Tuesday, 8 June 2010

Narrativewatch: Canada's deficit cuts are not a simple story for UK politicians

As the prime minister, David Cameron warns of the need for massive spending cuts to bring down the UK's huge public deficit, the coalition is citing the experience of Canada's Liberal government during the 1990s. In 1992, Canada had a budget deficit of 9% of GDP. By 1997, they were showing a surplus. When they were in opposition, senior Conservatives studied the Canadian experience in some detail.

At the weekend, deputy PM Nick Clegg praised the way the Canadian Liberals consulted the public over where to make cuts -

"taking the people with them".

This is a political version of what Stephen Denning calls a springboard story:

a story that enables a leap in understanding by the audience so as to grasp how an organization or community or complex system may change.

He explains:

A springboard story has an impact not so much through transferring large amounts of information, but through catalyzing understanding. It enables listeners to visualize from a story in one context what is involved in a large-scale transformation in an analogous context.

But springboard stories need to be handled with care. There's usually more to them than the politicians let on, or understand. And context is key.

Today, the FT recounts how external developments - low interest rates, a rebounding global economy and a falling Canadian dollar - helped the country's numbers to come right.

Larry Elliott of The Guardian has described some of the differences between Canada's economy then and the UK's now:

Canada was aided by the pick-up in the global economy in the 1990s, and especially the strong US expansion. Britain does not have a fast-growing US for a neighbour: it has a eurozone mired in crisis.

There are other reasons why the Canadian experience may not be exported so easily. Today, The Guardian's Heather McRobie points to some important political-cultural distinctions. She says that the Canadian government took a comprehensive approach to deficit-cutting, with a high level of co-ordination between departments. She doubts that this country's Conservative-dominated coalition government could do the same.

Neil O'Brien of Policy Exchange has stressed that the Canadian government took a consistent, "no exemptions" approach -- and devolved responsibility for finding savings to officials. The latter would be a major departure for the UK's centralised model of government. O'Brien also points out that the size of the UK deficit gives the coalition a much bigger mountain to climb than Canada faced.

Yesterday, the Daily Telegraph highlighted the downsides of what happened in Canada:

The science budget was halved, while agricultural subsidies, overseas aid and transport were also badly hit . . .

. . . As provincial governments saw their health grants slashed, thousands of nurses were sacked and hospital waiting times soared. The shortage of new buildings also led to overcrowding and higher infection rates on wards.

But a report from The Times last year gives a somewhat different perspective:

. . .the federal administration of the Prime Minister, Jean Chr├ętien, a Conservative [sic] elected in 1993 . . . targeting the cuts carefully and calling on different departments to make very different sacrifices.

There were big cuts in fisheries (22 per cent), defence (more than 15 per cent), transport (50 per cent) and international aid (20 per cent) departments but benefits for the elderly increased by 15 per cent over six years and spending on aboriginal peoples and children rose by around 10 per cent.

[In May 2009, David Halpern of the Institute of Government developed some of these points in more detail.]

Perhaps we should be wary of the way UK commentators can cherry pick factoids from other countries' experiences (that is, tell stories). I speak from experience -- I sometimes think that New Zealand post-1984 has been used to back up every policy argument in the UK.

Here's another example. Andrew Sparrow of The Guardian has used an anecdote of how at least one hospital in Canada was blown up. But this was done under the provincial government in Alberta, which had targeted health and education spending.

Nick Clegg may have been on safer ground when he stuck to the way Canada's Liberals managed the politics of fiscal consolidation. Last year, Brian Tobin, another former Liberal minister who was involved in the Canadian deficit cutting exercise, was asked what were the lessons for the UK. His main conclusion:

"What needs to be done...is to speak frankly, openly and honestly.

"Don't try to over-simplify the issue. Don't try to put all the blame on the previous administration. Because if you're in a fiscal mess, it's often generational or structural."

This level of candour will be a new experience for UK politicians and voters. All the major parties were slated during the campaign for not being straight with people about the deficit and their plans to reduce it -- although I have to say the Liberal Democrats came off more lightly than the others.

Still, coalition ministers will need to get their narratives in order, and quickly. In today's FT, Paul Martin, who was Canada's finance minister in the 1990s, agrees that informing and consulting the public were hugely important elements in his success. But the article also points out that:

events beyond Canada's borders helped. The Mexican debt crisis broke just two months before Mr Martin was due to deliver his belt-tightening budget in early 1995. Canadians were jolted by a much-quoted Wall Street Journal editorial that described the Canadian dollar as the northern peso.

Posted via email from Neil Stockley

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