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Public sector has ‘exhausted’ potential savings

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By Vivienne Russell

13 November 2009

Many of the efficiency gains to be had in the public sector have already been exhausted, the head of the National Audit Office has said.

Addressing the conference, Amyas Morse said there were no easy or short-term answers to driving down public service costs.

‘Much of the low-hanging fruit has already been picked, and if it hasn’t been picked it’s turned into raisins long ago,’ Morse told delegates on November 10.

He added that ‘really strong financial management’ was vital and suggested public sector managers could learn much from their counterparts in the private sector and their business acumen.

‘There is less understanding [in the public sector] of all the objective measurement tools that are commonly used in the private sector,’ Morse told delegates.

But he warned that there would also be ‘significant opportunity costs’ involved in generating savings. ‘It’s going to be a long road,’ he said.

The session also heard from Liberal Democrat Treasury spokesman Vince Cable, who warned that cutting public spending too enthusiastically and too quickly could undermine fragile economic recovery.

‘The fiscal crisis is extremely important, but it isn’t urgent,’ Cable said. ‘The government’s debt problem is not exceptional by international or historic standards.’

Reform has maintained that fiscal stimuli could prolong the recession and has labelled the government’s approach ‘toxic Keynesianism’.

But Cable challenged this, saying: ‘Where else is the growth going to come from? I’m persuaded that if government embarked on big cuts in the near future, it wouldn’t stimulate growth.’

With private sector confidence at a low level, it could make things worse, he warned.