Darling plans to cut public sector HR costs

Personnel Today’s Greg Pitcher has been reading through last week’s budget report and has discovered that Alistair Darling has a few tricks up his sleeve to pay for his VAT giveaway and his massive bank bailouts. As well as the post election tax and NI rises he plans to cut public sector spending on HR and Finance. Through the use of shared service centres, the Chancellor aims to cut 30 per cent off the cost of back office support functions.

A good idea in principle but not so easy to implement in practice. It would make economic sense for government departments, local authorities and NHS trusts to move their transactional HR and Finance processes into shared service centres. By 2010, all NHS trusts will be on a common HR and Payroll system. Local and even regional HR and payroll centres would, in theory, be relatively straightforward to implement.

The report mentions the joint venture between Steria and the Department of Health claiming that 100 NHS organisations are using their shared service centres. On closer inspection, though, most of this appears to be finance and payroll processing.

In fact, many NHS organisations have been reluctant even to set up HR shared service centres for individual Trusts, let alone pool resources across organisations. The decentralised structure of the NHS also means that there is no-one at national or regional level with the power to force them to do so. The whole point of Foundation Trusts was that they would effectively be free from central control. Forcing the NHS to implement local or regional shared service centres would cut across the government’s stated intention of devolving the management of the NHS to local level.

That said, when there is a desperate need to cut public spending, all that rhetoric about localism may well go out of the window. I suspect that, if the government thinks it can save large amounts of cash, it may well rediscover its enthusiasm for central control as fast as its sudden reconversion to nationalisation.

Even so, although shared services can save money on HR transactional and advisory services, it is not something you can implement overnight. I have done it a few times and it always turns out to be more complex and to have more knock-on effects on the rest of the organisation than you anticipate. Yes, it can save you money but the initial outlay to set it up can be expensive.  If Alistair Darling thinks it will be an easy win, he may be in for a nasty surprise.

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3 Responses to Darling plans to cut public sector HR costs

  1. Jo says:

    Hmm, the easiest way to save money is to step back a bit and see what employees do. They know where the waste is and it usually annoys them! Let them alone and they’ll sort it out!

  2. jameshigham says:

    A good idea in principle but not so easy to implement in practice.

    Cutting back office support, you mean?

  3. Rick says:


    What he is proposing is to share back office support among various government organisations, thus reducing headcount. Fine in theory but most government organisations have evolved different ways of doing things over time. If you strip out support functions and make them work in the same way, which you have to in a shared service centre, this impacts on the way the ‘front office’ functions that are left behind do things too. Disentangling these often archaic processes and impementing new ones is what takes the time.

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