Chief financial officers have a crucial role to play as the public sector copes with budget cuts and rising demand. So what should they be doing?
This year’s CIPFA Conference in Liverpool featured a significant innovation. On the eve of the formal opening, we organised a high level summit for chief finance officers or their nominees to discuss the state of the public finances and the extraordinary challenges facing public sector organisations now and for some time to come.
The event clearly struck a chord. More than 90 CFOs from a variety of different types of public bodies contributed to a rich exchange of information, views and ideas.
The event was kicked off by Gemma Tetlow, programme director of the Institute for Fiscal Studies, who provided an expert summary of where we are in the quest to eliminate the structural deficit in the UK public finances. A real-terms cut in public spending of just over 5% was achieved in 2011/12, and almost 6% is scheduled for the next three years. On top of this, further cuts to public service spending have been signalled in the first two years of the next Parliament. If no further reductions are made to other areas of spending such as welfare benefits, a real-terms cut of 7.5% is likely in 2015/16 and the following year.
So far so good, but there is a long distance still to travel. And this is based on a view of the pace and timing of economic recovery which is looking ever more optimistic. In practice, even deeper and more protracted cuts might be required.
Four leading CFOs made case-study style presentations: Patrick Birch from Worcestershire County Council; Clive Heaphy from the London Borough of Brent; Nigel Hiller from South Yorkshire Police; and Bill Shields, from Imperial College Healthcare NHS Trust. They explained the challenges their organisations were grappling with, and the strategies being used to ensure survival and success.
All four speakers emphasised the importance of medium- and long-term planning, and clear organisational priorities. However, Bill Shields stressed the difficulties inherent in local prioritisation in a service with strong founding principles that extol equal access for all, free at the point of delivery.
In developing their future plans, organisations had to be prepared to think and act differently, the speakers said. Patrick Birch encouraged CFOs to guide their organisations to work through options systematically with interested parties to identify the solutions most likely to succeed.
Fast-track decision-making has an obvious appeal. But if policies break down the first time they are exposed to real pressure outside the laboratory, the outcome is simply more haste, less speed. Nigel Hiller too underlined the importance of clear and effective channels of communication, internally and externally, to promote a shared understanding and to test options. He also stressed the need to empower staff to use their initiative and expertise to overcome challenges, rather than reverting to centralised decision-making and control.
All four CFOs felt that commissioning skills would become more important as public bodies considered more radical service provision options. There was scope for learning across the public services, and a need for everyone to raise their game urgently. Clive Heaphy also advocated programme management as critical for organisations trying to both improve services and cut costs.
Not surprisingly, leadership of and by the finance department were recurring themes. Each of the CFOs urged their counterparts to relish being at the heart of the action, seizing the opportunity to influence and inspire their organisations.
With such a daunting national economic backcloth, it would have been easy for the summit to develop a gloomy, downbeat atmosphere. In practice, the mood was anything but. Overridingly there was a real sense that CFOs are staying focused on the task in hand.
This article first appeared in the September issue of Public Finance