Last week’s ‘emergency’ Budget shed light on the direction of some aspects of government policy towards the deficit. Details of tax changes were released as well as changes to welfare benefits. Also the government indicated the size of the savings that will take place in government departments (an average of 25%) over the next four years, but the details of exactly where these reductions will take place will have to await publication of the Comprehensive Spending Review (CSR) in the autumn.
While accepting that these changes have to take place I have three particular concerns about the process of cutting public spending within public sector organisations:
- Timing – some relatively ‘small’ cuts (£6bn) in public spending will take place in 2010-11, but the larger cuts will start in 2011-12. However, we are only nine months away from the start of that year and by the time the results of the CSR are known we will be only five months away. Couple this with the fact that it seems the government wants large cuts made early on, then public sector managers have only a short period of time to identify and implement cuts by the start of the financial year 2011-12. In these circumstances, it seems unlikely that there will be much sophistication involved and quick fixes will be needed such as reducing buildings maintenance, freezing staff numbers, reducing organisational overheads and dropping preventive programmes.
- Forward planning – The above situation could be seriously exacerbated by the fact that some public sector organisations seem to be doing little in the way of forward planning and are awaiting the results of the CSR before doing so. Why they are waiting is unclear since in the majority of situations they can be pretty certain now that the have to plan for significantly less money next year and the following years. The detailed plans can be firmed up after the CSR, but some early thinking is vital.
- Risks and governance – the level of cuts faced in public spending is unprecedented for most public sector organisations. Couple this with the pressures of time already referred to and it seems that there will be many risks associated with the expenditure decisions being made. In recent years there has been a huge emphasis in the public sector on risk management and governance and these issues will become more not less important with major changes to service levels and the means of delivery. Thus, public sector organisations need to consider how they will enhance their risk management and governance processes to deal with this.
Malcolm Prowle is professor of business performance at Nottingham Business School and a visiting professor at the Open University Business School. He can be contacted via his web page www.malcolmprowle.com