Features: January 21st, 2010

Local leaders will have greater freedom to lead and set local priorities, but the price to be paid is a tightening of the purse strings. Using simple arithmetic to calculate to size of budget cuts could pose a threat for many councils and other bodies. Capacity to deliver radical change is the unknown factor and setting tight deadlines could spell disaster.

There has been a sudden surge in the shift of power from Whitehall to Town Halls. The recent white paper Putting the Frontline First announced radical reforms which will reshape the relationships with the centre.

Local leaders will have greater freedom to lead and set local priorities, while central government cuts targets and regulations. Key measures include more devolution of resources and removing ring-fence funding. But this greater freedom will be matched by tightening the purse strings which could pose a threat for many councils.

The UK Budget deficit has created a totally new climate for public services. History reveals many periods of austerity, but this is different and marginal savings of a few per cent will not be enough. Many strategies for cost cutting have been known for a long time. Sir Peter Gershon, in his 2004 report recommended that public bodies simplify and streamline their generic functions and seek to share services with others. He also advocated collaborative procurement.

Following publication of the report Ruth Lea, who at that time was Director of the Centre for Policy Studies, published a study claiming that public spending could be reduced to just 84 per cent of its current levels. Will a 16 per cent cut in public sector budgets be the number that appears in the 2010 Budget?

A beefed up menu for making savings was published in April 2009 in the Treasury’s Operational Efficiency Programme. In the Programme the Gershon recommendations were re-cycled and reworked, but they were supplemented by proposals for better managment of assets and for looking at how a ‘whole area’ approach to public services could lead to better services at less cost. This is Total Place.

Communities Minister, John Denham, recently appointed a task force to advise on how the Operational Efficiency Programme could be applied to local government and he added a new savings option in the shape of senior management restructuring. The senior Civil Service salaries bill is to be cut by 20 per cent, so can this saving be achieved across the public sector?

The announcement of the task force launch carried the news of greater freedom from Whtiehall, but also the threat that: “Woe betide the local authority which cuts frontline services when it hasn’t made every possible efficiency savings.” So the picture is clear, greater freedom will come soon, accompanied by budgets which will be pared down by the savings calculated at the centre as achievable. The task force will report in February and so will the Total Place pilots. The numbers will be crunched and appear in Budget 2010 in March.

In the five years since the Gershon report, savings have been made in central and local government. Many councils have flirted with the idea of shared services, but there have been relatively few marriages. There is collaborative procurement, but it is hardly widespread. This is not because of bloody mindedness or indifference. Designing and implementing radical change is monumentally difficult, massively time consuming and horribly expensive. If it were not so all public bodies would be sharing services now and procuring collaboratively. But they are not.

Change management skills are rare. The capacity to create a detailed vision of where the organisation wants to be and to plot a path to get there, does not come easily to most people. If the new found freedom to set local priorities means that every council will be assigned a potential efficiency saving figure on the assumption that the Treasury’s programme will be implemented in full, there will be severe problems. In many cases, the capacity is not there to make the changes. What is needed is a staged approach starting with the low hanging efficiency fruits. This would allow change management skills to be built up steadily so that the more radical changes can be tackled at a later date.