The great public sector fire-sale

Writing in Guardian Public, Eifion Rees casts doubt on the public sector’s ability to meet its budget targets. His piece contains a couple of interesting quotes from public sector finance expert Malcolm Prowle.

A budget on paper is one thing, but delivering the promised savings is another matter. Historical experience would suggest that savings are often overestimated, with plans found to be inadequate at the end of the financial year.

In other words, public sector bosses often over-rate their own ability to deliver savings, which is hardly surprising given that many have little experience of what is involved. This lack of experience may also explain why the severity of the situation still hasn’t sunk in among some managers.

There is also a problem of rhetoric in terms of dealing with expectation. A lot of people are still talking about improving and even enlarging services – if they can maintain services at roughly the same standard then they’d be doing well.

Well, yes, I know there are going to be cuts but, while all this is going on, my department will need to get bigger.

Like Professor Prowle, I have heard these la la land conversations too. 

Take a lack of management experience together with a lack of money for investment in productivity improvement and the chances of making efficiency savings look slim. Add in the increased demand that recessions produce and you are in deep water. Consequently, organisations just try to make savings wherever they can:

The current approach, particularly in local government, might best be described as slash and burn. Some councils don’t have the time to consider issues such as efficiency or productivity, and are simply chopping out large areas of services.

Which is typical of distressed organisations. As they stare financial collapse in the face, managers cuts costs in a frantic attempt to survive. Cost cutting becomes the key focus. Not efficiency, not productivity, not customer service, just cost cutting. It’s not pretty and it usually leads to organisations that are shadows of their former selves. When the objective is simply to cut costs, you close things down and sell things off for whatever you can get.

In the public sector this could translate, as Professor Prowle says, to the withdrawal from some services. It could also mean the fire-sale of public sector contracts. While it might be a worthy aim to foster a strong third sector, charities and social enterprises might not have the critical mass to take big problems off councils’ hands. Councils will go to whoever is most likely to dig them out of a hole. As Patrick Butler said in November:

[T]here is little evidence that government departments, local authorities and NHS primary care trusts – all of whom are currently focused on sacking staff and managing vast cuts to their budgets – are thinking seriously about how they might nurture a pluralistic, innovative local supply chain. The fear is that for many councils the imperative to make short term savings trumps medium term strategy, resulting in them in them rolling up services into mega contracts which only the likes of Serco will have the scale and muscle to compete for.

A senior local government executive I know put it more bluntly. We were in the pub discussing the options open to local authorities. “Bullshit!” he spat, before I had even got the words ‘social enterprise’ out of my mouth. He took a sip of his beer. “Bullshit,” he said again. “It might work in one or two areas but it’s not going to make a big difference.” He too saw the withdrawal from some services and the privatisation of others as the most common approach to cutting costs.

Private sector organisations, facing financial armageddon and with no money left to invest, tend to adopt a fire-sale approach and just cut and sell off until they have met their cost-cutting targets. There is increasing anecdotal evidence that, now that they are in a similar position, the same mentality is affecting some public sector organisations. Distressed organisations do not innovate or make plans for the long-term; they focus on survival.  Apparently, “creative chaos” is a popular phrase among government ministers at the moment. They are probably right about the second bit but I’m not so sure about the first.

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3 Responses to The great public sector fire-sale

  1. Pingback: The great public sector fire-sale - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Christopher Bean says:

    There seems to be one surviving trait in local government; the traditional way of thinking which supports decision making. Yet, as Einstein informed us: “without changing our pattern of thought we will not be able to see the problems we created with our current pattern of thought” These are not questions for the operational system but for strategy and policy, but strategy and policy in LG seems to be made up of managers who are possibly admirable performers and decision makers at the coal face when directed by appropriate strategy, but have not yet grasped, from evidence to date, that strategy now requires a different way thinking. Just managing budgets and using sophistic terms such as ‘efficiency savings’ reflects an inadequacy in thinking.

  3. Tom Roche says:

    There is scope for the public sector to reduce costs without impacting on services through improved efficiency (obviously this can only go so far). The NAO report this week on ICT in government was particularly critical of the lack of co-ordination in central government, with departments jealously guarding their own ‘patch’. Sharing services, outsourcing, and greater collaboration can quickly reduce costs and increase efficiency – the “more with less” scenario – but the public sector has to stop being so insular. Local government is being forced to make this culture shift because of the spending cuts received from on high, but there needs to be a similar driver in Whitehall. More on my blog (http://blogs.ts.fujitsu.com/uk-ie/publicsectoroutsourcing)

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