Reform in the next Parliament

18 May 15

The general election delivered a clear result. The Conservatives can now implement their manifesto pledges to build on the last government’s work on public sector reform

Whatever your view on the election result, it delivered a surprising amount of certainty, surprisingly quickly. Most people inside and outside government had been braced for days or even weeks of coalition talks. But not only have we known the party of government from day one, we know its overall public spending plan as we head towards the July Budget because there is no coalition partner seeking to alter its manifesto commitments.

A Conservative majority also confirms that the direction of government and public sector reform will remain along the same lines as in the last Parliament. Its manifesto pledges to build on reforms to date while also pointing to some specific new elements.

For Whitehall, the manifesto commits to annual savings of £10bn by 2017/18 and £15-20bn in 2019/20, building on the work of the Cabinet Office Efficiency and Reform Group. Some of that is expected to come from the sale of government-owned property and co-location. While savings of that scale become increasingly harder to find, those targets remain in the same ballpark as the £14.3 billion saved in 2013/14.

The Civil Service Reform plan looks likely to stay live, with some adjustments. The manifesto suggests that its recruitment will change so Whitehall can secure ‘exceptional talent’, especially in roles that are hard to fill. Those posts tend to require specific skills that command higher salaries in the private sector, such as commercial and digital.

The mutualisation agenda also looks set to continue. After a slow start, more than 100 public sector mutuals have been formed since 2010 with government workers ‘spinning out’ to form their own organisation. The Conservative manifesto promises a ‘right to mutualise’ to stimulate more public servants to leave the state sector while continuing to generate public value.

Digital transformation is also mentioned in the manifesto, both in terms of citizen interaction with the public services and in improving government productivity. The public sector – historically built on analogue processes – has more to gain from exploiting digital technology than any other, with clear benefits to citizens as well as the public purse.

If delivered, these reforms could be bold in global terms. Governments around the world often look to the UK for lessons in public sector reform, whichever party is in power. But reform will need to be bold – and focused on productivity gains – for the public sector to manage the spending reductions that Chancellor George Osborne put forward in his March Budget.

Those plans suggest deep public spending cuts in the first half of the coming Parliament. They means cuts to day-to-day spending on public services and administration in 2016/17 and 2018/19 that are twice as deep as anything in the last Parliament. Those cuts will come at a time when the outlook for some public bodies is already worrying. According to the National Audit Office late last year, local auditors are concerned that 56% of metropolitan and unitary councils will not meet medium-term savings targets. Monitor, the health regulator, reported in February that more than half of all foundation trusts are in deficit.

All of this means some tough choices ahead, so civil servants have been kept busy during the purdah period preparing options for their new ministers. The Spending Review scheduled for this year will need to marry a difficult set of concurrent pressures: meeting deficit reduction commitments while ensuring the financial viability of public bodies, and deploying reforms that mitigate the impact of cuts whilst simultaneously driving improvements. Balancing those elements will be a major preoccupation for civil servants and ministers over the summer months.

Our analysis of the outlook for the incoming government – set out in our State of the State report in the autumn – suggests that the new administration needs to view reform through three strategic lenses. First, the debt reduction lens should remain focused on restoring the public finances by eliminating the deficit and then on reductions to public sector debt. Second, government should use a talent lens to be sure it has the right people with the right skills in the right jobs. That is especially important in the context of a fewer state employees. Third, considering reform through a productivity lens is vital to make sure that change in the public sector helps its people maximise their time and energy while mitigating the impact of cuts.

None of this is easy. But as the post-election analysis fades, the business of government will need to continue – and it will need to focus on restoring the public finances, keeping the public sector viable and making the most of its people.

  • Mike Turley
    Mike Turley

    Mike Turley is the vice chairman and public sector leader at Deloitte

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