Patrick Nolan

Taking stock of the coalition’s first 100 days

Taking stock of the coalition's first 100 days
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While the milestone of 100 days is not new – US presidents are still measured against the progress made in 100 days by Franklin Delano Roosevelt in 1933 –  it is important. A poor start can create the impression of a government of novices. A good one can provide a new government with critical momentum. So how has the coalition done so far? And, in particular, how well have they done in beginning to rescue the UK’s public finances?

Today Reform has released a report discussing the coalition government’s performance over its first 100 days. This report draws on four cross-party conferences held over June and July on welfare, education, public sector productivity and healthcare. Around 600 senior delegates from across the UK and abroad debated the presentations of 60 senior speakers and panellists including Iain Duncan Smith, Steve Webb, Yvette Cooper, Lord Knight, Nick Gibb, Francis Maude and Simon Burns.

 

The coalition was right to state that reducing the deficit is its most important task. The emergency Budget introduced by George Osborne contained the goal of eliminating the structural deficit within the term of a Parliament. Achieving this will require tough spending choices yet delay would make fiscal consolidation harder as interest payments on debt and the costs of unreformed programmes and entitlements would continue to rise. The coalition was also right to emphasise that the majority of the work in rescuing the public finances should come through spending cuts not tax rises, given the damaging effect that tax increases can have on economic growth.

While the goal was right the coalition is still to make the tough spending choices. The measures announced in the emergency Budget left the real drivers of government spending unaddressed. They set out to simply trim existing budgets. Examples include freezing the child benefit, rather than withdrawing benefits from people on middle and higher incomes, and freezing public sector pay, rather than introducing a link between pay and performance.

 

In other areas the spending choices that have been made have been the wrong ones. These choices include increasing the long-term cost of pensions by linking increases in the state pension with earnings, protecting the most poorly directed spending on welfare (middle class welfare), and the pledge to increase the NHS budget regardless of its efficiency or productivity. These are the largest budgets and the goal of eliminating the deficit will not be achieved unless they are addressed.

 

On pensions alone restoring the link between the core state pension and wages would increase cost by £21 billion (in today’s money) by 2050. The coalition remains in denial over the need to amend the pensions system and this will cost younger generations dearly.

 

The coalition has committed to a spending review and requested members of the public and public sector workers to submit ideas for making savings. However, of the “100,000 ideas” submitted to the review the coalition has chosen to highlight ideas such as encouraging volunteers to form teams of “civic gardeners” to reduce the demand for council staff. Again this highlights the concern that the coalition has not got to grips with the need to reduce the real drivers of government spending. Eliminating the deficit requires an honest debate on how to curb the over-reach of the state and what the future state should look like, not the charade of “civic gardeners.”

 

Given the long-term consequences of many policy decisions 100 days is early to take score. Rather than easily measurable short-term achievements what is important about this period is whether the government has begun to establish its long-term vision. While the coalition may have looked busy so far, that is not a measure of effectiveness. The coalition will be seen as being effective if it meets its target of eliminating the structural deficit in one term. But failing to meet this target – which will happen if the coalition does do not take some tough choices – will fatally damage fiscal credibility.

Patrick Nolan is Reform's Chief Economist