Wake up and smell the harsh fiscal coffee

Further to Simon another useful reality check from Hamish McRae in the Indy who sees the gathering storm as a race against time. Enjoy the phoney war while you can because there's no other game in town at the moment. When tomorrow hits, it will hit you hard is the message.

Armageddon hits public finances sometime after May next year but in the meanwhile we've got Christmas to divert ourselves with.

Again enjoy what there is to enjoy as we're going to suffer what there is to suffer as a fact of life. Since we've been bad girls and boys, and proven to have been naughty not nice with Miss Prudence, it's a stick of coal in the festive sack until 2020 at the earliest.

Unless there's some other way of saving £110 billion a year or three times the MoD budget that has escaped our wavering attention!

Hamish points to Vince Cable's Reform pamphlet which brings light on the unprecedented structural dangers inherent in redressing the stateflation bubble. Fuelled by seemingly enldessly rising tax revenues from financial services and rising housing market, the public sector expanded share of GDP rose a staggering 10 per cent in the New Labour decade.

Dr Cable's remedy suggests nine areas for savings to kick-start reform- how many are beyond argument?

> Zero growth overall for public sector pay (saving £2.4 billion a year), a 25 per cent reduction in the total pay bill of staff earning over £100,000 and a salary freeze and end of bonuses for the civil service (saving £200 million a year).
> Tapering the family element of the tax credit – saving £1.35 billion.
> A radical review of public sector pensions with the view to moving to higher employee contributions and later retirement ages. There is currently a £28 billion subsidy to unfunded schemes.
> Scrapping several major IT systems including the ID card scheme (£5 billion over 10 years), Contactpoint (£200 million over 5 years), the NHS IT scheme (£250 million over the next 5 years) and the proposed “super database” (£6 billion).
> Curbing “industrial policy”, including scrapping Regional Development Agencies (£2.3 billion annually) and EGCD subsidies (£100 million annually) and reducing (by at least half) the Train to Gain and Skills Councils budgets (£990 million together a year).
> Reforming the National Health Service, by reducing the centralisation and over-administration – starting by scrapping Strategic Health Authorities (£200 million a year) – by strengthening commissioning and with “supply side reform” – in particular tariff reform could save around £2 billion a year.
> Curbing the centralisation in education, by cutting national strategies and scrapping quangos – saving around £600 million a year.
> Reducing the amount of waste in the defence procurement process, including scrapping the Eurofighter and Tranche 3 (£5 billion over 6 years), the A400M (total cost £22 billion), Nimrod MRA4, the Defence Training Review contract (£13 billion over 25 years) and the Trident submarine successor (£70 billion over 25 years).
> Examining possible future public sector asset sales, including some aspects of the Highways Agency (land value of £80 billion) and intangibles such as spectrum, landing rights and emissions trading

How to move beyond this to decentralisation, democratisation is Vince's next question? He argues against salami slicing but for setting high and low priorities. No more 'ring-fencing' of the big budgets of health, education, defence and welfare and all spending to be justified, not assumed as a given and lightly trimmed around the edges.

He argues for the return of real powers to local government and restoring the link between locl tax raising and accountable expenditure. While we're at it, as well as abolishing the remaining Strategic Health Authorities, who not start the process of bringing health services back to local oversight as it had been in the past and is elsewhere in the world?

Dr Cable's prescriptoin is for 8% fiscal tightening over a five period.

Meanwhile the Daily Mail reports that the Treasury has been planning harsher medicine for 9.3% across the board cuts in the four years after 2010 since the last Budget.

We know that Permanent Secretaries in the major spending departments have been making battle plans for 10 per cent and more so it should come as little surprise.

Will there be any surprises left in store for Osborne's Emergency Budget 2010?