The right cuts can boost services: A step-by step guide to minimising the damage that will be caused by the coming decline in public expenditure

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History has something to teach us about public sector cuts. The Thatcher administration adopted largely blunt instrument cutting, which resulted in some fairly awful public services and New Labour’s mandate in 1997 to restore sensible spending levels.

But there are other approaches that we should avoid when budgets begin to be squeezed in earnest. The failure, for example, of some innovative and effective social care homes in the 70s to, in anyway, measure outcomes and evaluate performance, left them vulnerable to a hostile political credo. They went. Similarly, while occasional set-piece efficiency reviews have some impact, most of their objects resume their shape quite quickly.

Many public services are not providing a fair deal for their funders – us – nor good enough services for the citizens and consumers – us. Public expenditure is going to be cut. It can be only wishful thinking by some public sector employees to pay for the credit crunch through higher taxes. But, let’s heed history and take a more nuanced approach to reducing expenditure by at least the 10% some are looking for,an estimate with which my experience is congruent. The nuances are many and varied. Here are some of them.

In 2004, The Countryside Council for Wales announced the deforestation in Anglesey of 100 hectares of a rare form of shifting sand dunes, provoking a strong local reaction by residents, walkers, visitors, red squirrel protectors and scientists. National politicians responded to the local pressure and promised not a single tree would be touched.  Wise heads in CCW and Forestry Commission Wales (FCW) switched the approach from Decide-Announce-Defend to Engage-Deliberate-Decide by engaging with local communities and interests through a liaison group run by a professional facilitator. After 3 years of consideration, options and much of CCW’s scientific fact becoming scientific opinion, a new scheme for woodland, habitat retention and partial deforestation was agreed.

Ten months later, CCW reverted to DAD and sought through WAG the deforestation it first thought of. The same people and groups are, again, mounting an effective opposition. This is all a considerable waste of public money – with all the staff time at CCW, FCW and WAG  – hundreds of thousands of pounds worth of work, thrown away in favour of an undeliverable and wrong decision.  But nowhere in any accounting, auditing or performance measurement system will this waste show up.

Move down to a London borough to a carer at a centre for people with learning difficulties, suspended on full pay for four months for an unfounded allegation, before the case was heard. The authority, caught between the ‘politically-correct’ power of the allegation and the lack of evidence, sat on its hands. The allegations are of no cost or accountability to those making them. Again, the waste goes unrecorded.

In response to Gershon, the Environment Agency wisely hired a specialist fresh from balancing income and expenditure at a health foundation trust to achieve efficiency savings. £25 million was found, mainly in the blackberry, mobile phone, company car categories and the like. Coincidentally, Defra increased the Agency’s funding for flooding, and the efficiency programme went off the agenda.

Examples of opportunities to cut public expenditure without damaging their services (indeed, often with improving them) abound. The National Audit Office was writing much the same critical reports in the 60s on the MoD’s  weapons procurement as it does today with the Chinook helicopters.

Process and the pension are the ends that too many employees serve, and not judgement and the customer. Reactive or poor legislation builds unaccounted cost into the public expenditure. Professional contract management is largely unknown in Whitehall with poor value for money consequences, and the contractors conveniently on hand to offload the responsibility to. Unfunded, final salary pensions are unfair and increasingly costly. Rail privatisation continues to be an expensive muddle. Vetting of the individual is a very high cost and largely ineffective means to achieve the ends intended. The Metropolitan Police’s mistaken deaths cost millions. Some NHS hospital staff are having to be persuaded to wash their hands between patients to prevent the costly transmission of disease (didn’t Florence Nightingale sort this out once before?). Benefit spending is often misplaced. Work rate can be low. Outdated statutory duties for quangos incur unnecessary cost. I could go on and on. And on. And on.

The point is that public expenditure can be reduced massively without damaging services. But the routes in to savings are many and varied. The public sector is not one monolithic block. Achieving savings will require diverse and targeted approaches.

Step 1 is to decide on your efficiency programme before arriving in government. Most of the good Tony Blair and co achieved was worked out in the relative peace of opposition, and most of the downside in the rush and pressure of government. If David Cameron has not worked it out by June 2010, then it will be cuts only.

Step 2 is to appoint specialists and to give them the authority to make changes. This means breaking up the civil service monopoly. On election, Barack Obama appointed 300 foreign policy specialists to advise him on every region and hotspot of the world. He followed a similar course in bringing together motivated specialists for each of his priorities. Sounds sensible? How else would you deliver a democratic mandate in a complex world? Over here, it is branded ‘politicisation’ by our news media, buying the spin from the First Division Association, the trade union/professional association for senior civil servants.

Step 3 is to increase the visibility of public service performance. Sort out the performance measures and base them on the outcomes, we, the citizens and consumers, are paying for. Drop targets – Giuliano realised the value of measures and the distortion of targets as New York mayor, from 1994 – and replace them with customer satisfaction league tables for each public service entity. Transfer all responsibility for score keeping from the government to parliament and to its semi-independent arms including the National Audit Office and the Office for National Statistics. Strengthen the remit and resource of select committees, and appoint their chairpersons by the Commons (and not government). Introduce Citystat – publicly available and comprehensive performance measures, for example on crime and teenage pregnancies for your area.

Step 4 is to take a blowtorch and a pipe wrench to legislation.  The NAO should introduce a public league table of the effectiveness of legislation, comparing the results achieved by each Act with its intentions and summing its cost of operation.  Acts should be abolished or tidied up. The Daily Mail, in its lifelong demands for new laws, is a major driver of public expenditure, from extra police to swine flu vacines to vetting. Any Government must avoid the mistake of New Labour in legislating to the media’s tune. Whole swathes of the law need major reengineering (I use management consultants jargon advisedly). Some commercial and chancery law is excessively and unnecessarily complex. Most family law should not be the province of the courts.

Step 5 is to recast the role of government departments. The civil service monopoly has to be broken up. But the role of departments needs to be restricted to the Finnish model where they deliver against a business plan agreed with the centre. Lumbering, semi-independent departments with a separate view are not required – nor can be joined up. Efficient delivery of their remit is. Some functions need to be extracted from departments and grouped under a central organisation, as with the registration process for all regulations (as in Singapore).

Step 6 is to transform the thinking of the Treasury from purser dishing out money to those that make the best case to a major investor in a very large portfolio of public services, with a core responsibility to make the most return from the huge sums of money it is entrusted with. The zero responsibility model is simply not acceptable. At the same time, the public services themselves should see their duty to earn their funding through providing value. Government needs a single chart of accounts to allocate expenditure to outcomes  – an arcane but fundamental accounting point.

Step 7 is the really tricky one, which is to engender a learning culture throughout the public sector as described so well by Peter Senge in the Fifth Discipline. This would replace the self-belief too prevalent in Whitehall with the humility to learn from every source new ways to run public services. Systems Thinking in the Public Sector by John Seddon is a great place to start.

Finally, resist your prejudices and identify those organisations which deliver. NICE has many critics, but my sense is that it is delivering value, albeit it needs urgently to learn to engage its customers in its research and conclusions, not impose. An unsung hero of New Labour is our museums which, from the Llanberis Slate Museum to the Science Museum in London, have been transformed and are world class as attractions and sources of learning.There are others, but they must be chosen carefully. If you believe in your public service, crack on and prove its value now.

Policy Review Magazine    September 2009

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