Darling frustrated by lack of public sector cost cutting

Remember Alistair Darling’s plans to cut public sector back-office costs by 30 per cent? Well it seems it’s not happening quickly enough. Mr Darling’s sidekick, Yvette Cooper, has written to other ministers demanding cuts in finance, HR and IT functions. According to the Times:

The Chancellor is said to have been exasperated by the failure of Whitehall departments to pull their weight in cutting costs and has called for urgent action.

Both the Telegraph and the Guardian report that government departments have been resisting the proposed cuts.

Perhaps they are but, from the little I know about this, ‘resistance’ seems like too active a verb. They’re not really resisting; they’re just not doing much about it.

Since the treasury report came out last autumn, I have spoken to a number of people in central government, local authorities and the NHS. For many of them, the government’s stated intention to cut HR, IT, procurement and finance costs is background noise. It doesn’t feature anywhere on their lists of priorities. It’s certainly not something they are being given incentives to do. Other people are shouting louder so other things are more important.

As I said when I last wrote about this, setting up shared services functions in one organisation is difficult enough. Just ask the people at the Department for Transport. Doing so across different organisations adds extra layers of complexity. Sure, there is scope for government departments, quangos, NHS trusts and local authorities to pool HR, finance and IT support but someone needs to take the lead if that is to happen. At the moment, the government seems to be expecting these organisations to get together and organise this themselves.

I could be wrong about this. It may be that there is a team co-ordinating these shared-service projects but, if there is, a lot of my public sector contacts don’t know about it.

The CEOs of local authorities and NHS trusts most probably know intellectually that savings could be made by sharing these back office services but none of them have the authority to lead such a project.

Like many government initiatives, this back-office cost savings initiative seems to suffer from that yawning chasm between elegant strategy and practical implementation. If the government really wants these savings to be made, it needs to appoint people with the authority to grab hold of Whitehall departments, NHS trusts and local councils, and say, “You will combine your HR, Payroll, IT and Finance functions with these other organisations.” Until that level of direction is given, the Treasury’s call for savings will just be more background noise.

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3 Responses to Darling frustrated by lack of public sector cost cutting

  1. Foul says:

    The time that the public sector moves is much slower than most people realise. A cut of 30% in budgets is going to take at least 2 maybe 3 years to actually action.

    The problem comes in the incentives that cuts create. In the case of local government, to have a budget cut means less people employed. This makes the department smaller and so its importance within the organization is reduced.

    Unlike the real world where the end result is what defines the importance of a department is to an organization, the public sector is all about size. Having a huge useless department is more important than a small efficient one. It effects the wages of managers where the number of staff being managed is related to pay packets.

    Who is going to force a pay cut for themselves when the alternative is to blame something else? Managers in the public sector for a start!

    Next year, budgets will be cut at source, this is the only way efficiencies can be implemented. You also need to remember that there is a huge requirement to fund a certain Olympics in a few years time. the public sector is already worrying about finding the money for this. Its unlikely that the government will be printing the £15Bn or whatever it ends up costing – that would be a step too far, even for this government, and certainly too much for a Tory one.

    Budget cuts? They will happen, but not in Darlings time!

  2. I would support Rick – and add another dimension to the debate: the politics of shared service in local government.

    The problem lies in the sovereignty of each council. Each has been entitled over the years to construct an individual culture and way of organising itself (for instance, information technology, staff terms and conditions, the internal political balance and past
    relationships with neighbours). Converging services in a number of councils from that disparate base is not impossible, it just takes time – and the more councils involved in the service, the longer it takes.

    Back to Ricks question about who is forcing councils to share and where is shared service happening really quickly? Look no further than the new unitary authorities being launched next month.

  3. Rick says:

    Yes, Dominic, and that sovereignty has now been extended to NHS trusts, especially foundation trusts, which can effectively tell the Strategic Health Authority to get lost.

    That’s all fine and dandy, and very locally empowered and all that, but it doesn’t help you cut costs by sharing back office services. It just makes it even more unlikely.

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