When the government published its Operational Efficiency Programme report the day before the budget, I expressed some doubt about the £9 billion a year savings it identified. It’s not that the opportunities to reduce costs are not there but that public sector organisations have, so far, shown little willingness to identify them, or to collaborate with each other to cut costs. To achieve this level of savings, I argued, would require a more directive approach from the government.
Toilet and Douche’s public sector partner, Mark Lawrie, goes even further. He wants legislation to force local authorities to share back office services like Finance and HR:
[T]he lack of broader take-up of shared services is a cause for concern. The causes are not all obvious, but at the core is a political resistance because of the implications for local employment, organisational sovereignty,
decision-making and control over inputs.
This would perhaps see the creation of new public sector bodies to deliver human resources, financial and IT services on a county or regional level.
We have found, in some cases, that the cost of overcoming these issues can be greater than savings from the shared service. The real solution might be to cut through political concerns that can focus on the ‘reasons not to’, by legislating for the aggregation of a core set of back-office services.
To quote Mandy Rice-Davis, he would say that, wouldn’t he? The setting up of these bodies would almost certainly create work for consultancy firms like Deloitte.
That said, his general argument is sound. Squeezing efficiencies out of public sector organisations, not just local authorities but also NHS trusts and government departments, will require some kind of co-ordination. I’m not sure that legislation is necessary. The government already has enough power to persuade organisations to participate. But a centrally managed initiative of some sort would speed up the process. I hate the term, but the government needs to appoint something like a shared-services Tsar. A small team of people who understand the public sector and its back office operations could go into organisations, carry out a quick review, tell them what they should be doing and then, if necessary, implement it for them.
Mark Lawrie concludes:
Failure to recognise that local government stands on a ‘burning platform’ might lead to last-minute ‘budget balancing decisions’ that could do long-lasting damage to front-line service delivery.
This applies not just to local authorities but to the entire public sector. It’s a choice between making intelligent cuts or eventually being compelled to make across-the-board savings that will fall disproportionately on front-line services.