The costs that count
Senior Researcher
This afternoon, policy pros in Westminster will be poring over spending tables and OBR analysis of the expected costs and benefits of budget announcements. Ink will be spilled on big tax changes and adjustments in spending.
Ultimately, it’s these numbers that matter to the Exchequer and to departments that have pushed to receive a favourable settlement. And it’s already been trailed that the Treasury expects departments to make productivity savings of 2 per cent, amounting to “billions” that could be reinvested in the frontline.
Underlying these totals, however, are the costs we don’t see. If what gets measured gets done, these are — to coin a phrase — the things least likely to get done.
First, we’re bad at interpreting and acting on the costs of regulation.
Attempts to implement ‘one in one out’ or even ‘one in two out’ policies for new regulation have been short-lived and unsuccessful: partly because accounting for the economic costs of regulation is so difficult.
A state that has in many cases outsourced responsibility for service delivery has also, over time, become one that regulates more — imposing serious costs on public and private sector bodies.
Second, time. Governments keen to secure efficiency savings have historically looked to public sector pay and workforce reform. The public sector pay bill amounts to more than £1 in every £5 the government spends. But rarely does it ask, hour-by-hour, what large parts of the public sector spends its time doing.
Hours spent booting up outdated IT or filling in unnecessary admin — cumbersome business case processes and reporting requirements, for example — carries immense costs. Yet a failure to track these costs means they are a second-order priority, despite being some of the most valuable areas to focus on.
Finally, risk. The UK state is one of the most centralised anywhere. As our Policy Director, Dr Simon Kaye, has written, there are “economies of context” that could come with devolving public services, such as healthcare, to a more manageable scale. Yet it’s local decision-makers who are forced to argue this counterfactual to Whitehall, not the other way around.
More often, we should challenge ourselves to consider whether inaction is the costliest choice.
Even if this afternoon’s budget meets its fiscal rules — balancing the books that matter on Horse Guards Road — if government really wants to transform the State, it should consider the hidden ledgers of regulation, time and risk that (without us knowing) end up being the biggest numbers on the scorecard.