So now we know. In addition to the increases in taxes and VAT, the government has proposed cuts which add up to a 25% cut in public sector spending. That is some aspiration given the lamentable efforts at cost cutting made by previous governments, but it has got to be made to work if we are to avoid further huge increases in tax as the alternative.
The situation has been made worse by a commitment to protect overseas aid and the health service. This I think is a mistake. If you use an approach to cost cutting which is about improving efficiency, and this is done at a local level where everyone can be involved, it should be applied to all areas of public spending. There is, without doubt, waste and inefficiency in the health service and the overseas aid budget and under the current policy this will continue. Where’s the sense in that. OK it was an election promise, so break it, it won’t be the first time!
Aside from that there is still the issue of how to make 25% cuts? The government have decided to send a personal letter to every public sector worker asking for their ideas about how to cut costs. Now this is a first, and congratulations to them for at least beginning to understand that they do not have all the answers, and the people who do are the ones doing the jobs. Of course they will get loads of ideas, or at least they should as there are 6 million people involved. If they don’t, they really do have a problem!
The question is, what will they do with them? They can’t implement them from the centre, as my guess is that most will be solutions to local problems, and by the time they have passed them down the chain of command to the local level, the ideas generated will be so diluted by vested interests, and it will have taken so long, that all the will to implement will have gone, and everyone will just view it as another gimmick by the politicians.
The problem with the current approach is that the idea is right but the application is wrong. If you try to manage it from the centre it becomes a very blunt instrument and everyone involved will do their damnedest to frustrate it. A typical example of this crude approach is the headcount freeze, almost standard practice in most ill-conceived cost cutting exercises imposed from the centre. What happens here is when someone leaves they are not replaced. This can cause critical problems to an organisation and increase costs rather than decrease them.
A great example I heard was on the London underground. A particular employee left (in this case was made redundant) and weeks later all the trains began breaking down. No-one could work out why as all the documented maintenance procedures were being followed. As a last resort they visited the ex employee and offered to pay him as a consultant to cure the problem, which he did at far greater cost to the business than when he was an employee. I am sure there are lots of others with similar stories of short-term savings turning into long-term cost increases defeating the whole objective.
So what is the answer? As I indicated above it has got to be local. Get the people who really know what is happening at the coal face to provide the answers, and let them implement them. It takes a brave politician to admit they don’t have all the answers, and an even braver one to loosen the reins and let others take the lead, but in my experience it works (see my blog “Cost of a disengaged workforce” for an example or read Breaking the Mould by Peter Hunter http://www.breakingthemould.co.uk ). It won’t be a magic wand, it will take time to convince public sector employees that this isn’t just another initiative which, if ignored, will go away like all its predecessors. Persist and it will deliver beyond the wildest expectations.
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