15 June 2007
Public sector managers and politicians will have to ditch their embedded opposition to shared services and offshoring to achieve the savings required by the Comprehensive Spending Review, CIPFA delegates were told this week.
In a hard-hitting opening speech to the institute's annual conference in Bournemouth on June 13, Rod Aldridge, former chair of services company Capita, said that the public sector was failing taxpayers by ignoring potential savings and service improvements.
He derided as 'barriers to progress' those in senior positions 'who talk the language of change but who know in their hearts that they have no intention of embracing it'.
Referring to the poor take-up of shared services – where organisations combine back-office functions such as IT, finance and human resources – Aldridge chided: 'Let's be honest, the logic for shared services is obvious but the execution is pitiful.'
The recent local government white paper identified potential savings of £40bn through sharing IT and HR services. Aldridge urged local and national leaders to make brave decisions over the job cuts that would result. He also called on the government to identify and match up public bodies that could merge functions.
'Large sections of the population feel that while services are better, they have not improved sufficiently for the investment made in them by the government. The imperative to change has never been greater – and you now face that challenge at a time when the money available to run services will be limited through the CSR 2007,' Aldridge told delegates.
He added that the public now demanded instant access to services and would not accept low standards. 'This means that public services have to change and, equally, the processes and structures that sit behind them need to be rethought and the skills changed.'
That, Aldridge said, should compel organisations to look abroad. Some public bodies, such as the Department of Health, have outsourced contracts to low-cost centres in India, but many politicians will not risk public criticism for axeing thousands of local jobs and investing taxpayers' cash overseas.
But Aldridge, who now champions the charitable sector's potential to deliver public and social services, claimed that improved quality could also result from using India's increasing expertise in industries such as IT.
'How long can offshoring be ignored by the public services? All the major business processing companies now have significant offshoring capabilities. But… it's still the case that when any major supplier puts an offshore solution to you, it won't be selected. Even to the most radical chief executive, offshoring remains a step too far. It is time to look at it with an open-minded approach.'
But the extent of public sector opposition was reflected by a response from the Public and Commercial Services union, which represents 300,000 civil servants.
A PCS spokesman told Public Finance: 'We have very serious concerns about offshoring. It involves local job cuts and a loss of expertise. It fragments crucial services and accountability is a major issue: the public is sceptical about having sensitive personal data administered from overseas.
'More immediately, we're concerned about the quality of current offshore contracts. The Office for National Statistics, for example, took part of its births, deaths and marriages services to offices in India. The contract is behind schedule and the quality of the data produced is poor. There is also evidence that letters being sent out to the public under an NHS offshore contract regularly contain inaccuracies.'
Meanwhile, Aldridge also called for finance professionals to be placed at the heart of public sector decision-making. He said the current norm was to prioritise the presentation of policy ahead of financial management. 'It saddens me that the finance director is not around the main table when key decisions are made – I find that incredible,' he said.
Aldridge derided the Home Office, for example, for producing a set of qualified accounts two years in succession because it could not balance its books or produce its figures on time.
'In my world, this simply could not happen. If a company had those issues, its share price would collapse. It would tarnish its reputation and the directors would definitely have a problem – they wouldn't have a job,' he said.
Cabinet secretary Sir Gus O'Donnell is implementing plans to put finance directors on the board of every major government department. The Treasury said it was 'developing the finance function as a professional skill across all departments'.
PFjun2007
