Page last updated at 13:56 GMT, Tuesday, 30 June 2009 14:56 UK

Lord Jones on easing the spending squeeze

Lord Digby Jones was director general of the Confederation of British Industry (CBI) and Minister of State for Trade and Investment before becoming a life peer. He is one of four high profile panellists taking part in Newsnight's Politics Pen where, in Dragon's Den style, hopefuls pitch ideas on cutting public spending.

Here Lord Jones outlines how he thinks the government can ease the squeeze on public spending.

Massive borrowing by the government may well have helped sort the banking crisis, but I wonder if the penny has dropped in some parts of the Labour party that borrowing is merely deferred taxation.

Digby Lord Jones
Lord Jones has lobbied against protectionism

It has to be repaid by huge hikes in taxes, rendering the country an unattractive place in which to earn a living or take risk and create jobs and wealth, or by big savings in what those taxes are also used for - the provision of public services and those associated costs.

It is quite achievable to maintain all front line services in our schools and hospitals, in our armed services and prisons, regardless of what many politically motivated people say, if immediate action, with all the necessary courage and leadership that entails, is taken.

Necessary action

This is what we need to see happen:

Public sector pension provision must be reformed. A popular move with many parts of the electorate, but not the party donation cheque writers in the unions.

Is slashing inheritance tax a piece of cake?

It would also go a long way to end the growing apartheid and unhelpful bitter resentment festering between the private sector and those on fixed incomes on the one side, and public sector with total job security and wonderful pension provision on the other.

We also need to change the system of delivery so that the "back office" of government needs hundreds of thousands fewer people.

It is important to stress this is not about the quality of the good and decent people, or their tremendous culture of public service, it is about a system that needs radical change.

Hurdles ahead

And we must move to a simplified business tax regime reducing hugely the numbers employed in the tax calculation and collection departments and - although back benchers bent on raising money from the rich will never accept it - increasing tax revenues.

Politics Pen panel
Also in the Pen are Deborah Mattinson, Matthew Taylor and Greg Dyke

We must also stop the ridiculous "politically correct" job creation, especially in local authorities, such as "street naming executives" and "street football managers" which not only costs the tax payer, but adds to the pension burden.

So why will these things not happen? There are four main hurdles to overcome:

Firstly there are vested interests which will put the country's needs behind their own.

And we have a media which always links public spending savings with fewer nurses and teachers, making every politician run scared of tackling the issue.

Add to that political cowardice - understandable in democracies - but even if the penny drops and that is overcome the people who will be tasked with achieving the changes will be the very people who will suffer and

And finally - turkeys do not vote for Christmas!

The next edition of Newsnight's Politics Pen will be broadcast on Tuesday 30 June 2009 at 10.30pm on BBC Two.

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