Cuts of 25% in 4 years are rare, even in the private sector

It’s always reassuring when a proper journalist, and especially a proper BBC business journalist, says what I’ve been saying for ages. Robert Peston takes issue with this claim from David Cameron:

“Let’s put these cuts into perspective. Many businesses have had to make far great reductions than us in one year”.

But as Mr Peston points out, cutting out a quarter of the business in four years is almost unheard of in the private sector. Even “pretty flabby” RBS will only manage around 15 percent over a similar period – nowhere near the amount that is being demanded from public sector organisations.

In truth, outside the lean manufacturing organisations, almost no-one has experience of reducing an organisation by 25 percent over four years. The few that have managed it have done so by paring the organisation back so far that it is barely recognisable. Trying to do so while maintaining anything close to the usual levels of service is almost impossible:

[This] carries an unavoidable implication, which few private sector bosses dispute when I discuss it with them: if you’re cutting up to 40% from a budget, either you have to stop providing certain services or the quality of services provided will suffer (or both).

Some of our most seasoned trouble shooters have already worked that one out.