Deloitte report - the public sector needs to act now to prepare for a long period of austerity

Counting the Cost a new report from Deloitte, the business advisory firm, urges the public sector to take immediate action to ease the pain of major cuts after the next general election.

As a result of the lag between economic performance, spending cycles and the reluctance of any political party to implement potentially unpopular actions until after the next general election, contraction in public spending will be delayed until 2010. But Counting the Cost argues that after that time, sustainable public services cannot continue without unprecedented efficiency gains, tax rises and service cuts.

‘Beyond 2010 government professionals will face choices over resource allocation, headcount, capital programmes and the need to align their service delivery planning more closely to their minimum statutory commitments.’

Ian Howse, Director in Deloitte’s public sector practice in Wales, said: “The public sector will be the last sector into the recession and the last one out. It is going to have to confront a number of difficult decisions from 2011 onwards. The more public bodies prepare now and start to reduce costs in an effective and sustainable fashion the better equipped they will be to deal with the time of austerity that lies ahead. We are seeing evidence in Wales that there is an awareness at the Assembly and throughout the public sector of the challenges ahead.

“However, the challenge of reducing costs is made more complex by raised public expectations fostered by ten years of high levels of investment in public services. For the next government, a ‘slash and burn’ approach to frontline public services will be unappealing from both a political and economic perspective.”

Counting the Cost identifies a number of areas in which public bodies can cut costs in an effective and sustainable way and includes suggestions for their successful implementation. They include:

Removing hidden costs that lie between core support services and frontline delivery
Establishing adequate property and asset management skills in response to the Operational Efficiency Programme (OEP)
Reducing headcount and payroll costs in a sustainable and politically viable way
Embracing collaborative working described in the OEP by establishing genuine partnerships
Optimising tax compliance to make VAT and payroll savings

Ian concluded: “Although the prospects for the public finances appear bleak, history suggests that productivity and efficiency can actually improve as budgets contract. Public sector cultures may use this ‘burning platform’ to innovate and implement long overdue changes and to build consensus for tough choices on resource allocation.”

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