Spend Management at a national level – is cutting that easy?

If you've ever worked in procurement in a very large organisation, there's a certain factor you may have observed that used to surprise and annoy me.  it was the 'stickability' of certain major suppliers; particularly consultants, IT integrators and outsourcing type firms. It seemed that, no matter how hard you worked to reduce overall spend with them, they would pop up elsewhere in the organisation, doing something slightly different!

Nothing necessarily wrong with that of course, but frustrating at times if we were in the middle of a cost reduction programme.  A similar observation applied to budgets; we've probably all seen consulting budgets slashed, only to see very similar looking spend suddenly classified as 'contractors', 'training' or the ubiquitous 'miscellaneous'.

Now, we could easily turn this into a post about spend analytics - and the great benefits thereof.  But that's not my point today.  Rather I was thinking about the UK budget deficit - and indeed that of many other countries - in these Spend Management terms.  But the UK in particular had an unexpectedly large public sector borrowing requirement in November.  It may just turn out to be timing effect, but no-one seems too sure.

So I wonder whether countries that have announced large spending cuts will find it quite as easy as it may seem to make them actually stick.  Like my suppliers, or pushing the pile of rubbish under the carpet, things have a habit of being moved around rather than actually disappearing.

For instance, benefits paid to the poor, sick or jobless have a habit of being remarkably 'sticky'.  Cut one allowance, and you will find more people are claiming another.  Or as we've see in the UK, make it harder to get appointments with local doctors*, and more people turn up at hospitals, costing the state even more.  Reduce the level of 'social care' available to old folks in their homes, to save local councils money, and more folk will end up blocking beds in hospitals (as reported by the Guardian).  Cut legal aid, and more people represent themselves in court, leading to longer cases and more appeals.

Of course none of this is inevitable, and the best antidote is real joined up thinking and communication across boundaries and organisations - just as it would be in our 'corporate'  spend management parallel situation.

But if we don't get that, we may come to appreciate that most of the 'cuts' so far are actually just smaller numbers in spreadsheets.  They're not real reductions in government expenditure until after the event, when we can see that less money was actually spent.

* That was a particularly appalling bit of spend management by those in charge at the time, some years ago; local doctors (GPs) negotiated huge increases in payment for doing less work!

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