CentreRight

By Daisy Thornton.

The ripples of problems in the economy are starting to hit the public sector. Just as households up and down the country are slimming down their budgets, now more than ever parties of every colour need to think about how they would tighten the purse strings. The Ministry of Justice is reportedly drawing up a £1 billion package of savings aimed at “reducing overheads, removing duplication and increasing efficiencies in order to prioritise frontline services”.

One point that has been overlooked so far is the damaging effects on opportunity for middle earners.  The Chancellor yesterday reduced the higher rate threshold of income tax from £36,000 to £35,400.  Reform’s latest report on social mobility raised the idea of ‘mobility blocks’ – key points in the tax and benefits system that undermine mobility.  The upper rate threshold is one of these blocks.  Adding on National Insurance Contributions, the Chancellor moved thousands more people into the position of paying 51 per cent direct tax on their earnings.

Nick Herbert gave a clarion call for public sector reform yesterday in a speech to Reform (pdf here).  The following points seemed to me to lay down important markers:

> “Real reform is intrinsically modern and post-bureaucratic.”  This suggests that public sector reform is integral to David Cameron’s Conservative Party.

> Successful reform has four principles: “supply side liberalisation and choice”; “meaningful information provided independently of government”; “clear lines of accountability”; “transfer public spending from subsidising failure to incentivising success”.  This is the real deal for public sector reform.

> As demonstrated in Reform’s April paper Shifting the unequal state, “reform is needed to drive social mobility”.