The Chief Secretary to the Treasury, Danny Alexander MP, has announced that government departments will be required to hold 5% of their budget as a contingency.
Government departments are being asked to identify billions of pounds of potential new savings as part of plans to tighten financial management.
Chief Secretary to the Treasury, Danny Alexander, says they must identify 5% of their budgets which can be cut if needed to deal with unforeseen events.
Departments will also have to monitor and share spending information with the Treasury on a monthly basis.
As we know, the MoD budgets is as tight as a drum, the annual shennigans of the Planning Round and volumes of UOR’s is testament to that, what impact is this going to have?
Read more here
http://www.bbc.co.uk/news/uk-politics-17809650
Where have they found the £10 Billion for the IMF?
Perhaps that is one of those unforeseeable events then, the need to bail out a currency union we aren’t a member of
BOHICA!
could the MoD claim the saving from a faster draw-down of operational costs in Afghan?
just claim the 5% as assets tell ‘em we’ve got a deal going with withams!
I’m sure this govt is testing the underground command bunker and is cut off from any human contact, the labour manifesto should just be made of newspaper cuttings of this lot’s arse decisions
5% of MOD’s budget, per year(£2bn) or over life of Parliament (£10bn)? Well since Trident is going onto the MOD’s budget, that could be the first thing on the list for the 5% buffer! I am not anti-Trident, but Treasury are going to look like a right bunch of pillocks if MOD throws that back at them. It is not as if you can get £2bn-£10bn without cutting anything major, having already done a round of cuts!
given the past cut was just 8% I would imagine a further 5% would be devistating. As I understand they are only asking for departments to identify potential cuts rather than make them.
I don’t think they could use a faster drawdown from the stan as this comes from the treasury contigency fund not the mod budget (apparently)
Cutting Tornado, Army down to 75,000 and laying up the entire amphib fleet seems about all that is left to cut.
The IMF money is borrowed. But as yet its only pledged rather than given.
“Where have they found the £10 Billion for the IMF?”
Australia, Korea, Singapore. Not sure if there are more.
@ Observer – The £10 billion is just our but the rest are on the hook for $430 bn total.
@ Martin “As I understand they are only asking for departments to identify potential cuts rather than make them.”
This is just salami slicing by another name, something the MOD is meant to stop doing. Delaying the carrier build because they needed £300m to meet ‘unforseen circumstances’ leading to £1.2bn extra costs, is a perfect example. If they said this money had to be uncommitted cash, it would make more sense and in the short term effectively means the MOD needs to find another 5% in savings unless Treasury stumps up the extra cash.
I can’t see the other Government Departments being better off. It is a seismic policy shift that sounds good to the media, but completely f***s up financial planning across the board (unless it does not come into effect until 2015). Imagine being told by the bank that you need to keep 5% of your outstanding mortgage in your current account for contingency circumstances!
Well, it was a “Damned if you do, damned if you don’t.” choice. If the eurozone tanks, the whole region will get dragged under too, and the whole world will follow suit. So to them, it was the choice between the carriers or the economy.
Sucks to be them.
@ Desk Jockey – I totally agree. I really think Osbourne is sticking with the cuts not from a desire to save the UK’s fiscal position but in an attempt to reduce the size of government based on some neo conservative ideology.
Its getting to the point that cuts are doing more harm to our credit rating than good. The government should continue to cut the core budget but at the same time unvale a stimulus plan for infrastructure. If we can borrow at 2% then surely it makes sense to forinstance move up the schedule for the new high speed rail system from 2032 to 2022 and possibly extend it all the way up to Glasgow and newcastle. Not to mention getting their thumb out of their arse and building 8-12 new nuclear reactors.
I agree we need to chip in with the Euro resuce. Japan has stumped up $60 bn and given the fact there debt level is 3 times ours I suppose we have gotten of lightly.
during the last round of cuts several departments were protected from any cuts, including our overseas aid budget (actually increased) plus i think health and possibly welfare? it’s been suggested before, but get the MoD to claim back from this aid budget the costs of any humanitarian operations its forces (i guess principally the RN?) are called upon to perform.
as for the IMF money, well it’s not new as such, it was passed through parliament a while back that the chance-alor (!) could give up to £12 billion more without further act of parliaments if needed. why now i don’t know, i’m afraid economics bores me to tears most of the time, but form all the guff coming from the EU etc. i thought they had solved all their euro-zone problems. no? quelle surprise …
“Perhaps that is one of those unforeseeable events then, the need to bail out a currency union we aren’t a member of
”
I think that’s not a bailout, but a deposit needed to keep the voting rights in the IMF. An enlargement of the IMF’s capital stock leads to a new distribution of voting rights if not all members pay up proportionally.
So whatever the UK gave to the IMF was about a tiny amount of influence, the IMF’s allocation of those resources was only the occasion, not the reason for the UK’s contribution.
Hi S O,
Thanks for that, so they did not count the SLBMs (neither do they do that in the UNSC); just the money
“I think that’s not a bailout, but a deposit needed to keep the voting rights in the IMF. An enlargement of the IMF’s capital stock leads to a new distribution of voting rights if not all members pay up proportionally.”
@ Desk Jockey – “I am not anti-Trident, but Treasury are going to look like a right bunch of pillocks if MOD throws that back at them.”
Haha, very much agreed.
@ Martin – “I really think Osbourne is sticking with the cuts not from a desire to save the UK’s fiscal position but in an attempt to reduce the size of government based on some neo conservative ideology.”
If he was then i would cheer him all the way down the damned aisle. An advanced western nation with a declining technological (hi margin) and declining demographic (hi output) advantages should not be spending more than 40% of GDP on gov’t services.
Do so is literally destroying the long-term growth that is the only thing able to preserve our standard of living for our children.
Given that the economic cycle can wreck tax receipts (7% of GDP or therabouts) and that a stable spending regime is desirable (can’t just stop writing cheques), that means Gov’t spending at the heigh of the economic cycle should be somewhere around 33% of GDP.
The problem is that UK government debt as a percentage of GDP is now the fourth highest in Europe. Classic.
What annoys me is the concept that in order to balance the budgets every department should be cut equally (5%). That’s just lazy financial planning that basically palms off the decision making to lower orders.
What’s needed is for someone in a central position to grab the bloody bull by the horns and start working out what each department needs and what we can live without.
If that means a government taking decisions that will almost certainly get it unelected at the next election, then so be it.
Hi Desk Jockey @ April 23, 2012 at 1:53 pm
RE “It is not as if you can get £2bn-£10bn without cutting anything major, having already done a round of cuts!”
- a good one
- throw back,both the design costs and the long-lead items up to 2021 (possible start of construction, that is), and you get a round £ 7bn back
… after all, it is a political decision
- so why should the MoD be cutting back, in anticipation, and actually have a Bobby on the Beat (with a side arm attached!) should the decision be to
- scrap that, and
- go back to conventional forces/ deterrent
at the time (hey! only slightly making it up; the next Parliament)
@Martin High speed rail won’t be going to Glasgow if the Scots vote for independence.
http://www.independent.co.uk/news/business/news/mod-set-to-overhaul-trident-subs-7668817.html
So some of the savings might come from this or not…
Jedi-b @ 5.09
So when was the top of this economic cycle you are talking about?
Dave the Rave and Sniffy are a choice pair of wallopers.
They are economically illiterate.
They survive only because they represent the upper middle class, dog boiling, establishment with their friends in the media.
Now that they have lost NI / Monkey Glands it will be interesting to see how they fare with a hostile media – he has never rated them and now he blames them for the loss of BSkyB and the every interesting inquiries.
All the past 2 years have taught us is the the paradox of thrift is alive and well, the lessons of the 30′s have been lost, the bankers caused the problems but the poor / the unemployed and the poor are the ones who will have to pay and that an expansionary fiscal contraction is the biggest joke every hoisted upon an electorate since I do not know when.
X,
It might well, depending on how you budget. That and a single-class CMC build after Astute per hint-droping in the RN yearbook. But that seems an obvious start at putting this back in Georgie Porgie’s face.
Clinch,
The Scots, at least those in the population belt bw Edinburgh and Glasgow, are pragmatists. I’m not sure even Call Me Dave can piss them off enough to provoke an intemperate response. And he may even be trying for that (Scotland, after all, costs money and for a Bullingdon Club sort like Dave and the other bloke on this govt’s sofa, Osborne, expense that doesn’t show off your power is the worst of sins, even ahead of fuss. That’s not a brush to tar all Conservatives with, just these two bumbling High Tories who are running the country.) Besides the Scottish issue could be solved at a stroke by my proposed Operation Mars Bar, the Salmond snatch raid. It involves combat landing a Hippo BARV, and two frame-reinforced Chinooks flying in tandem with a special load bearing pallet underslung the pair of them for extraction of the HVT. Now I could just point at a picture of the wee piss stain and chant “you fat bastard!” But that’s just so much less milbloggy….
ACC @ 5.21
What is the going rate for “Son of Trident”?
Surely it is a cut a shut job on a properly sorted Astute Mk2?
The report linked on here a month back had some incredible costings in it. Is VFM / reality never on the agenda?
Hi FBOT,
RE “What is the going rate for “Son of Trident”?
Surely it is a cut a shut job on a properly sorted Astute Mk2?”
- I don’t know (but I have linked all the estimates, as they have been reported)
The latest amazement was that the new SSBN would actually be larger than the current ones
- based on Astute design; good
- that CLC -design is a “biggy” regardless of how many tubes you actually keep (dimensions, that force out the boat dimensions)
On the issue about the “£10 billion to bail out a currency union we’re not part of,” I don’t like the Euro but the simple fact is if it goes tits up then there will be a global depression on a far bigger scale than the 1930′s. It’s not the best choice but that’s the situation we’re all in
Surely the 5% option for the MOD is the option to sell our nukes to the Iranians…
“What annoys me is the concept that in order to balance the budgets every department should be cut equally (5%). That’s just lazy financial planning that basically palms off the decision making to lower orders.”
It’s been proved to be the most practical way of cutting a budget. Any more superficially sensible way leads to a lot of inter-agency infighting and extreme fights against every tiny cut.
A x% haircut for all can easily be communicated to the public and can easily be enforced. The treasury/PM simply tells the ministries that they get only so much and need to figure out what to spend it for by themselves. No discussions.
@Oncoming Storm:
I’m not convinced that a drop of Greece and Portugal out of the Euro would be a deterioration at all. After their drop-out the ECB could print some money, proportionally for all remaining member countries (= buy low interest rate bond). That could create some surprise inflation, but it would also address financing issues for a while and re-establish the central bank as lender of last resort.
That would be the short-term repair for the liquidity perils; they’re after all based on the lack of a lender of last resort.
Really is tired of pointing out government spending is £60bn higher under the coalition.
Defence has of course suffered, but every other department is full steam ahead (with the possible exception of the police)
Hi Repulse,
Your quote for the option was rejected. Because the volatility in the number of nuke owning countries is so low, only 2.5% premium is available for that option… so sorry
“Surely the 5% option for the MOD is the option to sell our nukes to the Iranians…”
SO
That implies EUrope has a liquidity problem.
It does not, it has a solvency problem.
Assets of five and liabilities of ten = bankrupt
DominicJ, that is nonsense. Governments do not need to have equity capital. Trust me, I’m an economist.
Our governments have a liquidity problem because of a self-reinforcing spiral upwards of the interest rates they need to pay. Higher rates because of higher perceived risk (risk premium) => greater risk of default => higher rates … rinse and repeat.
This self-reinforcing cycle is coupled with another self-reinforcing cycle; everything looks worse if your economy is worse off, and the worse it looks, the more degraded the economic performance. This also affects the austerity policies.
“It’s been proved to be the most practical way of cutting a budget.”
?? Where? By who? That’s a rather speculative statement you’ve made. If it is such a well proven method then a) where is the theoretical framework that encapsulates the school of thought and b) why is not every nation affected taking this approach?
It’s nothing more than a fudge that protects governments from having to do hard ground work and make unpopular but critical decisions.
Chris, it’s been done in many if not most European countries over the last decades. Germany and its states did it, too.
There’s no need for a theoretical framework. I wrote it’s a proved “practical” way.
In theory, it’s utterly inefficient unless you include much more variables than any model should have.
@ Jackstaff re single class
Won’t happen. As I have said before there are reasons why Vanguards are that big. The big savings as Astute has shown in sharing reactor and other technologies etc. You can’t expect a Transit to carry the same load a 7.5t lorry…….
S O said “Trust me, I’m an economist.”
Chris B, Jed, and I do the funnies around here matey.
@ S O
Really? I don’t remember seeing that perscription being handed around the whole of Europe.
You said it’s been proved as the most practical method, which means that if true then someone would have sat down and codified it into an economic model for others to use. Or even better, would have sold it on in book form as a perfect economic handbook for governments.
Back in reality, all you’re doing is forcing an inefficient cut in resources across every department. If you’re cutting money then there has to be a reason why, that why being to meet a target sum of savings.
You do not reach the best balance between achieving that target while minimising disruption to the wider economy by just telling each department that they have to cut an arbitrary percentage from their budgets.
Rather, you identify how much money you need to save and then you find the right areas to cut across the broad spectrum of government.
I think something we can all agree on is that the two aircraft carriers, and the one hundred F35C, should be protected at all costs.
This 5% cut is a little like the governmnt saying “dammit, we forgot to factor in the self-fueled inflation we created with our quantitive easing”.
Actually Chris, SO has a point. If there was an audit on what to cut, a government with a history of departmental infighting is going to explode in a smear campaign and a “to the death!” defence of their hobby horses, a “divine fiat” declaration has the advantage of skipping the drama and force internal cuts instead of departments looking to cut other departments. Sad but true, we all have our hobby horses.
BB,
I wish ’twere so and “at all costs really shouldn’t enter into it, even from within HMG’s overall budget there are funds to work with. That will, sadly, launch another round of debate (wait a maximum of three comments) but there are a number of strategic choices like that, not just in defence, that could be funded simply by turning aside this blanket approach, stopping with the austerity-for-its-own-sake (the other way to pay down debt is by generating more GDP and setting up structured funding lines for repayment S. Korea style, not to mention getting the b(w)ankers to pony up for the trillion quid on top they caused in ’08.) But those are quite beyond the scope of what Georgy Boy is trying to accomplish.
X,
“Chris B., Jed and I do the humour around here matey.”
I shall go into the garden and eat worms….
@ Jackstaff
Sorry. I knew when I posted that I would offend somebody. I was thinking who else, who else?Remember before you eat the worm to squeeze the worm between thumb and forefinger and pull it throw the pinch to expel the bile.
X,
‘S all right, mate. Just a fine opportunity for a miniature wind up. And a very good point about worm consumption. Reminds me for some strange reason of a gastronome friend of Mexican descent who told me a well cooked tarantula tastes just like crab. That’s one of my favourite foods spoiled, then :p
BB again,
I think its a compelling campaign slogan: “carriers with aircraft on them; so crazy it just might work.”
@ Observer
The problem with enforcing mandatory, fixed percentage cuts across every department is that you end up with one of two situations;
1) You don’t cut enough money, because 5% of each departments budget isn’t enough or,
2) You cut too much, because 5% of each departments budget results in an excess of savings, meaning that services than need not be cut are cut for the sake of “fairness” leading to inefficiencies.
An “economist” like S.O. should grasp this concept fairly easily.
I’m not saying it’s easy to do and it needs a strong central hand that is prepared to wield the axe where needed, but it should result in a more efficient program of cuts rather than just forcing everyone into an arbitrary deficit reduction plan in the name of being “fair”, which is hardly a sound starting point for a major economic upheavel.
By comparison, corporate businesses will identify weak areas of the their business and/or needed savings to achieve a required budget plan and will then make the needed cuts with that plan in mind.
They wouldn’t cripple the long term viability of a profitable portion of their business in the name of being fair in cutting all departments.
X @ 7.25
Transit vs 7.5 tonne truck.
You realy are on the money.
Guess what – 4.6T transit + Trailer vs 7.5T truck.
Photo finish in the load carrying stakes.
One question on SoT/V – What tubes / missiles are they using?
Regarding the current reactor design – looks quite tall / got a bit of a hump.
Astute as a Camel following on the race horses of the previous classes.
Anyway what are the proime drivers of sub design.
What are the new technologies opening up to move the patform / component set away from its 50′s high tech kettle roots?
Looking to a crew of 50?
Size – similar to the CSA of today with length to suit the number of tubes?
New reactor based on current comercial / USN practice.
Escape module / seperate living quarters?
FE classes for the designers / borrow some from the auto / aero industries?
Budget – £2bill for development / £1.5bill for the hull including tubes?
What are the USN doing?
Trident refurb?
Ohio class refurb?
Any idea of timings?
@ Jackstaff
I wouldn’t eat the worms in the TD garden if I were you. Just trust me on this one.
SO / Chris B et al
Getting the old grass cutter out to sort out a funding issue is the Q+D / lazy way of doing things.
It offers no insight or understanding into the problems of the present it only spreads the pain across the guilty and the innocent.
The whole issue looks political.
The Gang of Four Dog boilers want to put the big squeeze on to generate some flex / excess funds and they use a % of these funds to fix the real issues / the unacceptable cuts while the flabby just lose some weight.
Unfortunately it is a game easily played as all the departments will cut high profile programmes and hope the bad press / public concern will get the money back.
As mentioned by just about everyone at the moment -
Dave the Rave and Sniffy are tacticians being asked to do strategy with the usual results.
Chris, I’d admit it’s the lazy approach, but do we really need more drama?
And there is also the important consideration of time. Randomly wielding the axe means you can make the cuts now as opposed to 6 months down the road after the whole government gets audited. (And I’ll bet they would hire external auditors… more $$ down the drain.)
Well a compotent government (stop laughing) would already have their finger on the pulse by now.
“You said it’s been proved as the most practical method, which means that if true then someone would have sat down and codified it into an economic model for others to use.”
Macroeconomic science is about efficiency, not about practicality in institutions. Economists have models that describe the (on the institutional level) efficient fight that the bureaucracies put up against other methods of budget cuts. These in combination with the look at what’s efficient on the national level is enough theoretical description of the issue. This is how economic science works. It’s not a lessons learned cookbook.
Besides, the grass cutter budget cut method IS a sensible one IF the government cuts budgets because it realises that it has been living beyond its means (assuming the previous budget structure was sound). This is by default always something that should be looked at when cuts are medium or long-term cuts and not temporary (only for the next 1 to 2 budgets).
Besides; the UK is geographically one of the most secure European nations, yet has one of the higher %GDP military budgets. Additionally, it would have much more industry (income, wealth) today if it had directed about 1 or 2% GDP into capital investment instead of into the MoD for the last two decades. Now think about higher order effects!
“Well a compotent government (stop laughing) would already have their finger on the pulse by now.”
Chris. They did. And recommended amputation. I’d recommend they start head first.