UK Politics

Analysis: Combination of cuts could be explosive

A civil service union leader is warning of strikes. Hundreds of school building projects are being cancelled. An additional £1 billion of spending cuts is announced.

Image caption Public sector cuts are dominating headlines

How can anyone feel upbeat about the future of the public sector with such developments coming thick and fast?

The impact of these events is somewhat magnified in the current climate - as every piece of news that could conceivably contain the word "cuts" is bundled together with every other similar headline.

If we did not know that most departments were being asked to hack 25% off their projected budgets, would there be such focus on redundancy terms for 500,000 civil servants?

Spending squeeze

Would there be such interest in an announcement by the chief secretary to the Treasury of the cancellation of several programmes - some of which had not even started yet? Maybe not.

But when voters find that plans to rebuild their local school may not now go ahead, the reality of the public spending squeeze hits home.

Over the next few months, we will move slowly and steadily from the abstract to the specific.

"Cuts" will cease to be distant billions chopped off budgets that have not yet been defined, and will start affecting real services used by millions of people.

It is still not clear, though, how much these "cuts" will eventually hurt and, whether the benefits might - and I say might - ultimately outweigh the costs.

For instance, will unemployment, as David Cameron predicts, in fact be lower at the end of this parliament?

Will the public sector emerge from the painful crunch stronger and better able to deliver services?

Will the private sector be given the space to grow and energise the economy? Or will the whole process tip us back into recession? There are lots of unknowns.

Scary rhetoric

A 25% cut in departmental spending sounds pretty alarming, 40% (the higher figure floated at the weekend) feels downright terrifying.

But, as we were also told yesterday, no department will actually be cut by 40%.

Asking the various bits of government to plan for such a high figure may just be a way of getting them to look deeper into their accounts, and deliver a menu of options for Downing Street and the Treasury to choose from.

There are those, like the Conservative MP John Redwood, who argue that the government needs to soften the scary rhetoric.

He says that the amount of cash spent by some departments may in fact rise over the next few years. In real terms - after allowing for inflation - the totals fall sharply, as the growth in overall spending is reigned in.

'Efficiency savings'

But, if every government department was handed a bundle of bank-notes every year, those bundles would not be 25% smaller.

So, Mr Redwood argues, the key is getting the government to provide better value for the money it gets from the taxpayer.

Given that public sector costs and prices tend to spiral upwards, we are going to be hearing a lot more about "efficiency" - how to make the money go much further.

But many unions, of course, see "efficiency savings" as code for attacking staff. That is where Monday's warning of unrest by the Public and Commercial Services Union comes in.

The row is about changes to the Civil Service Compensation Scheme - the redundancy package for civil servants.

This has been a long-running dispute. Strikes have already taken place, and the dispute has twice ended up in court. Labour had tried to reduce the redundancy bill.

The argument made by ministers - of the previous government and this one - is that a redundancy scheme that gives staff a pay-off of up to six years their salary is overly generous in the current economic environment.

But, many in the public sector now fear a three-pronged assault. Their pay is being frozen, their pensions may be cut, and now their redundancy protection is threatened.

It might be an explosive political combination.

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