By Lucy Phillips
03 June 2010
Could the influence of the private sector help the civil service provide more for less? If so, it will test relations both with the unions and within the coalition itself, reports Lucy Phillips
The announcement last week of £6.2bn of public sector cuts marked the end of the phoney war. While arguments about when and how to cut the deficit have been raging for some time, Chancellor George Osborne’s programme of spending reductions for this year means the debate has suddenly got real.
Some commentators are confident that Whitehall is better placed than ever before when it comes to skills and capability to start reining back its spending. Others, however, continue to question the need for the cuts and warn that putting brakes on central government spending could have far-reaching consequences.
Mark Gibson is a former mandarin and chief executive of the Whitehall & Industry Group, which works to foster better relationships between government and business. He claims the civil service has benefited from ‘a real injection of private sector experience’ in recent years, driven by Cabinet secretary Sir Gus O’Donnell.
More finance, human resources and commercial directors now have more business acumen behind them, he says. Meanwhile, all government departments and major agencies now have boards of directors, including non-executives with heavy private sector backgrounds.
The private sector responded relatively well to one of the worst recessions in history. Job losses were kept below the numbers predicted because of the willingness of staff and unions to change working patterns and accept pay freezes or cuts, according to a recent survey by the CBI. But the business group claims the public sector has been ‘cushioned’ from the impact of the economic downturn so far and now faces a squeeze.
CBI deputy director general John Cridland argues: ‘Drawing on the experience of the private sector in engaging employees during the recession to deliver much-needed change could help the public sector minimise the pain of spending cuts.’
But other voices caution that too much might be being invested in cuts. Eilís Lawlor, head of ‘valuing what matters’ at the New Economics Foundation think-tank, says: ‘The idea that you can cut public services to this very lean, efficient machine is completely overstated.’
The NEF has also warned of the wider knock-on social problems, particularly through radical changes to government procurement. Lawlor says that current public service contracts might be more expensive, but they are ‘meeting multiple social objectives’. These include keeping jobs and services going in the UK during a time of rising unemployment. Moving them abroad ‘might store up future costs in other ways’, she warns.
For Gibson, though, the new public sector skills base will help produce better procurement deals as well as improved financial controls, new ideas on sustainability and ‘going green to save money’. It will also bring better workforce planning and talent management. The private sector is particularly good at prioritising spending, he suggests, citing its success in slashing training budgets by focusing on the people it wanted to retain.
Gibson also believes there is much learning to be done within government. Strong leadership quickly guided the Land Registry through massive redundancies as the recession took hold of the housing market. Ofcom and Natural England are good examples of where regulators or quangos have been brought together and now operate at a lower cost, he adds.
Minsters have been very clear that they wish to eradicate Whitehall ‘waste’ before moving to cuts in services.
But Gibson says ‘waste’ is the wrong word to be using. ‘Reducing public sector debt simply requires prioritisation of spending decisions, which are political judgements. The issue for Whitehall is does it have the capability and experience to do it and in my view it absolutely does.’
The Department for Business, Innovation and Skills was among those hardest hit by the chancellor’s first round of cuts, with £836m of in-year savings required. Senior executives and non-executives told Public Finance how the department was facing up to the cuts.
Jean Irvine, a non-executive board member at the DBIS, believes the ‘dos and don’ts from the private sector’ will be vital when it comes to areas such as sharing resources, services and outsourcing.
Irvine, whose background is at the Royal Mail, says: ‘For the foreseeable future, the public sector has major challenges facing it while continuing to provide more with less. It’s as much about innovation as anything. This is a very important department for getting the country out of recession.’
Rachel Sandby-Thomas, the solicitor and director general for legal, people and communications at the DBIS, agrees that the private and public sectors share many of the same problems. But, she says, often they must be dealt with differently – not least because of different terms of employment and civil service-wide agreements with unions. ‘It’s much easier to make people redundant in the private sector than the public sector,’ she adds.
She explains that radical HR strategies, for example, cannot be applied ‘slap bang into the public sector because the context is different’. But, equally, public services can pick and choose the best bits.
Sandby-Thomas says new organisational design has been on the agenda since the beginning of the year. Duplication of certain functions was inevitable given the various incarnations of the department and with ‘bits being bolted on’ over recent years.
‘It’s very rare that you have the time, impetus and will... to look at how best you can organise yourselves for maximum efficiency,’ she adds.
Unions have denounced the civil service-wide recruitment freeze imposed by the government, saying it will make existing skills and staffing shortages even worse.
Unison general secretary Dave Prentis warns that this year’s cuts are a ‘worrying sign of things to come from the new government’. He stresses that the timing is wrong, and adds that cutting now has implications not just for the public sector, but the private sector also.
‘Withdrawing support could see the recession return. Private sector firms will be hit; many depend on public sector contracts for their survival. Local shops and small businesses will see less money going through their tills if public sector workers join the dole queues,’ Prentis says.
With industrial action being threatened, union opposition will test Whitehall’s resolve, particularly when it comes to job losses, recruitment and pay freezes.
‘It will present problems,’ admits Sandy-Thomas. ‘No organisation wants to do that but private companies have had to do it when going through the recession and it’s our turn now and we have to deal with it.’
But even if the civil service is ready to take its share of the cuts, obstacles beyond the unions will inevitably emerge. The public will need to be convinced at every stage that the decisions are justified, while the relationship between the coalition partners is likely to be pushed to its final frontier.
03 June 2010
Could the influence of the private sector help the civil service provide more for less? If so, it will test relations both with the unions and within the coalition itself, reports Lucy Phillips
The announcement last week of £6.2bn of public sector cuts marked the end of the phoney war. While arguments about when and how to cut the deficit have been raging for some time, Chancellor George Osborne’s programme of spending reductions for this year means the debate has suddenly got real.
Some commentators are confident that Whitehall is better placed than ever before when it comes to skills and capability to start reining back its spending. Others, however, continue to question the need for the cuts and warn that putting brakes on central government spending could have far-reaching consequences.
Mark Gibson is a former mandarin and chief executive of the Whitehall & Industry Group, which works to foster better relationships between government and business. He claims the civil service has benefited from ‘a real injection of private sector experience’ in recent years, driven by Cabinet secretary Sir Gus O’Donnell.
More finance, human resources and commercial directors now have more business acumen behind them, he says. Meanwhile, all government departments and major agencies now have boards of directors, including non-executives with heavy private sector backgrounds.
The private sector responded relatively well to one of the worst recessions in history. Job losses were kept below the numbers predicted because of the willingness of staff and unions to change working patterns and accept pay freezes or cuts, according to a recent survey by the CBI. But the business group claims the public sector has been ‘cushioned’ from the impact of the economic downturn so far and now faces a squeeze.
CBI deputy director general John Cridland argues: ‘Drawing on the experience of the private sector in engaging employees during the recession to deliver much-needed change could help the public sector minimise the pain of spending cuts.’
But other voices caution that too much might be being invested in cuts. Eilís Lawlor, head of ‘valuing what matters’ at the New Economics Foundation think-tank, says: ‘The idea that you can cut public services to this very lean, efficient machine is completely overstated.’
The NEF has also warned of the wider knock-on social problems, particularly through radical changes to government procurement. Lawlor says that current public service contracts might be more expensive, but they are ‘meeting multiple social objectives’. These include keeping jobs and services going in the UK during a time of rising unemployment. Moving them abroad ‘might store up future costs in other ways’, she warns.
For Gibson, though, the new public sector skills base will help produce better procurement deals as well as improved financial controls, new ideas on sustainability and ‘going green to save money’. It will also bring better workforce planning and talent management. The private sector is particularly good at prioritising spending, he suggests, citing its success in slashing training budgets by focusing on the people it wanted to retain.
Gibson also believes there is much learning to be done within government. Strong leadership quickly guided the Land Registry through massive redundancies as the recession took hold of the housing market. Ofcom and Natural England are good examples of where regulators or quangos have been brought together and now operate at a lower cost, he adds.
Minsters have been very clear that they wish to eradicate Whitehall ‘waste’ before moving to cuts in services.
But Gibson says ‘waste’ is the wrong word to be using. ‘Reducing public sector debt simply requires prioritisation of spending decisions, which are political judgements. The issue for Whitehall is does it have the capability and experience to do it and in my view it absolutely does.’
The Department for Business, Innovation and Skills was among those hardest hit by the chancellor’s first round of cuts, with £836m of in-year savings required. Senior executives and non-executives told Public Finance how the department was facing up to the cuts.
Jean Irvine, a non-executive board member at the DBIS, believes the ‘dos and don’ts from the private sector’ will be vital when it comes to areas such as sharing resources, services and outsourcing.
Irvine, whose background is at the Royal Mail, says: ‘For the foreseeable future, the public sector has major challenges facing it while continuing to provide more with less. It’s as much about innovation as anything. This is a very important department for getting the country out of recession.’
Rachel Sandby-Thomas, the solicitor and director general for legal, people and communications at the DBIS, agrees that the private and public sectors share many of the same problems. But, she says, often they must be dealt with differently – not least because of different terms of employment and civil service-wide agreements with unions. ‘It’s much easier to make people redundant in the private sector than the public sector,’ she adds.
She explains that radical HR strategies, for example, cannot be applied ‘slap bang into the public sector because the context is different’. But, equally, public services can pick and choose the best bits.
Sandby-Thomas says new organisational design has been on the agenda since the beginning of the year. Duplication of certain functions was inevitable given the various incarnations of the department and with ‘bits being bolted on’ over recent years.
‘It’s very rare that you have the time, impetus and will... to look at how best you can organise yourselves for maximum efficiency,’ she adds.
Unions have denounced the civil service-wide recruitment freeze imposed by the government, saying it will make existing skills and staffing shortages even worse.
Unison general secretary Dave Prentis warns that this year’s cuts are a ‘worrying sign of things to come from the new government’. He stresses that the timing is wrong, and adds that cutting now has implications not just for the public sector, but the private sector also.
‘Withdrawing support could see the recession return. Private sector firms will be hit; many depend on public sector contracts for their survival. Local shops and small businesses will see less money going through their tills if public sector workers join the dole queues,’ Prentis says.
With industrial action being threatened, union opposition will test Whitehall’s resolve, particularly when it comes to job losses, recruitment and pay freezes.
‘It will present problems,’ admits Sandy-Thomas. ‘No organisation wants to do that but private companies have had to do it when going through the recession and it’s our turn now and we have to deal with it.’
But even if the civil service is ready to take its share of the cuts, obstacles beyond the unions will inevitably emerge. The public will need to be convinced at every stage that the decisions are justified, while the relationship between the coalition partners is likely to be pushed to its final frontier.
