If public bodies are to find genuine efficiency savings, managers will need to put their financial skills in order too
Politicians and senior public sector managers rightly emphasise the importance of dealing with reductions in public sector funding by identifying real ‘efficiency savings’ as opposed to straight cuts in services.
However, there must be serious doubts about whether enough efficiency savings can be realised, because of both the short timescales available and the lack of a robust approach to strategic financial management in many public bodies.
A recent Audit Commission survey found that only four of 14 councils surveyed displayed the five major strategic financial management characteristics: strong and accountable financial leadership; a culture of financial awareness; ability to specify priorities and make choices within means; comprehensive financial information that clearly underpins decisions; and ability to anticipate changing circumstances and manage financial risks.
This is a very unsatisfactory and worrying situation that, if reflected across the public sector, does not augur well for achieving the large-scale efficiency improvements needed.
But good strategic financial management extends beyond the finance function itself. It involves the many people who manage budgets and make decisions that have financial consequences – who also need financial skills. Of the five characteristics noted, two could be seen as the province of the finance professionals but the other three are needed by service managers.
If public sector organisations are to find major efficiencies they will first need to increase the financial skills of their service managers and professional staff.
Malcolm Prowle is professor of business performance at Nottingham Business School
