Phoney deficit wars

Increasingly, three phoney debates about the future of Britain's public finances are distracting from the lack of serious ones.

The politicians won't say how, exactly, they'd get rid of the bulk of the deficit - so instead we're debating the meaning of the word "bulk". Neither the government nor anyone else will put numbers on departmental budgets after this year - so instead we're debating whether an "efficiency saving" counts as a cut. And we trade ever more pessimistic visions of the future for individual departments, because large parts of spending are being counted out.

That first debate - about the meaning of the word "bulk" - is well-known to readers of this blog. But it just got even more rarefied, because the difference between Labour and the Conservatives on the deficit seems to have shrunk to just £8bn.

To recap, the Conservatives have not set a formal target for the deficit, but they have indicated that they would like to balance that part of the structural deficit that is not due to investment - the current structural deficit - by around 2014-15. As the IFS confirmed yesterday, the Budget book now suggests this measure of the deficit will fall to 0.6% of GDP by 2015-16, not 1.1%, as forecast in the PBR. As a result, the Conservatives would apparently only need to find an extra £8bn in spending cuts or higher taxes - on top of the chancellor's existing plans - to meet their target, not £15bn as previously estimated.

As we know, another version of the Tory target is that they would eliminate "the bulk" of the structural deficit. Evan Davis had a ludicrous exchange with George Osborne yesterday morning about whether two-thirds cut envisaged by Labour constituted "the bulk"; and if not, what would. Let's just say he didn't get far. But this is what we're reduced to, when faced with the politicians' stonewalling on how, exactly, that borrowing was going to go away.

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The same dynamic is operating in the debate over the government's "efficiency savings". If re-elected, the government says it will look to public spending cuts to achieve £38bn of the reduction in borrowing between now and 2013-14. The government is offering up £11bn in operational efficiencies to help achieve that - but yesterday the IFS was having none of it. For one thing, they pointed out that these efficiency savings have a habit of not materialising - we're still waiting to see two-thirds of the efficiency savings that were promised by March 2011. And, says the IFS, there's a more fundamental problem. Even if these savings are achieved, they are not the same as reducing the deficit. They wouldn't necessarily narrow the gap between the public services we would have had without cuts - and the public services we're going to get now.

I sympathise with this view. Many efficiency savings would have happened anyway - meaning there's not necessarily a read-across from those savings to cuts. But even so, some of them do save money. And they do protect the vaunted frontline.

Take the plan to save £550m by reducing staff sickness absence, which has been widely pilloried. It sounds fanciful. And maybe it is. But the NHS employs 1.3m people, who on average miss work more than 10 days a year due to sickness, compared to an average of about six days a year in the private sector.

An external report commissioned by the NHS last year did the math and suggested you could save £550m by cutting the number of lost days by a third. Maybe that's ambitious. But it's not mad. As it happens, the report listed examples of hospitals that have cut sick days dramatically by doing quite simple things. For example, West Suffolk Hospital Trust introduced a system which swiftly referred injured staff to a physiotherapist (these kinds of injuries seem to be a big part of the problem in the NHS. It's not staff catching infections from patients). In the first nine months of the scheme, the number of lost days fell by 40%, and they saved money on treating the injuries as well.

No, I don't think we can have all our our efficiency savings and eat them too. Not all of these savings are going to happen. Plenty of other hospitals have not had this kind of success - and, self-evidently, those that have already cut the lost days by a third are probably not going to be able to do it again. Even where they succeed, these savings are clearly not going to do it by themselves.

My point is just that big savings are possible - and they can happen in ways that have relatively little impact on patients. If you talk to senior officials in the NHS they will tell you the same thing. But we don't believe in them - can't believe in them - because the government has given us no reason to.

If the chancellor had given us departmental spending totals for 2011-14, we could measure how these efficiencies might help departments do the same with less. We could actually measure the effect on the bottom line. Instead, we have overall spending numbers, and a lot of "ring-fencing" from Labour and the Conservatives. Without the individual departmental budgets, all talk of "savings" is understandably given short shrift.

Finally, the IFS has once again calculated the implications of the spending plans for departments that are unprotected. On "plausible assumptions", they say that departmental spending will need to fall by £46bn in real terms by 2014-15. Depending on whether health and education are protected for the entire period or not, this would mean that other departments face real budget cuts of 20-25%

But remember that those "plausible assumptions" include the assumption that the 45% of public spending that is not part of departmental budgets will not be affected by the search for cuts. That includes the £173bn that is spent on benefits, tax credits and public sector pensions. No-one thinks that these things will be left untouched. Yet we paint ever more apocalyptic visions for other departments, based on the assumption that they will.

To repeat: these are the phoney debates we're reduced to, when politicians have decided the real ones are too tough.