It’s game on for the 2012 Olympics. But it’s also a testing time for public finance professionals. What lessons can be learnt to improve our resilience and win?
The country is gripped by Olympics fever as the world tunes in to London 2012. Economists, the Treasury and the general public will be hoping that the event and its legacy does its bit to boost growth and starts to shift the GDP figures in the right direction.
Away from London, the Midlands is also playing its part in the Games – Coventry hosting Olympic football and manufacturing the torches used in the relay; Birmingham hosting some of the greatest athletes on earth, the USA and Jamaica track and field teams; and Stoke-on-Trent’s pottery and ceramics industry producing London 2012 commemorative merchandise.
The need for the regions, core cities and other cities to play their part in driving the UK’s way out of recession is evident not only in the context of the Games, but also as the government looks for ways to boost the economy through its City Deals.
So with the public finances at the heart of national political debate, are finance leaders seeing the raft of policy changes and long term financial austerity as a challenge or an opportunity? In a series of Question Time style debates, CIPFA in the Midlands in conjunction with PwC have been taking the temperature of the public finance world in the region. Here’s what we have found (in the spirit of the Olympic theme…).
First, the hurdles are high and the race is long. The main pressures following the initial reductions in specific and formula grant are in looked after children, adult social care and grants to voluntary bodies. Reduction in income from trading activities, fees and charges and investment is also adding to the squeeze.
The big costs on the horizon are related to direct and indirect impacts of welfare reform and council tax localisation. Fixed costs stemming from long term contracts like PFI are also an issue, particularly in health. Risk continues to be localised in many policy shifts, making financial planning more volatile.
A counter to the austerity push is the critical need for places to invest to encourage business growth and job creation. Cuts in services in order to deliver capital investment where banks and the private sector cannot or will not intervene, is a brave move.
Second, there is a pain barrier that we need to overcome. Many of those we have spoken to have dug deep. Back office changes, reviews of commissioning and procurement, outsourcing and insourcing, co-sourcing and shared services, review of terms and conditions and technical financial solutions, all feature in balancing the budget.
But we need to dig deeper and this is characterised by a shift to the difficult and truly innovative which is yet to come. There is more focusing on outcomes, as exemplified in the troubled families thinking and demand management. There are judgement calls to make on whether investment in early intervention really leads to cost reduction.
The pain barrier includes the skills, time and capacity within organisations to make the changes. Some spoke of the challenge of u- turns, political dynamics and a view from service departments that underspends in recent years mean ‘it can’t be that bad’. With the next CSR looming and the graphs of doom, sometimes the finance director is a lone voice in preparing her or his organisation for the future.
Third, we know that training and endurance will ensure success. The importance of the accounting profession was emphasised, not just the absolutely critical role in ‘keeping score’, but also in providing strategic financial input to the decision making process and consideration of future direction. There is a huge advantage in having suitably qualified, professional finance staff, who have the capability and appetite to push and support their organisations to deal with the challenges.
There is also a need to encourage the brightest and best in the next generation to grasp a career in public finance; for organisations not to be short sighted and to offer these opportunities, even where training budgets have been obliterated.
And finally, there is team spirit and leadership. Trust and relationships are the critical ‘must haves’ in making change happen, particularly in areas such as health and social care integration where cultures are different, relationships complex and stakes are high.
There is a renewed need for new skills in the finance community – yes hard skills and accounting are still important – but so too are advocacy, business partnership approaches, wider economic appraisal, market understanding, creativity and judgement.
The accounting profession needs to gear itself and our organisations to taking more ‘commercial’ risk if we are going to help drive our local economies. There is also a need for citizens to either take the baton or join the team – people are going to have to ‘walk further, wait longer, contribute more…’
Much of what has been done to date has been economy and efficiency (doing the same things differently). It’s now time to focus on effectiveness – doing different things to (critically) secure outcomes that matter. So for everyone who works with and in the public sector, for officers, elected members and for those we serve, it is time to do different things, not just the same things differently.
Just like in the Heptathlon, there are skills, tactics and mental strength needed to compete and succeed in a role in public finance in 2012!
Lisa Commane is CIPFA in the Midlands president and assistant director of special projects finance at Coventry City Council.