Treasury mandarins are very bright people and especially adept at conjuring tricks.
Their aim, like all good magicians, is to ensure the audience attention is on the theatrical flurry of curtains or puff of smoke, while missing the deception being quietly perpetrated on them.
To that end, they have done a particularly fine job this week for their master, chancellor Alistair Darling who, Janus-like, has had to present two different faces, one to the UK electorate and the other to the global markets.
To the former, he has offered apparent tax cuts in order to reflate the economy. To the latter, in order to protect the pound, he has shown steely determination in plugging the public sector deficit with tax rises and efficiency savings in two years time, ‘once the recovery begins'. Actually, he can promise whatever he wants, because if a week is a long time in politics, then two years is an eternity, especially with a general election in between.
The pre-Budget report is, therefore, a political conjuring trick, with the aim of convincing the public that it is somewhat better off than before, thanks to a benevolent Government, while actually tightening the screw on public finances.
What is certain, and there are no surprises here, is that local government budgets will be further squeezed between declining revenue from charges, rising costs, reduced grant funding and the impact of the PBR changes on national insurance and VAT. The gap will come from further efficiency savings.
Increased efficiency targets were always on the cards, although where the figure of £5bn by 2010/11 came from is intriguing and will, doubtless, be spelled out in the Budget. However, as Sir Peter Gershon himself warned in The MJ last month, the next round is likely to involve more business process re-engineering, or transformation, rather than procurement savings. For consultants, the next couple of years could be halcyon days. As the old phrase goes, there's no such thing as an ill wind…
Michael Burton, Editor, The MJ
