The GDP figures and Osborne's public spending plans

I was having lunch the other day with a distinguished ex-government public finance expert who had a couple of observations that stuck in my mind. One was: 'There's no way George Osborne will cut public spending. No government has. All the spending review does is to reduce the rate of spending growth.' His second was: 'I don't understand why he keeps banging on about spending cuts satisfying the international markets. Most of the borrowing to fund the deficit is from within the UK.'
I thought about this as the latest grisly GDP for the second quarter of the year was published today. At 0.2% it is down on the previous quarter however much the drop is blamed on the Royal Wedding and the Japanese tsunami. With public spending cuts starting to bite, there is a very strong likelihood the current quarter could even show a minus figure. The irony is that it is financial services which are offsetting the drop in government services spend.
Will there be a temptation to do some behind the scenes adjustment of spending levels in order to shore up the GDP? For it is likely - going back to the above comment - that public spending will anyway prove to be resilient to cuts, especially as demand keeps rising. George Osborne is increasingly relying on the mantra that his spending plans are saving the UK from being hammered by the international markets like Greece even though the figures may be all smoke and mirrors. But in two to three years time all this will just be history and no one will probably care anyway.

More adoption could save in the long term

Two reports this week examine both ends of the care system, one from Dilnott on adult care and the other from ex-Barnado's chief Martin Narey on adoption.
The former has received inevitably huge coverage. It has at least provoked politicians into an all-party approach to the intractable issue of how to deal with adult care. The worst fears of the elderly is that they will lose all they have on being looked after in the last few years of their lives. At least Dilnot places a figure on the maximum cost the infirm elderly can expect to pay, thereby ensuring they can plan for it, as well as making the costs of finding insurance for it more feasible. The whole point of the welfare state is to act as a safety blanket so that citizens do not find themselved impoverished through no fault of their own. And nor should this just apply to the poor. If the middle classes are somehow removed from the benefits of the welfare system then they will refuse to fund it. Dilnot at last offers practical solutions. Now it's down to the politicians...
The second report, from Narey for The Times on July 5, follows the newspaper's campaign to improve the ramshackle adoption system. It criticises councils - among others - for inconsistent performance in placing children into adoption and calls for league tables to name and shame the council laggards. In particular it attacks bureaucratic and politically correct barriers to adoption and slates some social services departments for insisting against evidence on returning children in care to their problem families.
Considering that the local authority bill for looked-after children has soared since the Baby P case one would have assumed councils would be far more pro-active in placing such children into adoption. The record on educational achievement and crime among looked-after children is so abysmal that care has to be a last resort. More adoption will in the long-term save money - it could even help fund the extra costs of adult care outlined in the Dilnot report!

Conclusions from the LGA conference

There are three main messages to be drawn from last week's successful LGA conference in Birmingham.
The first is that DCLG ministers appeared to be making a real effort with the sector. Last year at the 2010 LGA conference the papers were full of the planted 'non jobs' story. This year there were no planted stories slagging off the sector. Indeed in an exclusive interview with The MJ last week Eric Pickles went out of his way to praise local government for bearing the burden of the cuts and announced the 'second phase', a warmer relationship with the sector driven by the localism agenda.
He and his colleagues made a point of being out and about among delegates with Bob Neill and Greg Clark also attending the evening receptions. Many delegates said to me they had noticed the more positive difference in tone this year. The question is whether this is all a deliberate part of the 'second phase' or they are carrying out instructions from No 10 to be more constructive with the sector or, as more than one delegate said to me, DCLG permanent secretary Sir Bob Kerslake has got to grips with his department and put the special advisers (the SPADS) back on their leashes - or in likelihood a mix of all three. Either way, the change was noted and appreciated.
The second message from last week is that despite criticism from some councils during the past year that the LGA should have been more forthright about the cuts, it continues to command respect in the corridors of power. How many conferences can boast having all three party leaders as speakers? And it was also the first time the LGA was addressed by a Prime Minister who also went out of his way during questions and answers to praise councils for being more efficient than central government.
Thirdly, this was the conference which for the first time heard the words 'Total Place' emanating from a senior Coalition minister when Nick Clegg uttered them as he announced new pilot programmes for community budgets. These two words have been out of favour for the past year since they were associated with Labour. But even without this shift, it is clear community budgets/Total Place are at last rising up the political agenda. Greg Clark may have his fingerprints all over this announcement of more pilots but the Treasury is also behind the concept thanks to support from Lib Dem chief secretary Danny Alexander - hence the pilots being announced by Nick Clegg ratheer than say Pickles.
And further evidence of this rediscovery of the value of merging public sector budgets came from Andrew Lansley who extolled their virtues in dealing with preventative health - to the extent of praising the health authority which gave some of its budget to the county highways department to de-ice roads, thus preventing elderly people from having accidents, thereby saving money in A and E. Now that is a perfect example of Total Place in action.