Now this is odd. Since George Osborne and his axemen entered the Treasury, far from cutting the school building programme, they’ve actually allowed it to swell.
Around £1.5bn of additional contracts have been signed since May, a billion of which came in the last 21 days. Given departments are facing average cuts of 25 per cent, you have to wonder what on earth is going on.
The truth is that there is no underground Keynesian resistance movement in Whitehall. It is just that the Treasury and Michael Gove have been unable to take a decision on what to cut. An announcement has been repeatedly delayed — the political pain and technical hitches were just too great.
The political indecision comes with a price tag. Had a moratorium been announced immediately, none of the contracts for Barking, Derby, Oldham and Camden would have been signed. Now if these projects are ditched (not unlikely) the government will pay cancellation costs. A waste of money.
What lessons are there from this?
1. Cutting is harder than ministers expected. Building Schools for the Future was a prime target for savings. But the hard reality of the political fallout is understandably debilitating. Gove must decide what to do with around 1,200 school building projects planned over the next three years. They’re scattered conveniently across scores of marginal constituencies (take a bow Mr Balls). Between 500 and 900 will have to be aborted — meaning contracts cancelled, the hopes of parents dashed, jobs lost, MPs infuriated. It is a horrible decision.
2. Cancelling contracts is expensive. Once builders or contractors are selected as preferred bidder, they expect compensation if the government pull out. It costs money, basically, to scrap spending plans. The Treasury half understand this. But clearly they’re not across it enough. It will require upfront money for defence, education and transport, for instance, to slash spending over the long term. (Or indeed to cut staff numbers.) Planning on these complications, though, doesn’t appear to be as advanced as it should be.
3. Early decisions save money. Taking bold action as fast as possible stops liabilities building up. It permits industry to plan. It stops needless work carrying on while the decision is thrashed out. The Autumn spending review may be the deadline. But the Treasury must not be afraid of stopping work in between.
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