Time to come clean

[Albus]

http://www.guardian.co.uk/commentisfree/2009/feb/09/taxandspending-policy

We're not seeing a return on higher taxes. But those who make a tidy living from public money won't admit it

According to a poll (Excel file) from last September, 59% of the public think more than £20 of every £100 the government spends is wasted. There is a simple reason why. Now recession has set in, the public feel weighed down by the burden of higher taxes, but don't see a corresponding improvement in the public services.

The Institute for Fiscal Studies' recent Green Budget highlights (pdf) how exceptional the increase we have seen in public spending is compared to other countries. We have gone from having the 20th highest level of public spending in the OECD, as a share of national income, in 1996 to the tenth highest level in 2008. Twenty-one of 28 OECD countries recorded a reduction in government spending as a share of national income over that period. The only country that increased public spending more than we did (South Korea) started from a much lower base.

Ordinary people pay a price (pdf) for that spending – whether they're paying higher taxes, facing increased charges for basic services like car parking or contemplating a vast national debt. Businesses are also suffering, and now face (pdf) the eighth highest effective average tax rate in the OECD. That hurts long term economic growth; researchers at the European Central Bank have found (pdf) that a percentage point increase in government spending as a share of GDP results decreases output growth by 0.12 percentage points.

It is hard to find evidence for a decent return on that massive outlay. The most respected international comparison of educational standards, the OECD PISA, suggests Britain has failed to keep up. Between 2000 and 2006, Britain fell (pdf) from fourth to 14th in scientific literacy, from eight to 24th in mathematical literacy and from seventh to 17th in reading literacy. While the NHS is slowly gaining on its peers, the pace it is catching up at hasn't really changed since at least the early 1980s.

If we are increasing spending rapidly compared to our peers and that isn't being accompanied by a significant improvement in the results we get, then something is going wrong. That is confirmed by official attempts to get to the bottom of what is happening with public sector productivity. NHS productivity is falling (pdf), according to the Office for National Statistics.

Beyond that, there are clear examples of wasteful spending and a growing bureaucracy: regional development agencies that have been expensive failures (pdf) since they were established in 1999; big government projects (pdf) like the NHS National Programme for IT overrun by a third on average (including those where the size of the order has been cut); councils have increased (pdf) eleven-fold the number of staff they employ who earn more than £50,000.

Trying to improve the efficiency of public services is in the interests of taxpayers and those using public services. Whether you are depending on the NHS for treatment or paying for it via your taxes, you won't want the NHS spending billions on computer systems that many trusts now don't even want. That is money that could be spent on much-needed drugs or on cutting your taxes.

The first step in trying to deliver more efficient public services is greater transparency – so that the public knows how its money is being spent – and proper criticism of those who waste taxpayers' money. The only people who don't have an interest in that happening are those who have made a tidy living, with little accountability, in public sector organisations and those who place their ideological commitments to old-fashioned ways of delivering public services above getting good value for taxpayers' money.