ECONOMIC PERSPECTIVES 116:

 

“Waste not, want not”

 This proverb spells out the link between waste and impoverishment. Economic Perspectives 112 highlighted the inevitability of massive waste of public money when government expenditure is not susceptible to economic calculation. Would I sanction this expenditure if it was my money?” is the question that should be emblazoned on the wall facing MPs, councillors and quango committees at every budget meeting. I could add: “If their aim is the avoidance of wasting taxpayers’ money, the need for objective economic reckoning is both obvious and indispensable.”

 

In the current state of our public finances Chancellor Rishi Sunak, who still refers to himself as a fiscal conservative, should need no reminding of this. Yet waste, the very antithesis of the frugality he espouses, continues to despoil the fiscal landscape in the wake of his Covid-related largesse.

 

But what did it cost?

 

The Chancellor has had ample plaudits from rank-and-file supporters over his readiness to issue quick-fire state handouts, but only now is the Treasury counting the true cost of interventions such as the “Bounce Back Loan” scheme that, in its first two months, loaned £47 billion to struggling firms. Now, however, MPs are told to expect that over a third of that, £17 billion, will never bounce back at all, almost £5 billion of it having been stolen by fraudsters.

 

Many claim this is a small price to pay for saving thousands of small businesses from extinction, and that without it the economy would now be in recession or worse, an argument we hear every time the wisdom of dishing out public money is questioned – not by its recipients, of course, but by those who would have benefitted from a different order of spending priorities.

 

 

The “seen” and the “not seen”

Frederic Bastiat, the 19th Century French economist, addressed this very issue in his treatise on “ What is seen, and what is not seen”, citing the “broken window” parable. If a child throws a stone and accidentally breaks my window, it may cost me £30 to hire a glazier to replace it with a new window. A friend tries to console me with the comment: “It’s an ill wind that blows no good – if no one ever broke windows, glaziers would have no work”. That, of course is true – on the material level of what is seen: for expenditure of £30 the status quo has been restored. I have a window.

 

But on the subtle level of what is not seen, I might have had the enjoyment of the alternate uses to which I could have put that money – a few books, perhaps, a visit to a museum, or having my old shoes repaired. I could have had those – and still have a window. As Bastiat put it, to break, to spoil, to waste, is not a productive use of labour; “destruction is not profit.”

 

Bastiat widens his example to the whole community with this conclusion: “Society loses the value of things which are uselessly destroyed.” That loss is ineradicable. New wealth may be created in its place, but what is lost, stays lost. And of course that is equally true of loss attributable to waste.

 

 

“Staggering cost” to the taxpayer

The £47 billion that didn’t bounce back isn’t exactly chicken-feed. It exceeds our annual defence budget or what was spent last year on transport and the Home Office combined. Even the Public Accounts Committee (PAC), the Westminster spending watchdog, notes in a new report that “business survival has come at a staggering cost” to the taxpayer. It was money that “could have been spent on improving existing public services, reducing taxes or to reduce government borrowing” – Bastiat’s “unseen” alternatives.

 

 

Complacency and profligacy

As noted by the Telegraph’s Ben Marlow, it’s the PAC’s charge of “complacency” that reinforces “the impression of a Cabinet infected by an inherent profligacy when it comes to taxpayers’ money.”

 

Indeed, Lord Agnew was so incensed by the scheme’s abuses – such the inclusion of 1,000 companies on the list of recipients despite the fact that none of them were trading when the virus struck – that he resigned.

 

The PAC’s chairman, Meg Hillier, put it like this: “With weary inevitability we see a government department using the speed and scale of its response to the pandemic as an excuse for complacent disregard for the cost to the taxpayer.” Other examples abound: the doomed “test-and-trace” scheme (£23billion); ineffective personal protective equipment (£9 billion); the Chancellor’s own moronic “eat-out-to-help-out” programme, which probably boosted the number of Covid cases (£850m) – not to mention the flawed and uncosted vanity projects like the smart-meter rollout and, always, HS2.

 

It will wreak lasting damage to Sunak’s reputation that his Treasury is spraying taxpayers’ money around at the very same time as inflicting National Insurance tax rises.

 

 

Holding the levers of government carries huge responsibility

 

Waste takes many forms, and propping up the deadweight of worthless government bureaucracy is probably the single largest drain of public resources. Subordinating the priority of service to contemporary fetishes such as “wellness” and “work-life balance” – always for the benefit of civil service employees – is effectively a culture of “sod the taxpayers” who pay their high salaries and gilt-edged pensions.

 

Woe betide the professional firm that displays such blithe disdain for the wishes of its clients. Yet the civil service headcount is up by 25 per cent since 2016, so don’t expect to avoid the “call-queue” any time soon.

 

 

But how will it end?

 

This scourge of inverted priorities will end in an implosion when resources needed for recovery are no longer available, having been wasted irreversibly. Only then will growth and wealth-creation be restored as legitimate objectives in the economic canon – just as the temporary perversions of cancel-culture, no-platforming and historic guilt are now producing their own counter-movements. Be patient and do not despair!

 

[ECONOMIC PERSPECTIVES 116, MAY 2022, EMILE WOOLF]

 

 

 

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