Today the details of the Comprehensive Spending Review are being reported.
Media coverage leading up to this has given much attention to waste in the public sector. Like most private sector directors, I tended to be of the mind that public organisations are too often inefficient or careless in how they manage their budgets.
My view has been radically altered following conversations with an associate who runs a consultancy business that works with public sector clients to help them find savings. Her experience gives lie to my assumptions and for this reason I have sought permission from the editor of Politics.co.uk to reproduce her recent article for that website. It is well worth reading.
The public sector can deliver major savings and without affecting frontline services, but don't hold your breath.
By Rachel Wynne
Last week Sir Philip Green published his Efficiency Review. It reported some startling figures about savings that could be made to the public purse. But mostly it told us something that we already thought we knew; that the public sector is either lazy or negligent in the way it spends our money, our taxes. We collectively shook our heads – not in disbelief, but rather in gloomy resignation at an old suspicion confirmed.
The public sector is bound by laws that ensure it keeps on paying overinflated prices for months at a time, even when managers know they can get a better deal
My company works with many public sector organisations – local councils in particular – and we too have witnessed needless overspend. What we have also seen – and this is not revealed in Sir Philip’s Review – is that the public sector is bound by laws that ensure it keeps on paying overinflated prices for months at a time, even when managers know they can get a better deal. To me, that is the truly shocking fact of public sector waste.
While the Efficiency Review adds detail to the tacit knowledge that the water of public finance is flowing faster than it should, it fails to give account of the legal situation that prevents public bodies from quickly closing the tap. Its intentions are laudable, but ultimately it is flawed.
Unfortunately this hasn’t stopped it being echoed in the media by braying private sector bosses feeling validated in their glib notion that the public sector is universally witless about the money it spends. Of course, these laws don’t apply to the private sector, which may explain why bosses there are so puzzled by public sector behaviour.
The areas of the public sector my company deals with have never been awash with cash, not even in the boom years. Where resources are always tight waste becomes a dirty word, and would be foolhardy to think that public sector managers are clueless about the overspend that’s happening right under their noses. Through our work we see a pubic sector trying to be enterprising and proactive in seeking savings, but finding itself relentlessly stymied by well-intentioned yet highly complex bureaucracy.
Indeed, pursuing opportunities to cut costs requires a level of tenacity that might surprise the private sector. Any change must be proposed in formal reports and approved by departmental, corporate and cabinet boards to support the democratic process. Laborious European Union tendering processes that managers legally have to follow, while aiming to make the process fair and transparent, have the effect of hindering what in private companies would be relatively simple procedures.
Similar obligations make it difficult for public sector bosses to speak out on this matter. Certainly at this time when the axe of deficit reduction is swinging they understandably want to keep their heads well below the parapet.
It is a travesty that this matter is not being properly debated, especially since the whole premise of the Coalition’s bid to cut the deficit is to do so rapidly. On the whole I support this goal, particularly where efficiencies can be made that prevent cutbacks to important frontline services, but what should be a simple matter of harnessing new technology or selecting new suppliers to get a better deal requires formal processes that take a year at minimum and often considerably longer.
The Government needs to realise that the procurement laws and democratic processes to which the public sector is subject will severely delay the pace of spending reductions ordered by the Comprehensive Spending Review.
It’s not that change can’t or won’t happen; my company helps public sector clients to identify and deliver cost savings within their contractual obligations and the results can be significant. Haringey Council used our skills and software to cut over £1 million in annual costs without affecting frontline services, while Camden Council has worked with us to reduce its design and print costs by 48% since 2005.
Significant savings can and will be made, and the public sector accepts this, but if the decision to make efficiencies, or change suppliers for a better price is made tomorrow, the benefits won’t be seen this year and probably not next year either. The reasons for or against the legislation that creates this situation can be debated, but the rules as they stand cannot be ignored and this needs to be understood by those in power.
Rachel Wynne is CEO of Panacea Group, which offers consultancy services to public sector organisations
The views expressed here and on Politics.co.uk are not necessarily those of the website or its owners
James Ollerenshaw sit on the committee of the London branch of the Institute of Directors, is chair of its Young Directors’ Forum and is managing director of Curzon PR
Any views expressed in this article are those of the writer and do not necessarily reflect the views or policy of the Institute of Directors
