News analysis The new cost-cutters aim to go one better than Gershon

10 Jul 08
If Sir Peter Gershon has left one legacy it is that he has made efficiency a major part of public sector discourse. This, at least, is the view of Chief Secretary to the Treasury Yvette Cooper.

11 July 2008

If Sir Peter Gershon has left one legacy it is that he has made efficiency a major part of public sector discourse. This, at least, is the view of Chief Secretary to the Treasury Yvette Cooper.

'He changed attitudes towards efficiency,' she tells Public Finance. 'I think [he] raised the profile and the importance in government departments to work to achieve efficiencies.

'It's work that permanent secretaries take very seriously… they look very carefully at issues like value for money.'

Four years on from the publication of Gershon's original review, the government is entering the third phase of the programme.

Gershon demanded £23bn in efficiency gains, a focus that has continued into the current spending round. All central government departments and agencies, as well as local authorities, have to make net annual savings of 3%. If successful, this effort will generate £30bn across the entire public sector by 2010/11.

While the Treasury select committee has commented that these targets are ambitious and take efficiency to a 'new level', ministers are not content to stand still. This year's Budget announced a public value programme looking at specific spending areas, such as road building and NHS commissioning, in an attempt to ensure even greater value for money for the taxpayer.

Running parallel is the operational efficiency programme, and on July 3 the Treasury published a prospectus fleshing out the details. The aim is to deepen and widen the efficiency and value-for-money agenda as the government prepares itself for the next Spending Review. Initial conclusions from this work will be set out in an interim report, to be published with the Pre-Budget Report later this year. Final conclusions will be published alongside next year's Budget.

While Gershon provided a good foundation, there is more to do, says Cooper. 'Any good organisation is always looking for ways to improve, do things better, do things differently, but do things more efficiently and effectively as well.

'So you see business organisations always looking for ways to operate more efficiently, but also the best of the public sector. The taxpayer has a right to expect value for money; that means the public sector has a duty to always strive for greater ways to improve efficiency and deliver better results,' she told PF.

Four distinguished business leaders have been drafted in to lead work on different aspects of efficiency – or 'work strands' – which cut across all public services. As was announced last month, Martin Read, former chief executive of IT company Logica, will lead on back-office and IT functions; Martin Jay, former chair and chief executive of support services company VT Group, will examine what can be done to maximise savings from collaborative procurement; Lord Patrick Carter, the Labour peer and founder of Westminster Healthcare, will look at property; and Gerry Grimstone, chair of Standard Life, is to lead work on asset management and sales.

A fifth work strand will examine what can be done to encourage frontline professionals and public service users to bring forward their own ideas on how to cut waste. Read, Jay, Carter and Grimstone joined Cooper at the launch of the prospectus on July 3, with Read saying that spending taxpayers' money as effectively as possible was vital to national productivity and competitiveness.

Speaking of his own work stream, Read said: 'Back offices are a crucial part of any organisation. In the private sector, competitive pressure over recent years, especially the effects of globalisation, has meant that organisations have had to focus on delivering back-office services much more effectively and much more cheaply. I do believe that some of this private sector expertise can be put to good use in the public sector.'

Carter noted some 'tremendous examples of good practice' within the public sector, but added: 'The big problem we often face is how do we replicate those high standards across the whole of Whitehall?'

Carter's area of property management is singled out by Cooper as something parts of the public sector could do much better. She cites her previous experience as housing minister. Last year's review of public sector land that could be developed for affordable housing threw up some telling conclusions, she said.

'It became clear that there was a lot of public sector land that could be better used… Some agencies had very good assessments of what land and property they had; others didn't.

'It's not just about identifying surplus land for housing, but also existing land and assets. Are we using them as effectively as possible? Are we getting the best results from the way in which they're used?'

On the subject of asset management and sales, Grimstone said the public sector should hold the assets it needs to fulfil its functions, 'no more and no less'.

'Those who are directly responsible for [public sector assets] must be incentivised effectively to manage them properly. In my experience, you can't micro-manage this from the centre,' he said.

'How do I see my role? Absolutely a practical role, not a doctrinaire role, and in essence it involves bringing a fresh pair of eyes to bear over what are really very complex issues.'

Echoing this, Cooper told PF that fresh ideas and insights were needed to regenerate the efficiency programme. 'I think it's important to have top expertise, but also different kinds of expertise.

'Maybe people not working in the public sector at the moment, but who have great expertise and ideas and who can challenge organisations, who can raise questions in different ways.'

As for how much in efficiency savings this new approach is likely to generate, Cooper and her acolytes are hedging their bets. Cooper says she sees this as a 'multibillion-pound' programme. Treasury officials added that the property work strand could generate savings of £5bn, while back-office and IT could release gains worth £1.5bn. But they stress that, with the project still in its infancy, it is too early to come up with a range of more robust figures, or an overall total.

Tighter estimates are likely to be included in the interim report, which will no doubt be greeted with interest and possibly a little trepidation by the public servants responsible for implementing this third-wave efficiency programme.


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