Down with expectations
Ferdinand Mount
The first time round, it sounded quite impressive. To begin with, the government's White Paper had the inestimable advantage of being presented to MPs by Mr John Biffen, the Chief Secretary to the Treasury. And these days Mr Biffen has the House of Commons nibbling out of his hand. His lucent honesty soothes the Labour roughnecks.
The contrast with Mr Healey is embarrassing; and Mr Healey last Thursday was embarrassing in his own right. He spoke like a man who has never cut so much as a slice • of bread, rather than as the author of the largest and most successful reduction in public expenditure in our island story.
However, in the cold light of dawn —well, of Friday — the cuts did not look quite so savage. Far from being hobbled, public expenditure appeared to be gamely trotting on. Even after allowing for inflation, the Conservatives plan to increase total spending this year by not far short of £3 billion. This total is then brought down to last year's by making generous allowance for overestimating the figures and for the sale of bits of nationalised industry. And next year's reduction is only arrived at by making even more generous allowance for this shortfall — up from£750 million to £1000 minion.
True, the system of imposing cash limits has so far meant that departments do tend to spend less than they budget for, but it is optimistic to assume that this tendency will continue to hold good when they are already scratching around to find ways of saving money. And Mr Biffen prides himself on being 'realistic' rather than optimistic — more realistic than the Prime Minister on the chances of reducing Britain's net contribution to the EEC and more realistic than the Chancellor used to be on the chances of upping production. And he has prevailed. The government now officially assumes that the EEC will continue to cost Britain £1000 million a year and officially expects no growth for ages, and an actual fall in production next year with unemployment rising to 1,650,000 in 1981.
But if government spending merely remains steady while total spending is falling, then the government share of the total must be rising — and so it is expected to, from 41 to 42 per cent of the gross domestic product.
This is not exactly a propitious start to the reduction of the government's role — which the new Conservativism is supposed to be all about. However, your ears may be spared too much on this topic. It is, after all, in the interests of Labour supporters to portray the cuts as being excessively savage, while it is in the interests of the government to illuminate its commitment to thrift; and even sceptics may be relieved to see the bureaucrats' noses at least pointed in the right direction.
The Tories did have to meet election promises to spend more on defence, the police and the prison services, which will come out at over £300 million. Those extra commitments will not recur in succeeding years. The Tories also have one long-term advantage which has not been much described. The Eighties do offer the best opportunity in recent decades for reducing the size of government expenditure — and not just because the political atmosphere haschanged.
Wars cast a long shadow — of domestic neglect and public debt. The length of the inter-war slump, too, contributed to the relative neglect of civil public expenditure between 1914 and 1945.1n the last 30 years British governments of both parties have been engaged in a huge programme of rebuilding. The peak of that mass rebuilding has now passed; it is specific black spots which now demand concentrated effort — psychiatric hospitals, small houses for the old and crippled, by-passes for market towns, maths teachers. In some departments, the demands will grow, particularly on social security where the number of pensioners is still rising — but, on the other hand, school rolls are falling at the same time.
There is then, in theory, no excuse for failure to control public expenditure over the next five years. The real problem is to reduce both the expectations that people have of the state and, much more damaging, the expectations of state servants themselves.
These expectations — which combine expectations of higher pay and personal status with expectations of interesting and grand projects to work on — may be directly and specifically attacked, by ministerial edict. But they must also be diminished in a more gen eral and radical way.
The single factor that most enlarged and ennobled the self-esteem of civil servants was the Plowden Illusion. In 1961 Lord Plowden's misnamed report on the Control of Public Expenditure prescribed that 'decisions involving substantial future expenditure should always be taken in the light of surveys of public expenditure as a whole, over a period of years and in relation to the prospective resources.' At a stroke, the bureaucrat was liberated from counting candle-ends and paper clips; he was a Resource Planner. 'Prospective resources' were so much more ductile and malleable than old-fashioned cash. They could stretch to include any leisure centre or computerisation scheme; all you had to do was to ink them in on your five-year Public Expenditure Survey.
The most painful lesson of the past decade is that the notion of 'prospective resources' is a fiction — not unlike the 'lump of labour' fallacy. There does not exist somewhere an identifiable, immutable amount of money which can be earmarked five years in advance for a list of costly schemes. You cannot forecast how high wages and profits will be in 1984; ergo, even if you assume tax levels, you cannot forecast tax receipts; nor do you know how much it will cost to build a given volume of roads or pay a given number of teachers five years hence. The exercise becomes increasingly unrealistic with each year further into the future that you project your programme for public expenditure. The only effect is to establish and entrench expectations which, if fulfilled, will be taken for granted and, if disappointed, will provoke indignation and cries of 'savage cuts'. Far from aiding governments and local authorities to plan ahead, fiveyear plans deter both foresight and flexibility.
At least, I thought, the Plowden Illusion is dead; even if this government finds difficulty in breaking down the resistance of the bureaucracy, it will not make the mistake of publishing five year plans. No such luck. In his final sentence, Mr Biffen uttered the dread words: 'The Government are also preparing provisional expenditure plans for the years up to 1983-84. These will be published in a subsequent White Paper' — to be published at the turn of the year. There was, it seems, a long Cabinet tussle about this, and the wrong side won. Curiously enough for a shy man, Mr Biffcn seems to be more effective in front of a large audience; and the big spending Ministries, where the civil servants still suffer from the Plowden Illusion, had their way and are now happily playing about with meaningless numbers for the Eighties. No doubt this five-year plan will claim to plot a more virtuous path than its predecessors; we shall be told that restraint in the first year will be followed by further restraint, if not actual decline, in real spending over the following years. But then all White Papers of this sort have plotted a pam with some pretensions to this sort of virtue. For the first year, they say, there are unfor: tunately one or two outstanding items to be paid for; but next year and the year aft!! that, we'll be as good as gold. Unf°!, tunately, next year turns into this year once again there turn out to be one or ec". unexpected, entirely exceptional expenos to be met in addition to the existing Pr g„ ramme. And so you start again fr°1310,7,. higher base. Five-year plans, however m est their intention, have a way of addingare expectations. The quickest way to 1984 a nightmare is to pretend you what itwillbelike.
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