Let us never forget this wonderful speech by Mrs. Thatcher (thank you to Giordano). Listen to it first.
I use it since my colleague Fausto Panunzi seems to think that I am (a bit?) crazy saying that Mrs. Thatcher and Mr. Blair greatest joint reform has been – together and complementarily – the one of improving the quality of the public sector away from a bureaucratic bunch (1970s) to a team of workers that supports British firms development and strives more than any other government for the well-being of its citizens.
It is true that Thatcher during her mandate reduced public spending over GDP from 43% to 34% (some of that, almost 2%, was due to lower interest expenditures, due to inflation and debt reduction). It is also true that public spending is today in the UK at 45% of GDP (most of it due to the crisis and to smart public spending during it). Are we thus back to where we were before? No way. The quality of the British public sector, its productivity, has dramatically improved since the 1970s (even though official statistics I could find start in end 1990s only).
Mrs. Thatcher herself puts it beautifully in her speech, where she destroyed the concept of public money and shifted to the one of taxpayers’ money, the move that made the concept of accountability in the public sector rise again, after many years of wrong Labor policies:
“How much of your money should be spent by the State, is one of the great debates of our times …”. She set the stage to destroy public waste, as she did, in the bloated public sector of the time when she says that: “prosperity will not come by inventing more and more lavish expenditure programs, by taxing citizens beyond their capacity to pay”.
But Mrs. Thatcher did not think that the public sector was irrelevant. To the contrary. She pretended a lot from it:
“We have the duty that every penny we raise in taxation is spent wisely and well…. Protecting the taxpayers’ purse. Protecting the public services. These are the two great tasks and their demands have to be reconciled”.
Mrs. Thatcher did not want the public sector destroyed, she wanted it first and foremost functioning. And also smaller. The first goal pertained to her duties of a leader, the second to her beliefs. When Blair came to power, he did not move away from the concept of having a functioning public sector that would fight waste. He simply increased the focus on the size of government (3 or 4 points larger in terms of GDP on average than the Thacher one) because he had different beliefs.
Nothing is more indicative of their differences than the different stance they had in public procurement matters. The first would only do price-only tenders, the second would also reward quality features and pushed less for price competition.
But both of them shared the view that waste was intolerable, whether government was smaller or bigger.
Why do I say that both of them together were the great reformers of the British public sector? Because there would have been no Blair without Thatcher first, with her capacity to fight to death against rents and waste in the public sector not listening to anyone that would try to dissuade her. Blair was able to add greater weight to the public sector in the economy, but only because Thatcher had changed it forever. At that point and only then the excesses of the Thatcher era could be credibly cancelled. Had they planned it, they couldn’t have done it better.
The reductions in the size of Government that are currently asked in the European Union have nothing to do with a vision of discussing and facing as Thatcher said “one of the greatest debates of our times”. They are done to cut numbers for accounting purposes, claiming the existence of an emergency, without any interest in the quality of what is provided.
This kind of reduction of public spending destroys little or no waste and reduces only what Thatcher called the essential “public services”. It is also for this reason, and not only for the obvious recession-motivated needs, that cutting spending in Europe right now should not be allowed, whether you are a left winger or a right winger.
Let Europe allow the rise of leaders that have a vision, and then we will be able to discuss government cuts, their size, their meaning. Or, for that matter, if taxpayers will agree, for public spending increases.