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David Cameron yesterday described the need to make drastic cuts as “critical” and “urgent”. He said that his predcessors in government had “thought the good times would go on forever”, and that not we must face up to the fact that “we have been living beyond our means”. Profligacy and waste “is the legacy our generation threatens to leave the next.” The current situation is “unsustainable”. Now is the time to “face the music” and stand up to the “most urgent issue facing Britain today”.
Cameron was, of course, talking about cuts to public spending. But wouldn’t it be nice if he used the same language, the same gravitas and urgency to talk about need to cut carbon emissions, in order to address the far more urgent, far more dangerous and far more unjust problem of climate change?
We’re often told that politicians can’t take drastic measures to tackle climate change because they are unpopular, or because it would be electoral suicide to talk about the need to make sacrifices. But this whole discussion of the deficit, and what George Osbourne has called the ‘painful’ cuts to come, shows that our political discourse can cope with talk of unpopular sacrifices. So why, if our Prime Minister can make a grave and serious speech about the deficit, can’t he do the same with climate change? If he thinks people can cope with hearing that there will be painful cuts to public services, why does he think that they’ll baulk at the idea of painful cuts to their carbon budget?
At nef, we don’t believe that tackling climate change means sacrificing everything we hold dear. In fact, we’re adamant that the Great Transition to a sustainable economy could result in us living happier, more meaningful lives. But we’d be foolish to say that such a transition would be easy. It won’t be. It’ll be the greatest challenge we’ve ever faced. And yet no politician can be honest about it. None of them are talking as frankly about the need to cut climate emissions as they are about the need to cut spending. Something is seriously awry when we make a huge fuss over the deficit, while the climate on which our economic and social stability depends is getting ever nearer to meltdown.
Lindsay Mackie is a consultant at nef. She is leading nef’s post office campaign and works on Clone Town and Ghost Town Britain.
I’ve always been keen on scanning the skies for new forms of avian life. And as I twitch with other bird watchers, I’ve registered the dark and looming shape of the deficit hawk.
This creature seems to be a bit picky about what it will devour. It swoops hungrily on some prey and whimsically leaves other, fleshy and well padded beasts well alone. It seems to be concentrating its attentions on our publicly owned pastures, leaving the private estates well alone.
Enough with the metaphor. What is happening is that the response to the financial crisis is being dictated by those, in Government and outside it, who believe that the words ‘bloated’ and ‘public sector’ belong together and that the crisis cannot be resolved without first cutting back – 20 % is being mooted – on our public sector. The deficit hawks are currently in control of the skies.
Since the banking crisis began nef has been clear that we cannot resolve our economic crisis without first reforming the banking system. We know that the banking system has decoupled over the past decade from the productive economy. That linkage has to be restored but with a banking system radically re-formed.
The Government seems to agree: Vince Cable said last week that ‘ we have a seriously dysfunctional banking system’. And in case anyone forgets that our crisis came about through banking failure these figures will remind them:
- UK government support package for banks totalled £1.3 trillion
- Combined losses of ten major international stock markets reached $9.5 trillion between the start of 2007 and 2009 , or over 10 per cent of global GDP
We now urgently need another linkage between the programme of public service cuts and the demands we must make of the banking system. These principally refer to availability of credit but also to the establishment of a Universal Banking Obligation which means that the banks offer a service to the millions of people who currently have either no bank account or who cannot get even small amounts of credit for the kinds of economic activity that will help our economy to grow (money for training, for education, for house maintenance, for energy saving).
Only radical reform of the UK banking and financial sector can deliver institutions capable of investment and lending that is economically and socially productive. And a concentration on cutting public spending without this reform will be disasterous for our country.
Image by The Original Ki via Flickr
In times of debates on budgets, dizzying large figures are passed around. What does it really mean to curb back government by £6.25 billion? The numbers can be made a bit more concrete by thinking what you get for the money. Some estimates say the first round of cuts equals losing about 100,000 jobs in the public sector. It also seems that the cuts are just about enough to finance a potential coming round of expanding prisons.
In the run-up to the elections, only the Liberal Democrats were rejecting expanding the UK’s prison capacity. The Conservatives were committed to matching Labour’s plans of expanding prisons by 14,500 beds. In the outlined coalition agreement, any mention of policy on prisons is strikingly missing. This may mean that commitment is being scaled down. Given the Conservatives’ tough stance on law and order, an era of penal moderation seems unrealistic.
The Ministry of Justice recently estimated that the building and running costs of five Mini-Titan prisons could be up to £4.5 billion pounds. These would deliver about half of the planned increase. England and Wales already have the proportionally highest prison population of all Western European countries. After the planned expansions, it would offer Zimbabwe and Tajikistan tough competition in the statistics.
In the current state of public finances, decisions around public spending warrants stronger scrutiny than ever. Are the billions we are disbursing for locking people up really creating a safer society?
A new report by nef studies in depth the consequences of imprisonment of young people and children. The evidence reviewed for Punishing Costs shows that going through prison makes it more likely for released young people to face unemployed, to have unstable accommodation, and to live on a lower income.
Last week I received a call from a director of services from a large London council. Let’s call him Mr Borough. He had just read our latest report, Public Services Inside Out, which makes the case for people and professionals designing and delivering public services together in equal partnership: what we call ‘co-production’. This innovative approach, we argue, results in much better outcomes, often shifts towards a more preventative model of public services and can lower costs. Mr Borough had also been told that he would need to make a 30 per cent cut to his budget within the next three to five years. But instead of heading straight for the nearest pub to drown his sorrows, he was actually excited by what lay ahead. Mr Borough felt that the current ‘squeeze’ on public services represents the biggest opportunity he had ever faced to radically revisit the shape and style of the support he is able to offer people.
Co-production offers such an alternative, as a wider transformation of our public services by bringing new resources – people’s time, skills and experience – into the system.
Mention “co-production” to someone and the chances are most people won’t know what you’re talking about. But although the vocabulary of co-production isn’t well known, the practice of it is increasingly happening all around us. Almost any service can be co-produced: while the actual process and activities can vary, it almost always looks and feels the same as the principles which underpin the approach are manifested in everyday practices, as well as in strategic level governance.
Spending a fortune to prop up the banks but only small change on the urgent transition to a dynamic, low-carbon economy, is like building a crystal palace on sand, then shoving a few bricks under it as an afterthought for foundations.
New investment to match the Government’s rhetoric on climate change amounts to a tiny fraction of 1 per cent of the public support given to the finance sector. Such lack of ambition is counterproductive and a missed opportunity if Alistair Darling wants to pay down the public debt. As the Green New Deal Group point out in their report, The Cuts Won’t Work, productive investment in renewable energy, efficiency and green transport both pays for itself through the economic multiplier effect of spending, and ensures that more people are in work to pay taxes.
That’s without counting the additional benefits of cutting carbon emissions, increasing energy security and tackling fuel poverty. It’s odd that such basic economics is so hard for the Government and the opposition to grasp. History told us that it was when Roosevelt stopped spending three years into his New Deal that things went wrong and plunged the country back into depression. More than with the banks, the biosphere really is too big to fail and we should invest what is needed to maintain it, not small random amounts. Around £50 billion a year on a Green New Deal to create jobs and make the UK fit for a low-carbon future is needed to get us on track. The PBR prescription is more like medieval bloodletting, it is more likely to kill than cure the patient.
Cuts, cuts, cuts… The word is chanted in politics until we work ourselves into a frenzy. We’re transfixed by a large and growing public debt brought on by banking failure. But does it make sense, now, to cut public spending? Can we even afford to? History suggests not.
For three years after Roosevelt announced his New Deal in 1933, regulating the banks and launching a bold programme of public spending, things went well. But then he blinked. Afraid of rising debt, he cut spending – and made the depression worse. It was only later, when there was a surge of production for the war effort, that things turned around again.
Public spending creates jobs and has a positive, “multiplier” effect in the economy. There are more economically active people to pay taxes, in turn reducing the public debt. It is a false economy and counterproductive to cut in a downturn.
It’s also a schoolboy error to think that a national economy should be managed just like a personal budget. Governments can issue and manage money for a wide range of purposes, individuals can’t.
But, of course, that doesn’t just mean the government should go ahead and spend on just anything. On the contrary, some spending can do more harm than good.
It’s hard to be precise, but it’s very likely that most of the benefits from the blanket cut in VAT and the bung given to the car industry through the scrappage scheme leaked out of the UK – not to mention encouraged environmentally wasteful consumption.
Targeted spending, however, in the face of climate change and rising energy insecurity, could do an awful lot of good, creating jobs, cutting carbon and fuel poverty and helping to reduce the public debt.
A new report The Cuts Won’t Work by the Green New Deal group (of which I am a member) shows that earmarking just £10bn in “green quantitative easing” (that is, releasing more money into the economy on the condition it is spent on low-carbon initiatives) could create 60,000 long-term jobs in the energy efficiency sector (a total of 300,000 years worth of employment). The same amount could multiply by five the contribution to the UK’s electricity supply of onshore wind power.
Spending on some things creates more jobs than spending on others. Spend on public transport, housing and energy efficiency and you will create far more jobs, pound for pound, than you would if you opted for unproductive military expenditure. Cancelling the Trident replacement and spending instead on the great low-carbon transition would create 105,000 jobs according to a York University study.
So, should the chancellor implement cuts when he announces the pre-Budget report on Wednesday?
Medieval doctors used to think that the best way to cure patients of a wide range of ailments was to drain their blood. More often than not it killed them.
The government and the opposition parties all need to understand that economic bloodletting will not work. It’s far more likely to kill the ailing, carbon-addicted economy.
Gordon Brown succumbed to mounting pressure from the somewhat unrelenting Tory line on public spending cuts and used the “c-word” in his speech at the TUC conference yesterday. The message was that cuts under a Labour government may be necessary to restore public finances, but they won’t be as bad as under the Conservatives.
Of course, the devil is in the detail and neither party has shed much light on where these cuts will take place. Brown has assured us that “vital” frontline services will be saved from any future belt-tightening, because the cuts will happen in “low priority budgets”. What he didn’t say was how we decide which services are high priority and which are low. In the scramble for votes before the General Election, there’s a risk that all parties will try and score points simply by promising bigger savings and this will narrow the focus of the debate.
Quick fixes will be seen as cheap and attractive. Those services that generate significant social value by way of bringing wider benefits to society but which will not deliver an immediate return to the State may be brushed aside, in favour of those designed to provide a short, but temporary, solutions for our most critical social problems. Already professionals working in children’s services have expressed concern that preventative services – which typically work ‘behind the scenes’ to keep families together, keep children in school, and promote mental and physical health – will be some of the first to go. Yet, the work of these services, particularly in early childhood, has far reaching implications for generations to come, beyond the next term of office starting after the Election.
Consider, for example, nef’s analysis of the social and economic benefits of preventative and early intervention services, released today in Backing the Future: why investing in children is good for us all. Our reseach shows that if we invest upfront to rebalance our system of service delivery towards one that is more preventative than our current model, we can expect to save £486 billion over the next 20 years – even when the transaction costs of making the transition to a new system are taken into account. When compared to conservative estimates which show the UK’s preventable social problems – crime, mental ill health, family breakdown, drug use, and obesity – look set to cost the UK economy £4 trillion over the next 20 years, the case for investment is overwhelming.
And while it may seem like a strange time to be looking to temporarily increase and reconfigure public spending on children and young people, the evidence indicates we can ill afford not to. At the moment it looks extremely unlikely that the UK will meet its poverty reduction targets, it is languishing at the bottom of international rankings of child well-being and the UK has the lowest rates of trust and belonging among 16-24 year olds in all of Europe. The current system of services has got things the wrong way round. It spends much more on children and young people when problems have become entrenched, when they are often impossible and certainly expensive to remedy. Despite being one of the richest countries in the developed world, our society is one of the most unequal and one of the least child-friendly. By not proactively tackling the root causes of our social problems, we have for too long allowed them to become a drain on public resources: the price tag of the UK’s social problems is a third more expensive than the next most troubled nation in Europe.
Even in a time of immediate crisis, any politician worth their vote needs to keep one eye on the future. Out of the ruins of the recession, we need to harness the opportunity to build a stronger society, with fewer social problems. To achieve this, we need policies that can improve the life chances of today’s most at-risk children and succeed in preventing the same root causes of social problems, including poverty and inequality, from having an adverse effect on the next generation. As the details of spending plans are unveiled, we should not be won over by easy political sells at the expense of funding decisions that will put the UK on a trajectory to a stronger, fairer and happier future.
Backing the Future: why investing in children is good for us all makes the social and economic case for switching to a preventative model of services for young people and children. This research was carried out by nef in partnership with Action for Children, whose Executive Director Clare Tickell makes the case for change in today’s Society Guardian.