02 June 2006
Financial managers in the public sector are prepared to do what is required to make the Gershon efficiencies – but first they want some firm decisions on how the improvements will be measured
We are led to believe that there is deep scepticism over the public sector's ability to achieve the £21.5bn in efficiencies set out in Sir Peter Gershon's report.
A CBI survey found that '90% of firms doubt that the target set by the 2004 Gershon Review will be achieved. This is a hardening of opinion since last year, when 86% of companies lacked confidence'.
But in a debate on the Gershon Review in March, the chief secretary to the Treasury robustly defended progress with a series of statistics, although he did refer to challenges with the technical measurements involved.
The debate also raised the fundamental question of whether efficiencies were to be deemed 'net' — ie actual savings against the state of play at a particular point in time — or were to be measured under 'spend against projected growth' in the public sector.
Siemens Financial Services commissioned a research project among the people tasked with driving efficiencies — namely, public sector financial managers.
Our research, from a focus group of 20 senior financial managers, indicated an interesting polarisation among those interviewed: from the deep sceptic (around one third of respondents) to the positive 'can do' attitude (approximately half of respondents), with the former suggesting around 50% of the Gershon targets would be a more realistic goal.
There was consensus, however, when it came to which measurements of efficiency improvement should be used. All respondents felt the situation was opaque and lacking in proper 'rules'. Some of the comments illustrate this frustration.
'Employment must surely be measured net — everyone knows that we have had a period of gross over-employment.' 'Measurement must be against current spending — or its real-terms equivalent — otherwise the efficiency process is completely meaningless.'
From these we can hear the clear clarion call for an agreed basis on which to calibrate efficiency savings.
On a positive note, what do public sector financial managers see as the most effective methods for achieving Gershon goals? All respondents cited improved analysis and accounting of spending and more joined-up enquiry handling as major routes. Three-quarters also highlighted improved workflow/business process management and a greater use of modern financing techniques as key tools in the streamlining process.
On the last point, we asked for a more precise estimate of actual growth in the use of alternative financing such as leasing. Again, with the proviso on drawing firm statistics from the exercise, our respondents put growth around the 4% per annum mark — a steady net rise in using alternative financing (ie not traditional borrowing) to fund capital expenditure and keep equipment efficient and up to date.
The research exercise also revealed where financial managers expected savings to come from.
Technology and on-line self-service is the most likely initiative to produce the required outcomes, stated one respondent, echoing a view held by the majority. This point has been much discussed as the e-government initiative moves this year from basic infrastructure set-up to application building and implementation.
The debate around e-government is also asking whether it is designed to achieve 'net' efficiencies or simply ensure that the landslide of new responsibilities — such as the Freedom of Information Act — do not swamp central and local government capacity.
A majority also agreed with one respondent who said that shared service centres were vital. This is quantified in a report commissioned by Serco Solutions late last year, which found that more than half of local government financial directors plan to implement a shared services strategy in the next year.
Achieving efficiency goals has to contend with cultural and infrastructure obstacles, too. One respondent commented that lack of co-operation within and between public sector bodies is at the heart of the problem. And there is concern that efficiency might sacrifice the quality and coverage of public services.
It is evident that whatever financial managers' personal view of the Gershon Review, they are making every effort to achieve efficiency progress. They feel hampered by the lack of clear and universal metrics to measure that progress. Even if the measurement regime were imperfect, it would be better than the lack of clarity that is frustrating financial management in the public sector.
It would seem that public sector financial managers are prepared to aim for ambitious goals as long as their efforts take place within a clear, dependable and equitable regime.
David Martin is head of public sector at Siemens Financial Services
PFjun2006
