The shadow of the government’s projected budget deficit of £175bn has loomed large over all three of this year’s party conferences.
All parties are now committing to tackling – in their own ways – government debt. Labour and the Conservatives have promised a public sector pay freeze of some form, while the Liberal Democrats have toned down their call for ‘savage cuts’ to the need for ‘progressive austerity’.
One proposed area for savings is through asset sales. The prime minister, according to a media report, hopes that selling government assets such as Ordnance Survey could be a way of avoiding higher taxes and sharper falls in spending.
He should be so lucky. Not only will the current state of the economy make it extremely challenging to secure best value from such sell-offs, but Whitehall also currently lacks the appropriate incentives to ensure success.
As things stand, any saving from an asset or property sale goes into the consolidated government fund, rather than the individual department’s budget. If a department could bank the proceeds of any of its sell-offs then far faster progress would likely be made.
Government was farsighted in setting up the Shareholder Executive as a centre of corporate finance expertise. It currently manages a portfolio of 29 businesses with a combined turnover of around £21bn and leads the asset sale strand of the Operational Efficiency Programme. The executive is responsible for improving the government's performance as a shareholder in state-owned businesses and is the forerunner for the Property Executive, which will help departments make the best use of their property assets.
Yet there remain doubts over whether it, and other centres of excellence – such as the Office of Government Commerce – have the necessary powers to drive efficiency across Whitehall and the rest of the public sector.
While central government needs to be a better customer, specifying what it requires more precisely, it also needs to be more ruthless in holding organisations and their management to account for the use of public money. Relying on revenues from sales of government assets to tackle the spending deficit will not suffice.
New approaches will also be required as only concerted and immediate action across a number of fronts will address the unsustainable position of the public sector finances.
James Close is a partner in Ernst & Young LLP’s government services practice
