UK Tories Begin To Offer Spending And Tax Cuts

by Jason Gorringe, Tax-News.com, London

01 January 2003

On Monday, UK Tory Leader Iain Duncan Smith confirmed that his party was considering spending cuts of up to 20% in central government. The plans had been trailed over the weekend by Howard Flight, shadow chief secretary to the Treasury, who suggested in a newspaper interview that spending in some areas could be cut. Conservative Central Office said it was "relaxed" about Mr Flight's remarks.

The Conservative leader said that all the savings would come from reducing wasteful spending, heading off criticism that schools and hospitals would suffer: "What we are trying to say is, here is a government that is wasting money dramatically," he told BBC Radio 4's World at One.

Prominent think-tank the Adam Smith Institute backed up the cost-cutting possibilities in a letter to the Financial Times from Director Dr Eamonn Butler:

'Sir,

'The shadow chancellor may be cautious about the tax cuts that he could actually deliver, but in principle at least he could make enormous cuts without any reduction in the quality of public services.

'Fifty years of state monopoly has mired health, education and many other services in enormous waste, bureaucracy, inefficiency and cost.

'Competition would squeeze this out - as we saw in the early days of privatisation. Regulators found they could demand 3 per cent, 5 per cent, even 7.5 per cent cuts in utility prices without services suffering, such was the scale of the waste; while the Audit Commission reported that councils were saving an average of 22 per cent by contracting out something as straightforward as refuse collection.

'Savas's Law, named after a New York economist, predicts that savings of 20-40 per cent are commonplace when competition replaces public monopoly. On that basis, the Tories could make 20 per cent cuts in taxes without anyone noticing the slightest difference.

'But they would need to be brave enough to make real and radical reforms that open up public services to competitive supply.'

Mr Flight said he would report on potential savings within weeks. He told The Daily Telegraph: "I am digging through current spending, finding opportunities for cuts. It's too early to say how much, but it could be up to 20%. There is waste going on all over the place, even on MPs' allowances, which are soaring.

"Everywhere there is a massive spraying of money, without it actually delivering anything. I'm not talking about health or education. I'm talking about central government. Think of regional assemblies, for example, huge amounts just pissed away."

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