CBI report on public sector savings opportunities

We’re going to get a host of reports into how government can save money as we approach the election and continue to experience issues with the robustness of public finances.   This CBI report is a recent example; and it will not be the worst I’m sure, but I doubt whether it will be one of the best.  There is some good stuff – but really it is a ‘greatest hits’ compilation of every NAO, government, or other report that has previously identified some potential cost savings.  As such, there are of course good ideas; but it falls into the usual traps of this type of report.

1.            Stating the b******ly obvious.   Did you know that if we can get 15% of long term unemployed into jobs we will save lots of money?  Believe me, this government and no doubt past and future ones are well aware of that and will do everything possible to achieve it.  But it is not easy, whether or not you use the private sector.

2.            Believing that you can scale up small scale success into £ billion savings.  A success in one local authority, saving a few million, is extrapolated into a national £ billion saving.  Doesn’t always work like that, and frankly, I don’t always believe the savings numbers anyway.

3.            Assuming costs can be cut without consequence.  I wonder how the CBIs members who provide consulting services feel about this  “A review to determine what is essential and non-essential government expenditure on consultants and advertising could result in a saving of £3bn by 2015-16 through halving both budgets.” So half the spend on consultants is totally wasted – no benefit whatsoever? Perhaps – but highly unlikely.  Why half anyway?  Why not 30%?  80%?  There is no evidence behind this, purely assertion.

4.            Playing God; looking to change millions of people’s behaviour overnight without any obvious capability to do so.  “Pharmacy is also proven to be cost-effective in providing services such as preventative advice, blood tests and contraception advice in-store. It is estimated that some 57 million GP consultations each year involve minor ailments, which could be dealt with at pharmacy stores. The average GP surgery consultation lasts 11 minutes and costs £32. The same 11-minute consultation in pharmacy would cost £18. If these patients could be moved to pharmacy then £4.8bn could be saved up to 2015-16”. Great – so all we have to do is overcome human nature and persuade – I don’t know, let’s say 11.4 million people to move 5 GP visits a year to the pharmacist (which gives us their 57 million visits), then that’s a deal.  But HOW?????  It’s like saying if I could learn to sing like Pavarotti, I could perform in the Royal Opera House.  It is a true statement but most unlikely to happen without divine intervention.

5.            A multi-year effect; the headline of £136 billion savings sounds impressive – but that is over 6 years cumulatively.  So that is an average of £ 23 billion a year – not to be sneezed at but somewhat less impressive, and nowhere near enough in all probability to address the budget issue.

6.            A touching faith in the private sector; more outsourcing to the private sector will save £ 30 billion. Again, the evidence seems thin.  “The Cleaning & Support Services Association estimate savings of £6bn could be achieved by 2015-16.” (By outsourcing hospital cleaning and catering – not the best example I would have thought...)  And might the ‘cleaning and support services association’ have a bit of a vested interest in saying that?   “Procurement Excellence estimates that their consulting advice could save £10% or £18 billion of the public sector procurement budget”.  There you go, there’s another £18 billion done.

The report shies away from tough issues; a two year pay freeze for public sector employees seems quite gentle, and public sector pensions are mentioned but in  a long-term softly ,softly manner.  There is no mention of significant job or benefit cuts; or indeed of targeting procurement savings generally.  There is some mention of improving procurement process but nothing particularly focused on real procurement savings; that seems a strange omission given the £180 billion annual public sector spend with suppliers.  Or would that be too threatening to CBI members (let’s buy better and squeeze the suppliers.....)

So... worth a quick read, well presented, well-intentioned, a good summary of existing ideas, but moderately annoying because of its logical flaws, and nothing I could see as a great and genuinely new idea.  And my over-arching issue with many of these reports is they make it sound like it will be easy to find this sort of savings.  It won’t be. It will be painful, difficult, require much thought and implementation expertise if the actions (which must be taken) are not to lead to a total shambles.  I would like to see reports of this nature recognising a little more explicitly that this will be really hard stuff to deliver.

Voices (3)

  1. Charles Findlay:

    Seems the biggest contradiction is local autonomy/responsiblity/control vs centralise everything and get apparenly huge guaranteed economies of scale. An Audit Commission Report this summer, highlighted the value that local, ad hoc groups can get with little or very limited central cost or overhead – and the value that come from initiative and individual enthusiasm. Page 6 of
    http://www.audit-commission.gov.uk/SiteCollectionDocuments/AuditCommissionReports/NationalStudies/valuablelessonscouncilsguide30jun2009.pdf

  2. Procurement Practitioner:

    I have to say that this report really doesn’t cut it for me. It’s a blunderbus of ideas and case studies, often quite independent and unconnected. It is as you say quite simplistic, and I think in some areas actually unrealistic. Take the strategy to public sector pay “This is not a pay freeze but rather a freeze to the total public sector wage bill. It would be a matter for individual departments or bodies to decide what strategy they might take for all or part of their workforces”. I’m probably missing something here but unless you’re going to sack people, you can’t give some people extra money in a total wage freeze without taking it off others. And that I think you’ll find is in breach of their employment contract.

    From my experience of public sector procurement I think a lot of the problems come down to some basic, but very difficult to change, factors:
    1. Its seems to me that requirements can be gold plated and there’s a big issue about appropriate specs, fitness for purpose and affordability
    2. Just like the private sector, there’s a challenge about getting procurement cost savings out of the budget. Unless this benefits realisation challenge is grappled, all that we have is headline savings but little change to the overall cost base
    3. The solution is tough to implement. The public sector has some of the very best people to be found. It also has some of the very worst. How often do we find that cutting a budget leads to cutting the easy thing i.e. the services, and that no real change is made to the back office? We have to get to a position where implementation is valued every bit as much as policy and strategy
    4. The cycle of change: A lot of things will take time to sort if we are to get to the root cause. If the political cycle (or the period that staff are assigned to roles) is too short then all that happens is that plasters get stuck on the problem. Worse still, all that this does is to layer more cost and complexity to a situation by treating the symptoms rather than the cause
    5. Lack of clarity on responsibilities: How often do we find that there are many authorities or organisations who impact or influence an area of spend?

    I’ll stop at 5! Sort those and public sector procurement would be in a very different place. Key thing though (assuming you agree with the above – and that’s a big assumption), how much of this can actually be influenced by the public sector procurement organisation itself?

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