After Osborne's spin, it's time to bring parliament and the public into the spending process

Institutional reforms can reduce the extent to which short-term tactics trump long-term thinking.

As with most spending rounds in recent history, George Osborne’s announcements last week were as much about politics as economics. It was, as the BBC’s Iain Watson noted, a nakedly political exercise, intended to define the battlegrounds for the next general election. In addition to electorally popular protection for schools, pensions and the NHS, the Chancellor attempted to lay a series of traps for Ed Miliband and Ed Balls on social security. It shouldn’t be a surprise to any of us that spending rounds are conducted like this, but it should be a disappointment.

The British economy is still very far from healthy and the government that wins the election in 2015 will still face incredibly grave fiscal challenges. We cannot afford for sound economic policy to be subordinate to the desire for soundbites and election tactics. That’s why parliament and the public have to be brought back into the spending process.

Consider the 2010 Spending Review. It was probably the most important political event of the parliament but it was the result of a rushed and secretive process and was subject to the bare minimum of scrutiny, with the Treasury select committee carrying out a one month inquiry on its content. The Fabian Society Commission on Future Spending Choices today publishes its first report, Spending Wisely, and calls for a comprehensive package of reforms to strengthen the ability of parliament and the public to hold the chancellor to account for the spending decisions he makes.

We think the public should have access to much better information about public spending, so they know where their money goes. One option would be a Citizen’s Tax Statement, which we think would reassure many people that most government money is spent on priorities people share.

Next we recommend that future governments set out 'draft' plans for consultation in advance of major spending decisions. Pre-announcement leaks to friendly journalists and running commentaries on cabinet negotiations just aren’t good enough. If we want proper scrutiny of spending decisions it is vital that parliament, policy experts and the media are given the chance to comment on relative priorities, review the evidence and rationale informing decisions and highlight unforeseen consequences. In fact, ministers ought to welcome this change as it would give them the freedom to change their minds without being accused of a humiliating climb-down.

Alongside this draft  we also propose a new long-term spending statement, which would require the government to explain its thinking on the direction of public spending over 10 or 20 years. Subsequent year-by-year decisions would then need to relate to this multi-decade perspective, or minsters would need to explain why not.

The commission suggests that the Office for Budget Responsibility should become a servant of parliament, charged with giving MPs the firepower to hold the chancellor and ministers to account. The OBR emerged in 2010 from a Conservative election manifesto promise and has transformed how fiscal policy is debated. But it focuses on the announced policies of the government of the day, so is unable to aid parliamentarians in weighing up the merits of alternative approaches. For the sake of good governance, its remit could be expanded, so that it is more like the US Congressional Budget Office. Finally parliamentary scrutiny might be strengthened by the creation of a separate Budgetary Committee, easing the burden on the chronically overworked Treasury select committee.

But simply scrutinising the spending allocations is not enough. The commission also calls for a new institution to advise on how to get more out of public spending. We propose the creation of an independent Office of Public Performance to police the quality of public spending and to help build public trust and understanding. Its aim would be to ensure that when decisions are made, as much attention is focused on what they are intended to achieve, as what they cost.

Politicians won’t stop being politicians. But institutional reforms can reduce the extent to which short-term tactics trump sound, long-term thinking. The public need to have confidence that decisions are being taken for the right reasons and the only way for that to happen is to shine more light on the murky process of setting budgets. 

George Osborne leaves 11 Downing Street in London on 19 June 2013. Photograph: Getty Images.

Andrew Harrop is general secretary of the Fabian Society.

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By refusing to stand down, Jeremy Corbyn has betrayed the British working classes

The most successful Labour politicians of the last decades brought to politics not only a burning desire to improve the lot of the working classes but also an understanding of how free market economies work.

Jeremy Corbyn has defended his refusal to resign the leadership of the Labour Party on the grounds that to do so would be betraying all his supporters in the country at large. But by staying on as leader of the party and hence dooming it to heavy defeat in the next general election he would be betraying the interests of the working classes this country. More years of Tory rule means more years of austerity, further cuts in public services, and perpetuation of the gross inequality of incomes. The former Chief Secretary to the Treasury, Seema Malhotra, made the same point when she told Newsnight that “We have an unelectable leader, and if we lose elections then the price of our failure is paid by the working people of this country and their families who do not have a government to stand up for them.”

Of course, in different ways, many leading figures in the Labour movement, particularly in the trade unions, have betrayed the interests of the working classes for several decades. For example, in contrast with their union counterparts in the Scandinavian countries who pressurised governments to help move workers out of declining industries into expanding sectors of the economy, many British trade union leaders adopted the opposite policy. More generally, the trade unions have played a big part in the election of Labour party leaders, like Corbyn, who were unlikely to win a parliamentary election, thereby perpetuating the rule of Tory governments dedicated to promoting the interests of the richer sections of society.

And worse still, even in opposition Corbyn failed to protect the interests of the working classes. He did this by his abysmal failure to understand the significance of Tory economic policies. For example, when the Chancellor of the Exchequer had finished presenting the last budget, in which taxes were reduced for the rich at the expense of public services that benefit everybody, especially the poor, the best John McConnell could do – presumably in agreement with Corbyn – was to stand up and mock the Chancellor for having failed to fulfill his party’s old promise to balance the budget by this year! Obviously neither he nor Corbyn understood that had the government done so the effects on working class standards of living would have been even worse. Neither of them seems to have learnt that the object of fiscal policy is to balance the economy, not the budget.

Instead, they have gone along with Tory myth about the importance of not leaving future generations with the burden of debt. They have never asked “To whom would future generations owe this debt?” To their dead ancestors? To Martians? When Cameron and his accomplices banged on about how important it was to cut public expenditures because the average household in Britain owed about £3,000, they never pointed out that this meant that the average household in Britain was a creditor to the tune of about the same amount (after allowing for net overseas lending). Instead they went along with all this balanced budget nonsense. They did not understand that balancing the budget was just the excuse needed to justify the prime objective of the Tory Party, namely to reduce public expenditures in order to be able to reduce taxes on the rich. For Corbyn and his allies to go along with an overriding objective of balancing the budget is breathtaking economic illiteracy. And the working classes have paid the price.

One left-wing member of the panel on Question Time last week complained that the interests of the working classes were ignored by “the elite”. But it is members of the elite who have been most successful in promoting the interests of the working classes. The most successful pro-working class governments since the war have all been led mainly by politicians who would be castigated for being part of the elite, such as Clement Atlee, Harold Wilson, Tony Crosland, Barbara Castle, Richard Crossman, Roy Jenkins, Denis Healey, Tony Blair, and many others too numerous to list. They brought to politics not only a burning desire to improve the lot of the working classes (from which some of them, like me, had emerged) and reduce inequality in society but also an understanding of how free market economies work and how to deal with its deficiencies. This happens to be more effective than ignorant rhetoric that can only stroke the egos and satisfy the vanity of demagogues

People of stature like those I have singled out above seem to be much more rare in politics these days. But there is surely no need to go to other extreme and persist with leaders like Jeremy Corbyn, a certain election loser, however pure his motives and principled his ambitions.

Wilfred Beckerman is an Emeritus Fellow of Balliol College, Oxford, and was, for several years in the 1970s, the economics correspondent for the New Statesman