US president Bill Clinton was said to have pinned on his wall a notice saying ‘it’s the economy, stupid’ to emphasise what he saw as the key issue of his presidency. It could be that in the current economic and fiscal climate, UK Cabinet ministers should have a similar slogan saying ‘it’s efficiency, stupid’ pinned to their walls.
These days one pound in every five of public spending is paid for by government borrowing and this situation is unsustainable. In the absence of significant economic growth, the maintenance and improvement in public services will have to come from efficiency improvements in existing services.The new government is making a start with its identification of £6bn of 'wasteful spending' to be cut this year. More will inevitably follow.
Of course, the public sector has been involved in the implementation of efficiency savings for many years and it is likely that most of the easy options have already been taken. Also the problem is that the term ‘efficiency savings’ is used rather loosely and can mean different things to different people. Some examples might include:
- Short-term measures - a classic way of quickly reducing public spending is through measures such as freezing posts, reducing buildings maintenance and delaying purchases of goods and services. However, these are not really efficiency savings but ‘smoke and mirror’ initiatives, often favoured by Whitehall, since they can only be continued for a relatively short period of time.
- Capital-led savings - efficiency can often be improved significantly by capital investment such as the closure of several old buildings and their replacement by a single new building. There are huge opportunities here for efficiency through the reduction of staff duplication and better energy efficiency, but careful design and planning is needed to ensure those efficiencies are realised.. However, such approaches take time to implement and require large-scale capital investment, which may not be available. An alternative would be to use the Private Finance Initiative, but this would leave the public sector with huge financial liabilities and a rigid cost structure.
- Systems rationalisations – with many public services, the actual delivery of services often involves a multiplicity of organisations including government departments, quangos, local authorities, regulatory bodies and third sector organisations. There is often confusion about who is commissioning what, who is paying for it and who is delivering it. Substantial efficiencies could be made just by simplifying the ‘systems’ involved and possibly eliminating some of the organisations involved. Aside from savings, such a change might also have the by-product of clarifying accountability.
- Internal efficiencies - there are huge and real efficiency savings to be made in the public sector but they are often very difficult to implement. They involve such sensitive matters as restrictive practices of certain professions, lack of clarity about the roles of different staff groups, poor staff productivity in some areas and organisational barriers. The problem is that theses matters are often essentially cultural in nature and not easily resolved. Included under this heading would be the transformation agenda but, again, achieving such transformations is often difficult and requires effective change management and huge amounts of management time and effort from senior people.
- Low-priority services - Some public sector organisations may (quite rightly) be tempted to look at their current portfolio of services and decide that some of these are ineffective, unnecessary or could be delivered in a different way. However, there may be a huge public and media outcry about such actions and they would end up being labelled as ‘cuts’ rather than efficiencies.
The one thing we can be certain of is that true efficiencies will not be generated through diktats from Whitehall. The last Labour Government tried that and failed. Academic and practical experience suggests that all setting targets does is get managers to focus intensely in the targeted areas to the detriment of other (untargeted) areas. What is needed is to create a culture, free of central interference, within public sector organisations that encourages. recognises and rewards efficiency and that takes time to do.
Malcolm Prowle is professor of business performance at Nottingham Business School and a visiting professor at the Open University Business School. He can be contacted via his web page www.malcolmprowle.com
