How to waste while saving waste

Last week the Taxpayers Alliance published some interesting figures on their website. These concerned the "success" of the Government in reducing the costs of Government.

In 2004 Gordon announced a cost reduction scheme, which he claimed would cut civil service posts by 70,600 by 2010 and save some £20 billion through this and other efficiency savings. This was in response to the Gershon report, which had pointed the way to such savings.

In October 2007, well before the target date, the new chancellor announced that the £20 billion cuts had been achieved. Unfortunately, the National Audit Office was quickly able to show that the true figure was nearer £5 billion. The new chancellor had been using the well-honed techniques of the old chancellor. Still, £5 billion is a considerable sum.

Even within this figure there are doubts. For instance, in many cases there was a reduction in service standards. In hospitals length of stays for treatment have been reduced, with patients discharged more quickly. Unfortunately the consequences are that emergency readmissions have soared and reduced the impact of savings through shorter stays.

Some half baked schemes for savings have actually generated extra costs. So in DEFRA cuts attempted by the Rural Payments Agency actually cost tax-payers £600,000 , quite apart from the delayed payment costs to farmers from the shambles. The hasty marriage of Inland Revenue with Revenue & Customs, and massive staff reductions, have resulted in lost data which has been expensive to neutralise and protect.

We would hope that most of the staff savings in all departments would be by natural wastage and staff transfer. In fact 7,717 civil servants were paid £432 million in redundancy payments. The Boss of the Government Commerce Department received £612,000, when he retired as chief executive, aged 54.

One problem is that a special high-paid section is in charge of delivering cost savings, working away and publishing long reports and plans. This unit has an even more highly paid boss.

The problem with a (Government) bureaucracy is that it is generally a cost increasing machine, even when it is trying to reduce costs. They, and the Government, are reluctant to dismiss colleagues except with generous severance packages. They are fighting institutions where the measure of success is size, whether budget or staff, because for salary or prestige reasons those at the top have no other ways of gaining or deriving personal significance. Each department and section is unique, and no competitive or comparison pressures help to keep costs down

Bureaucracy is one 0f the most significant cost raising machines known to us. Brown was always going to lose, especially as he operates a bureaucratic centralised system. Using bureaucracy to reduce bureaucracy is doomed to fail. We can only hope that the Conservatives, who a few years ago produced their own report under Lord James, will have learned the lesson.