One year into the Comprehensive Spending Review and many public bodies still do not have an effective strategy to deal with the new era of financial constraint. Simply salami slicing budgets isn’t going to work
Almost exactly a year ago, George Osborne unveiled the details of the 2010 Comprehensive Spending Review, and set out how the government would attempt to cut an average of 19% from departmental budgets.
In many ways it ushered in a new era – with everything from the BBC World Service to the way the UK punished and rehabilitated criminals set to change. It also divided opinion; if the UK economy was ill, the dramatic cuts were heralded as either the first injection of a life-saving antidote, or a shock treatment so severe that the patient's condition would worsen.
A year on, RSM Tenon has conducted a study into the effects of the CSR. It is a necessarily incomplete task: we are only a year in to a four-year project. A third of the public sector bodies we talked to said they did not yet understand what the implications of the budget cuts would be. However, a few themes stand out.
The first thing to consider is that the public sector isn’t a stranger to big, government-led drives that aim to shake the system up so it delivers better value for money. The National Audit Office and the Audit Commission have been conducting Value for Money reviews for a quarter of a century.
There have also been pushes including Better Value Services, the Gershon Efficiency Review and the Phillip Green Procurement Review, not to mention the birth (and passing) of other initiatives such as Best Value and Comprehensive Performance Assessments. Even this comprehensive spending review was hardly unprecedented – the previous CSR was in 2007.
Despite this, the 2010 CSR was different. The savings required are supposedly the largest since the Second World War. This time it’s not an option to just save and survive. To emerge from the other end lean and sustainable, public sector bodies need to be brave, and make wholesale changes. The question is: Faced with yet another efficiency drive, can the public sector rise to the task?
One conclusion to draw from our research is that there are, indeed, pockets of excellence where management and staff are innovating, restructuring, and coming up with ideas that may point the way for public services across the country. But these cases are not nearly as prevalent as they need to be.
When conducting our research, we have mainly come across salami-slicing of budgets. Not enough are being as brave as they need to, and there is a danger that the CSR is a missed opportunity. I’ll give three examples, from three different areas of the public sector, that exemplify the kind of thinking that others need to learn from.
Firstly, the tri-borough initiative in west London, where Westminster, Hammersmith & Fulham and Kensington & Chelsea are merging their upper management while combining many services. And just this week an announcement was made of the appointment of Deek Myers as single chief executive for two of the three. In total, the annual savings are estimated to be in the hundreds of thousands of pounds.
However, there’s no need to be restricted by geography. Several counties – and many miles – separate Cheshire and Northamptonshire, yet both regions’ constabularies have recently brokered an agreement to share back-office services, pooling much of the HR, procurement and finance work. This is expected to save £54m over four years.
But it’s not just about amalgamating services. In Greenwich, a group of more than 40 doctors have formed a social enterprise in order to create their own GP surgery. Because of the model they have chosen, they can provide all of the usual services of a doctors’ surgery, take some of the strain away from the local hospital, but also generate a profit (or a ‘surplus’, in NHS parlance), all of which will be ploughed back into local health schemes.
By setting up projects that help vulnerable people in the local area, it means that they will take some of the strain that would otherwise have fallen to social housing, local government, or local hospitals. Again, this is an innovative solution, and it’s saving money for the public sector.
This is the kind of reform and smart thinking that the entire public sector is capable of. However, we are not yet seeing this across the board. A high proportion of bodies seem to be simply laying people off, cutting some services, or salami-slicing budgets. Sadly, this is not going to work this time.
We should not be in a situation where a third of senior managers do not yet know what the implications of the CSR will be. People should have already made a plan, and be implementing it – at the very least, there should have been a thorough audit of strategic priorities.
It isn’t enough to batten down the hatches – the wind isn’t going to abate. We have to strengthen or redesign our houses.
Richard Smith is head of risk management at RSM Tenon
