Last year we suffered a near collapse in the entire global banking system. At the time, people started questioning how the international finance business could remain in the private sector. There was a de facto takeover by the state in both the USA and UK as banks and insurance companies were bailed out by the government, which then became the owner and controller of several high-street brands.
But that seems to be all forgotten now. Everyone I talk to in the City seems to behave as if things are just the same as they were back in the boom years. Bonuses are being paid again – even when it’s really the government paying them. What happened?
While the City appears to be back to business as usual, the public sector is falling apart. All the talk in the past few weeks has been from politicians of all shades warning of how they will need to make cuts in future. Now the Chancellor is starting to brief ministers about what they need to do.
Everyone I talk to has discounted the Labour party winning the next election. Even Labour supporters have given up on their own party. Yet, I think it’s too soon to call a victory for the Tories. Cameron is not riding so high in the polls that an outright victory is clear-cut. Even though most people are fed up of the present government, the Tories are not generally seen as saviours. They don’t have the answers to this global financial meltdown and all the issues it is presenting now for the public sector since the recession started.
But, whoever wins in 2010 will have a huge problem to deal with. £175bn borrowed this year. Even trimming budgets here and there can probably only save 10% of that.
There will need to be radical cuts and changes in the nature of how government services are delivered. New ideas like the G-Cloud mooted by Lord Carter in the Digital Britain report are only the start. It’s about time we explored how a government structured on hundreds of years of processes can be re-engineered to deliver in the digital age. That won’t be easy, and not every citizen is a digital native, but this cash crisis is creating an environment where no ideas can be ignored.