Ed Holmes

‘The most far-reaching reforms of British banking in modern history.’ That's how George Osborne called it in Parliament this afternoon, in a statement that contained few surprises. What the government's doing, in large part, is to follow exactly the recommendations contained in September's Vickers Report. But is that really as far-reaching, or as radical, as the Chancellor would have us believe?   Certainly, many of these reforms are encouraging: measures such as ‘bail-ins’ and ‘living wills’ should facilitate the orderly winding-up of insolvent institutions, and reduce the necessity for taxpayer bailouts. But other parts of the government's reform package are less convincing.

What is a “Budget for Growth,” and how can one be delivered? These questions have been preoccupying civil servants across Whitehall, policy folk in think tanks, and the press since the coalition announced in November that it would be reporting back on its “Growth Review” in the 2011 Budget. While foreign events rightly moved discussion of the impending Budget further back in last weekend’s papers, there was extensive coverage of the potential for targeted tax cuts and reliefs and incentives targeted at particular industries or sectors. The obvious problem with a number of these is that they cost money, and this is something the coalition does not have in spades. However, even if it did, should it be spending money trying to deliver growth to the economy?

Public sector workers will be waiting nervously for John Hutton’s pension review, due out tomorrow.  It is likely to mandate extra pension contributions of around 2.5-3.5 percent of pay and new ways to make entitlements grow more slowly.  Policy Exchange advocated a similar solution in a report published last year.  Predictably, the TUC is up in arms. It says that public sector pay is not significantly out of line with the private sector – despite all the evidence that it is. The main reason why those in the public sector get a better deal is their pensions. These add up to the equivalent of 44 per cent of public employees’ wages and 71 per cent for uniformed services – but are just 9.

The Fire Brigade’s Union (FBU) have called for strike action in London during the busiest firefighting night of the year: Bonfire Night.  Attempts to renegotiate work patterns (already changed in several fire brigades but unchanged in London for thirty years) have been hysterically termed ‘sacking’ all London firefighters by the union.  Rather like the threatened British Airways strike during Christmas 2009, this is a clear attempt by a trade union to use its monopoly power to force an employer into accepting its terms by inflicting maximum possible damage on the general public.   This is clearly worse than a normal strike, however.  If, say, all Asda employees went on strike, we could shop at Tesco or another supermarket.

Today’s Emergency Budget announced the most ambitious fiscal consolidation programme in decades.  It sets out a framework returning the government broadly to a state of fiscal solvency by 2014.  To do this, George Osborne announced a deficit reduction programme amounting to just over £100 billion in real terms – entirely in line with our recommendations.  The ratio of spending cuts to tax rises – 74:26 is largely in line with the international best practice model (which we also endorsed) of 80:20.

Today's papers are awash with stories that a public sector pensions levy will be announced in tomorrow Emergency Budget. Trade unions have already issued dire warnings, ranging from the PCS's promise to "organise the widest possible popular opposition," to Bob Crow of the RMT’s rather prosaic: "when someone’s winding up to give you a kicking you have a clear choice — you can either take them on right from the off or you can roll over and hope that they go away."  Public sector workers, however, should not be so dismissive.   In our report, released on Friday, we argue for an "Irish style" graduated public pensions levy of 7.5 percent.  We estimate this will ‘save’ 322,000 jobs.  Why?