Expenditure? On what? Those of us who pay income tax have been told we will receive a letter from the government. It will reveal where the money goes. 25% is spent on ‘welfare’, but the definition includes pensions for the public sector and benefits to people in work. To most of us, ‘welfare’ means payments made to those of working age who are not in work. Critics argue for closer clarifications. For example, how much of our personal taxation is passed to older people (17%); to the unemployed and those on low incomes (6%); to the sick and disabled (5%); and to families with children (5%). However, this information is only part of the story. We have to add national insurance contributions, VAT, fuel and alcohol duty and . . . capital gains tax. That’s before we get to council tax and the like.
Maybe Canada is an exemplar? The government decided in 1994 to have a ‘programme review’. Every activity was examined to decide if it served the public interest. ‘No’ brought removal. ‘Yes’ moved on to consider whether it was necessary for the state to provide the service or if it should be transferred to the private or voluntary sector. Within three years, the deficit had fallen from 9% of GDP to zero. By 1999, public debt was down by a third and expenditure had fallen by 20%. The UK’s politicians have never told us what they think is the job of government and, more importantly, what it is not for.
What is normal? The new normal as we emerge from the financial crisis is slow growth and continuing low interest rates. For all Britain’s supposed austerity, compared to continental Europe we are still trying to borrow and spend our way out of trouble. Our budget deficit remains the biggest in the European Union, alongside Spain. We may have avoided the depression-like conditions gripping much of the eurozone by failing to practise what we preach. This is limited comfort. If the slide continues in the eurozone, its problems will eventually hit us.
Watch your step at the top. There is a law of marketing fallibility. This says that when a business pauses to enjoy the view from its hilltop is just the moment it will slide down the other side. Winners are likely to be those who renew themselves constantly by listening to, learning from and acting on what the weakest signals in their market places are telling them. Businesses are more open to these indicators when they are stretching to deliver tough targets, even for survival. They know they have to respond quickly. But once they make it, all too often their judgement begins to suffer. Success can be a poor school. It tends to filter challenges and discourages experiments. Too few firms understand why they have flourished and what they must do to sustain that trading position.
Is the system for charities working? David Craig’s book, The Great Charity Scandal, opens a can of worms. He emphasises that this is not ‘an attack on charity itself.’ It is a criticism of the UK’s systems. Nearly 200,000 charities employ more than a million people and spend £80 billion a year. Craig accuses them of duplication and inefficiency. For example, there are four major charities for cancer – and some smaller ones. They all prepare their own accounts and have their own expensive administrations. Why aren’t they forced to merge? Is there a need for at least four charities devoted to red squirrels? Second, often little of what they raise goes into actual charitable expenditure. Some pay out more on pension schemes than on their declared objectives. Third, what we think of as charitable work is not always the same as many charities consider to be proper pursuits. For example, lots of them spend substantial sums on political campaigns. None of this would matter much if the charities were funded by the post-tax income of private individuals. But that is not the situation. Craig estimates that 27,000 British charities depend upon government for 75% of their income. All rely on the taxpayer one way or another. We and the European Union give them direct subsidies. They receive our tax relief, gift aid and lower business rates on properties they occupy. HM Treasury must reallocate around £1 billion a year to our chosen charities. There is minimal control. They get our money and can do more or less as they like.
Time. ‘The supply of time is totally inelastic. Time is totally perishable and cannot be stored. Time is totally irreplaceable . . . there is no substitute for time.’ Peter Drucker in The Effective Manager. 1909 – 2005.
Everything. ‘All government – indeed, every human benefit and enjoyment, every virtue and every prudent act – is founded on compromise and barter.’ Edmund Burke (1729 – 97). British statesman, orator and writer.