolling back bureaucracy" is the real story here. Getting rid of these quangos isn't going to eliminate the Budget deficit, but it will give the coalition political ammunition once more against the "bloated bureaucracy" instituted by Labour, and put the government on the offensive as public support for the spending cuts wanes and the spending review itself approaches.

Caroline Crampton is web editor of the New Statesman.

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The Future of the Left: A new start requires a new economy

Creating a "sharing economy" can get the left out of its post-crunch malaise, says Stewart Lansley.

Despite the opportunity created by the 2008 crisis, British social democracy is today largely directionless. Post-2010 governments have filled this political void by imposing policies – from austerity to a shrinking state - that have been as economically damaging as they have been socially divisive.

Excessive freedom for markets has brought a society ever more divided between super-affluence and impoverishment, but also an increasingly fragile economy, and too often, as in housing, complete dysfunction.   Productivity is stagnating, undermined by a model of capitalism that can make big money for its owners and managers without the wealth creation essential for future economic health. The lessons of the meltdown have too often been ignored, with the balance of power – economic and political – even more entrenched in favour of a small, unaccountable and self-serving financial elite.

In response, the left should be building an alliance for a new political economy, with new goals and instruments that provide an alternative to austerity, that tackle the root causes of ever-growing inequality and poverty and strengthen a weakening productive base. Central to this strategy should be the idea of a “sharing economy”, one that disperses capital ownership, power and wealth, and ensures that the fruits of growth are more equally divided. This is not just a matter of fairness, it is an economic imperative. The evidence is clear: allowing the fruits of growth to be colonised by the few has weakened growth and made the economy much more prone to crisis.

To deliver a new sharing political economy, major shifts in direction are needed. First, with measures that tackle, directly, the over-dominance of private capital. This could best be achieved by the creation of one or more social wealth funds, collectively held financial funds, created from the pooling of existing resources and fully owned by the public. Such funds are a potentially powerful new tool in the progressive policy armoury and would ensure that a higher proportion of the national wealth is held in common and used for public benefit and not for the interests of the few.

Britain’s first social wealth fund should be created by pooling all publicly owned assets,  including land and property , estimated to be worth some £1.2 trillion, into a single ring-fenced fund to form a giant pool of commonly held wealth. This move - offering a compromise between nationalisation and privatization - would bring an end to today’s politically expedient sell-off of public assets, preserve what remains of the family silver and ensure that the revenue from the better management of such assets is used to boost essential economic and social investment.

A new book, A Sharing Economy, shows how such funds could reduce inequality, tackle austerity and, by strengthening the public asset base, rebalance the public finances.

Secondly, we need a new fail safe system of social security with a guaranteed income floor in an age of deepening economic and job insecurity. A universal basic income, a guaranteed weekly, unconditional income for all as a right of citizenship, would replace much of the existing and increasingly means-tested, punitive and authoritarian model of income support. . By restoring universality as a core principle, such a scheme would offer much greater security in what is set to become an increasingly fragile labour market. A basic income, buttressed by a social wealth fund, would be key instruments for ensuring that the potential productivity gains from the gathering automation revolution, with machines displacing jobs, are shared by all.  

Thirdly, a new political economy needs a radical shift in wider economic management. The mix of monetary expansion and fiscal contraction has proved a blunderbuss strategy that has missed its target while benefitting the rich and affluent at the expense of the poor. By failing to tackle the central problem  – a gaping deficit of demand (one inflamed by the long wage squeeze and sliding investment)  - the strategy has slowed recovery.  The mass printing of money (quantitative easing) may have helped prevent a second great depression, but has also  created new and unsustainable asset bubbles, while austerity has added to the drag on the economy. Meanwhile, record low interest rates have failed to boost private investment and productivity, but by hiking house prices, have handed a great bonanza to home owners at the expense of renters.

Building economic resilience will require a more central role for the state in boosting and steering investment programmes, in part through the creation of a state investment bank (which could be partially financed from the proposed new social wealth fund) aimed at steering more resources into the wealth creating activities private capital has failed to fund.

With too much private credit used for financial speculation and property, and too little to small companies and infrastructure, government needs to play a much more direct role in creating credit, while restricting the almost total freedom currently handed to private banks.  Tackling the next downturn, widely predicted to land within the next 2-3 years, will need a very different approach, including a more active fiscal policy. To ensure a speedier recovery from recessions, future rounds of quantitative easing should, within clear constraints, boost the economy directly by financing public investment programmes and cash handouts (‘helicopter money’).  Such a police mix – on investment, credit and stimulus - would be more effective in boosting the real economic base, and would be much less pro-rich and anti-poor in its consequences.

These core changes would greatly reform the existing Anglo-Saxon model of capitalism and provide the foundations for building support for a new direction for progressive politics. They would pioneer new tools for building a fairer, more dynamic and more stable economy. They could draw on experience elsewhere such as the Alaskan annual citizen’s dividend (financed by a sovereign wealth fund) and the pilot basic income schemes launching in the Netherlands, Finland and France.  Even mainstream economists, including Adair Turner, former chairman of the Financial Services Authority, are now talking up the principle of ‘helicopter money’. For these reasons, parts of the package are likely to prove publicly popular and command support across the political divide. Together they would contribute to a more stable economy, less inequality, and a more even balance of power and opportunity.

 

Stewart Lansley is the author of A Sharing Economy, published in March by Policy Press and of Breadline Britain, The Rise of Mass Impoverishment (with Joanna Mack).