Cutting staff might seem an easy way to reduce council spending but it can cost more than it saves, says Andrew Jepp in the latest of PF’s occasional series of sponsored columns
Earlier this year the BBC conducted in-depth research among 49 councils in England to assess the implications of public sector funding cuts on staffing levels. It found that 180,000 jobs are expected to be lost in the next three to five years, some 10% of the sector – a significant figure that, if realised, could fundamentally change the shape of many council services.
Cutting jobs might seem to be a natural, if drastic, response to the mounting pressures councils face in a climate of squeezed funding. Certainly many private organisations have had to take this difficult measure during and post-recession to manage within a tough economic environment. Now, faced with similar decisions, local authorities might have much to learn from the experience of the private sector.
One of the main risks when planning for job cuts, particularly if they are large-scale, is external and internal reputational damage. Within an organisation, job cuts can have a negative impact on staff morale, affecting the productivity and engagement of remaining employees and in turn jeopardising delivery and return on investment. Disengaged employees are expensive employees – in any sector.
At the same time, job losses might be perceived as a knee-jerk reaction, even if detailed and lengthy planning and consultation happen behind the scenes. This risk is even more pertinent in areas where local authorities or other public organisations are major employers for the region. The people losing their jobs will also be consumers in the local area; a loss in income and consequent reduction in spending could trigger losses across the local economy.
The forthcoming election (in which the future of public sector service delivery is likely to play a starring role) and the continuing debate about the likelihood, shape and pace of economic recovery, mean there is a heightened public awareness of local authority spend and impact. Any sign of job cuts – however justified or well communicated – might give local communities cause for concern about a council’s ability to deliver services. A sceptical or distrusting audience is a big risk for councils, potentially causing increased scrutiny and backlash over service delivery, decision-making and prioritisation.
The only way to mitigate future delivery challenges is to undertake detailed risk assessments incorporating all relevant issues. In particular, councils forced to make cuts should invest in appropriate advice to ensure compliance with employment law and union regulation. As private sector organisations can verify, this kind of advice, on top of redundancy remuneration or packages, means that cutting jobs can be inherently expensive. Yet without following correct procedure and due diligence, councils might face legal or strike action, which could prove costly to their purse and reputation.
Further, this planning and risk assessment should not stop once the decision to cut jobs has been made. Councils also need to consider where and how jobs will be lost – frontline or back-office, outsourced suppliers or in-house teams – and what the wider impact will be on the organisation as a whole.
Importantly, some cuts might prove counter-productive. For example, reducing highway maintenance can lead to deteriorating roads and pavements, thus increasing claims, which will cost the wider public sector more and put a strain on other public services such as the NHS.
Ultimately, councils need to focus on the wider picture of organisational reliance – that is, how to undergo significant change but emerge stronger and able to provide the same, or better, services. In the case of service provision following job cuts there are three options: find ways to deliver the same services with a slimmer team, reduce services or cut services.
Service reduction should happen only if increased efficiencies are impossible. And cutting services should be the absolute last resort.
Budget reductions are likely to become a fact of life for local authorities but cutting jobs is not the only solution. Outsourcing can increase efficiency and provision while partnering, via schemes like Total Place, can reduce duplication across councils. While these kinds of measures might still necessitate job cuts, they may be less severe.
Reducing costs by reducing staff is fraught with issues that can negate any perceived financial benefit. Councils might regret premature cuts made in the current uncertain economic climate and find redundancies cost more than retaining staff.
Whatever steps authorities take to move forward, they need to make sure they are based on strong foundations, with risks and impacts fully considered and managed. Without the right planning and risk assessment in place, the cuts could undermine rather than reinforce councils’ solvency and ultimately impede public service provision.
Andrew Jepp is head of local government at Zurich Municipal
