How not to save a billion
How do you save £1,000 million - that's a billion pounds - from a budget of £74 million? That's the question raised by one of Gordon Brown's answers at his news conference this morning. The short answer is - you can't.
I will come to the puzzling prime ministerial arithmetic in a moment but first a bit of background.
Regular readers of this blog will know that I tend to bang on a bit about whether politicians of all parties are telling you the truth about future cuts in public spending made necessary by Britain's huge budget deficit.
That is the real issue that underlines the row which broke out between David Cameron and Gordon Brown in last night's TV debate about whether Labour's leaflets are lying about the Tories plans and whether the Tories are being about the cuts they plan.
At his news conference this morning the prime minister said that he had had to flush out Tory promises to maintain benefits for pensioners and that "It is right to ask questions and to get answers".
Taking this as an invitation I asked him to tell the electorate "the scale of the spending cuts that you will introduce if you are re-elected and to give the public some indication of what they will mean for ordinary families?"
Gordon Brown responded by listing the figures set out in the Budget for, amongst other things, efficiency savings, and then to illustrate his point he claimed that plans to pay child benefit over the internet "will save £1bn in the administration of child benefit" (see full transcript below).
Thanks to the Economic Editor of the FT, I can now reveal that the annual administrative cost of child benefit is, in fact, just £74m.
The Labour Party admits that the prime minister was mistaken. Apparently, he had in mind estimates of possible future savings from the wider use of the internet to pay benefits. This is a statement the party has just issued:
"PWC estimate that £600m p.a. will be saved by 2012 directly smarter government initiatives, additionally £900m p.a. is estimated to be saved if only formerly digitally excluded people make use of digital Govt services once a month. Gordon Brown was right to point out the large scale savings being planned already by this Government through the Smarter Government initiatives."
This year's Budget says: "HMRC is aiming to pilot a service for tax credit renewals for 2011 and intends to introduce a full online service for child benefit claimants as part of its online tax credit service". Tonight HMRC told me "We have not announced any plans to streamline Child Benefit, nor have we published any estimates of what any streamlining could save".
Gordon Brown simply misspoke, you may think. Perhaps. He did it, however, when asked to be open with people about spending cuts to come.
It's a question leaders of all parties have been remarkably reluctant to address, preferring instead to talk vaguely and sometimes inaccurately about efficiency savings, waste and tax avoidance.
Transcript of exchange with Gordon Brown:
Robinson: "Nick Robinson BBC News. Prime minister you said and I quote, 'It is right to ask questions and to get answers.' So let's have a go. Would you like to tell the electorate, the scale of the spending cuts that you will introduce if you are re-elected and to give the public some indication of what they will mean for ordinary families?"
Brown: "Yes, I have said that. £11bn of efficiency savings by 12..."
Robinson: "How many families?"
Brown: "Hold on, you asked me a question Nick. I'm I'm going to to answer it. £11bn of efficiency savings by 2013. £4bn is being taken out of pensions and public sector pay. £5bn is being taken out of lower priority departments. Now, extra taxes include the national insurance rise and of course, the top rate tax rise.
"We have been clear with people about what is going to happen. The choice will come down to this Nick - if you want your national insurance half a percent cut from the Conservatives in 2011/12 which is worth about £2, £2 or so to an ordinary family, you are not getting in return protection for the police and for the schools of our country and you're not getting the health service guarantees because the health service guarantees for cancer parents and for doctors they're all going to be removed.
"So the issue between the two parties comes down to this - you can have your national insurance cut of half a percent, but you will lose the protection that we will give for policing, and for health and the protections that we are going to give for schools.
"Now I know the Tories say they want to match us on health service spending, but why are they removing the guarantees for cancer treatment and for operations and the guarantees that they'll give for GPs?
"So that's what it comes down to. I've spelt out the figures. I believe families are better off with the proposals that we put forward that mean the police on the streets are still there which means that schools are still getting the investment they need for the future and it means that the guarantees that are there for people for cancer care and for operations and for getting your GP at the weekend and in the evenings as well as during office hours, that these are still there and we're introducing the urgent needs care for people who are in their own homes so that they don't need to have to go into old people's homes. Now these are the things that we can do. I accept..."
Robinson: "What are are your planned cuts? What will your planned cuts mean, not for efficiency savings, but for ordinary people? Well, let..."
Robinson: "Can you confirm that the government plans spending cuts bigger than Margaret Thatcher. So would you like to tell people what those cuts are and how they will affect them? Not efficiency savings, not back office, what cut priorities has a Labour government got if they are re-elected to make cuts bigger than Margaret Thatcher?"
Brown: "I've already said that pensions and public sector pay, we take £4bns out of that. So you can be clear that pay will not rise as it did in the past and we are taking money out of the public sector pensions scheme and that saves us £4bn.
"Let me give you an example of how it will change for people. Child benefit, child benefit will now be paid in the next few years. It will be paid over the internet. People will register for child benefit. They will not get it paid by post. They will not get it paid through a call centre.
"That itself will save £1bn in the administration of child benefit. We will move that into other services so if you are claiming job support, Jobseeker allowance or other services, you're going to have to do it through the internet.
"So we will be cutting the back office services that are necessary to produce the child benefit payments and we will be cutting the costs of transactions of government. Some transactions cost about £20 simply to send a letter. Some transactions at call centres cost about £1 just to have the telephone call.
"If you do it by the internet and you train people up to use the internet so that everybody is making that payment, you are cutting directly the costs of paying these services. Now yes, there will be other cuts because of the regeneration programmes that we're changing. We're making the regional development agencies more efficient in what they do but I've given you some examples of how we will change the way services are delivered and that is one of the ways that we will save money.
"I repeat £11bn from efficiency savings, £4bn from public sector pay and pensions and £5bn from lower priority departments but the difference you know, between us and the Conservatives is very clear, that they are going to put policing at risk and they're going to put schools at risk and they're going to put the guarantees we are giving to the Health Service at risk and I think people will see that by the time the election happens."