The Cost of Efficiency Savings
Of all the dirty tactics that the Conservatives have deployed since coming to power, using the localism agenda as a cover for massive austerity measures has to be one of the dirtiest. Local authorities, which provide the public services that so many people use on a day-to-day basis – social care, housing, schools – have had to suffer devastating budget cuts, and at the same time, they’ve been set up to take the blame for the resulting damage to those services. According to the government, if a council is unwilling to continue running the same level of services on a greatly reduced budget, then that is entirely their own fault. The Tories claim that local authorities simply aren’t efficient enough, and if they could just make the money stretch a bit further, then their problems would be solved
Efficiency is a great buzzword, because it sounds so relentlessly positive. Swapping your old lightbulbs for the energy efficient kind is good for the environment and lowers your electricity bill; working efficiently in your job means that you get to leave the office on time – it’s difficult to find anyone with a bad word to say about efficiency. It sounds fantastic as a way of running public services, until you get down to the details of what it means in practice.
To quote the economist John Maynard Keynes, “whenever you save five shillings, you put a man out of work for a day”. One of the biggest outgoings for a council is the wage bill, so it’s an obvious target for cost-cutting measures, and that translates into redundancies, wage cuts, and reductions to benefits such as pensions. If the only people who suffer are public sector staff, who the media tells us are pampered, under-worked jobsworths, then surely there’s no real harm done?
The redundancy notice can be a personal tragedy, particularly in the current climate, when there aren’t many other jobs to be had and the unemployed are villified as feckless scroungers, because it brings misery as well as poverty. But aside from the personal cost, it doesn’t make economic sense for the government to put people out of work. Efficiency savings will reduce the number of people in an area who are in paid employment, and reduce the incomes of some of those who are working. More people are forced to try and save their own “five shillings” wherever possible, and that starts to put private sector employees out of work too. If all the neighbouring towns are in the same situation, then businesses can’t even look outward for new customers, and the effects are intensified. Less tax is paid, but more public services are needed as the social problems associated with unemployment increase, and if the services aren’t available, communities slip even further into decline.
The Tories claim to have a solution that would save money and improve the quality of services: privatisation. Unlike the (supposedly) bloated and inefficient public sector, the private sector is allegedly more capable of operating efficiently, because the prospect of making a larger profit motivates the company owners to perform better. Whether the private sector is able to deliver the promised improvements or not – and there’s plenty of evidence to suggest that it isn’t – is a matter for another post, but their methods for saving money will be the same: cut jobs, cut wages, cut pensions. The only difference is that this time it makes a bit of money for a few shareholders and company directors. Council workers will suffer, with no improvements provided for service users, and as wages and services start to circle the drain, so do entire communities.
If our new ambition for public services is “efficiency” rather than “quality”, what does that say about our society? Do we only want to help the vulnerable when it’s deemed to be suitably cost-effective? It’s true that our public services aren’t perfect, but the aim of any efficiency drive should be to do more, not to do the same things for less money. This is a tactic which only helps the rich; it will transfer wealth to those who need it least, through tax cuts for the highest earners, or in the profits that investors make from the companies contracted to public services. Don’t believe the argument that efficiency will cut council tax bills for the ordinary, hard-working family: council tax revenues only make up about 20% of a local authority’s budget, while the rest comes from central government, from the taxes on earnings and big business. Efficiency savings will benefit people earning over £150,000 a year, whose income tax George Osborne wants to cut in 2012, without putting any money back into the pockets of people earning the national average wage of a little under £26,000.
As global capitalism lurches towards another crisis, we’re paying the price for ignoring the lessons learned in the 1930s. The only thing we can do now is look at how the world recovered from the economic devastation of the Great Depression and WWII. History has shown us that the economies which came closest to providing for everyone in society were built from the bottom up, creating public sector jobs, so that ordinary people could work for the benefit of their communities, and earn a decent living for it. It’s time to dust off the theories of Keynes, and get the public sector to pick up the private sector’s slack, instead of waiting for it to work the other way round.