Bring on the squeeze, it can make us better

Sunday October 25 2009

Perhaps the most profound human instinct, after the desire for food and sex, is the urge to ignore unpleasant truths in the hope that eventually they'll go away. It's our innate and misplaced optimism that leads us to trash the planet, or fail to start a pension plan, or leave unopened brown envelopes in an unsteady pile by the stairs. Something will turn up to solve the problem, we think, so we needn't worry about it now.

We couple an insouciance about the future with a stern analysis of our past failings. We marvel at our collective blindness about the dangers of the credit bubble. But just as we were deluded then, we are dangerously deluded now. The public finances are in deep trouble, with Friday's figures showing that Britain is in the worst recession since records began. Yet somehow the majority of us have taken the view that although we know there is pain to come, that pain needn't be great. We conveniently believe that although others may have to suffer, the spending squeeze to come needn't, or shouldn't, affect us.

From the public to the lobby groups, everyone hopes to be sheltered from any coming storm. There were a couple of bald examples of that on offer last week. The chief executive of the Arts Council said any future government must continue to fund the arts at their current level, no matter what the economic climate, because the arts were "a key part of any civilised government's mission". The Cambridge professor who has just led a three-year review on primary education was equally adamant that junior school spending must be maintained because it was an investment in the nation's future and "a rich country should do no less".

In this they echo every interest group I have talked to in the past month. The disabled claim their budgets for independent living must be preserved as a matter of human rights; the charities running hostels for the homeless say they must be funded in the name of social justice; the organisers of holiday play schemes and youth clubs say they must be maintained because they cut crime, depression and antisocial behaviour.

If the providers of services don't see why they should suffer, nor do the consumers. Ipsos Mori polls show that three-quarters of the public don't expect public services to get any worse, despite our increasing national debt. They think services are at present so badly run that efficiency improvements alone will deliver most of the savings the government needs. Only a quarter believe that public spending will have to be reined back.

We are living through the equivalent of a phoney war. We think we've already experienced the shock of the crash, but just now we are floating on a sea of money released by the government's programme to keep the economy afloat. We're not prepared for the fact that when the supply of money is turned off, as it will have to be in the next couple of years, some sharp rocks are going to be exposed.

It's the independent think tanks, not the politicians, who are sounding the alarm. The Institute for Fiscal Studies has analysed the Treasury's plans for bringing down public debt over the eight years from 2010. The IFS says these figures show that the spending squeeze to come will be harsher than at any time since the 1970s, when Britain was forced to slash spending in return for taking huge loans from the International Monetary Fund. All Labour's spending increases since 1997 may have to be entirely reversed in order to plug the widening gap between the government's expenditure and its income. The country will have to choose between tax rises, welfare cuts and fewer services and the IFS warns that making these choices will be painful.

A second think tank made even grimmer predictions last week. The National Institute for Economic and Social Research said that while the country must continue to spend and borrow for the next 18 months or risk a depression, the cuts that should follow would have to be so draconian that politicians would find it impossible to make them. Cutting public sector staff, including health workers, teachers and police by 10% and freezing public sector pay for five years would produce twothirds of the necessary savings. The sharp decline in the quality of public services that would follow would be immensely damaging to the country.

The alternative would be to raise basic rate tax by 7p in the pound, extend Vat to cover everything but food and children's clothing and still be left with a funding gap. The institute claimed that no politicians - not even the Tories with their message of austerity - were facing up to the stark choices ahead.

This sounds like a forecast of unrelenting gloom. In fact, it may be an opportunity if only we have the will to seize it. Clearly if we keep schools, libraries and day centres operating just as they do now, but with much less money, they will become as tattered, depressing and depressed as they were in the Thatcher era. Instead, we have to be imaginative - and not before time.

Even before the economy was hit, our public services and our attitudes to them needed to change. The systems aren't designed for an ageing population, nor one that has to respond to climate change. Worse, an unhappy dynamic has been created over the past dozen years in which a slightly truculent, increasingly demanding population with a sense of high entitlement has faced a set of rather weary, micro-managed and centrally directed doctors, teachers or benefit staff.

We have got used to thinking of ourselves as consumers who have no reciprocal responsibilities - which is not a good way to behave in a public space. A few weeks ago I passed three teenagers who were getting up from a bench and leaving their Coke cans and chip papers behind. I asked whether they'd mind putting them in the nearby bin. They looked at me, affronted. "Not my job," said one. "That's what the rubbish sweepers do."

The model of "we pay, you serve and central government directs" hasn't delivered the good society. All parties now recognise it. They're falling over themselves to suggest that localism, innovation and public participation are the answer. The Tories were there first, planning to use online information and mutual responsibility to change how services work. In Maidenhead, Berkshire, for instance, all council buildings show their real-time energy consumption online. That has already delivered a 15% cut in power use as embarrassed employees turn off lights and computers when they leave offices.

If the Tories take power, that model will be applied to a whole swathe of government information, with the public scrutinising salaries and spending, taking part in decisions about priorities and feeding ideas to officials. The senior Conservative aide I talked to was emphatic: if people were willing to participate wholeheartedly, the economic crisis could be a catalyst for transforming and improving services, not for making them worse.

This is an audacious aim. Anyone with experience of government talks of the near imposssibility of pushing through change, the obstinacy of the Treasury and the dead weight of customs and entrenched interests. But it's more convincing than Labour's deathbed conversion.

For a dozen years it argued that more money was the key to better public services. When it claims now that pilot projects in cities such as Manchester are showing radical ways to cut duplication and waste, the anxious voter just wonders why Labour didn't act before. The parties have been reluctant to spell out the mess we are in for fear of making themselves unpopular. We won't get through it, as we have in the past, by leaving the politicians to deal with it alone. We have to participate in these decisions; we have to take responsibility. It's going to be our problem, too.