Monday, January 09, 2006

How Much Waste?

As posted yesterday, the Taxpayers' Alliance Bumper Book of Government Waste 2006 is out at the end of the month. The individual examples of waste are jaw-dropping enough- even when they don't cost that much. But as someone once observed, a pole dancing class here, a pagan priest there, and pretty soon you're talking real money.

In this case, a denture loosening £82,000,000,000 pa according to TPA.

And it's not a figure plucked from the air. £82bn is derived from the pathbreaking research carried out at the European Central Bank by eminent economists Afonso, Schuknecht, and Tanzi. They conducted a statistical analysis across 23 industrialised economies, comparing government "outputs" with "inputs". For outputs, they measured end-results like life expectancy and infant mortality as health outcomes, educational attainment, and the equality of income distribution- all the stuff government says it's doing for us. Inputs comprised government spending.

Overall, they found that the UK falls well short of best international practice in terms of how efficiently government turns spending into valuable outputs. Specifically, they estimated that the UK could reduce its public spending by 16% if our government could match the efficiency standards of the best. £82bn is simply 16% of current government spending.

Now £82 bn is much bigger than the Gershon Review's estimate of waste- £21bn- and even the James Review figure- £35bn. But that's because they tried to construct a figure from the bottom-up, largely accepting the existing institutional structure, and its concomitant spending programmes and mindset.

If we are ever going to grip the waste issue properly, we need a much more fundamental rethink. We need to focus on end-results- as in the ECB study- and be prepared to learn from others who are operating their public services so much more efficiently than we are.

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