Does “smarter government” lay the ground for a more progressive PBR?

By Alex Smith / @alexsmith1982

In times of recession as at any other time, government should do everything it can not to be wasteful. So although Gordon Brown’s indication today that the public sector will be streamlined to create “smarter government” is the right move, the £12bn of savings made by clamping down on excessive public sector pay – some of which had already been trailed – will constitute but a small proportion of what can and should be done to reduce the deficit.

The key aspects of today’s announcement, which can be read in full here, are:

* Salaries above £150,000 and bonuses above £50,000 will require ministerial approval.

* A reduction in central targets will allow greater freedom for local authorities to decide where to spend their money.

* Merging or abolishing 120 quangos will aim to save £500million.

* Moving towards conducting government transactions online will aim to save £400million initially, and “billions” more later.

Because these measures are not enough to reduce the deficit particularly drastically, it’s important to look at the announcements in the context of what will follow in the PBR on Wednesday.

It’s highly unlikely that these announcements are preparatory for broader cuts to the public sector in terms of jobs, pay and investment; the PM would face a heavy backlash from Unions if that was the case, and it would also be the wrong move economically.

What’s more likely is that today’s announcements have softened the ground for a progressive PBR that should raise revenue through a clampdown on tax havens, levy the much-trailed tax on City bonuses and establish a Financial Transactions Tax, amongst other measures.

That package of trimmed, modern government and increased tax revenue would sit relatively well with left and right — and draw that much-touted sharper dividing line with the Tories, who still believe that government can only be the problem, and not the solution.