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A sudden mood of plenty

Source: PSE Dec/Jan 16

Alan Leaman, CEO of the Management Consultancies Association (MCA), looks into the detail of the Spending Review.

George Osborne’s recent Spending Review contained a few surprises. But have the fundamentals really changed? 

The first surprise was the unplanned £27bn that the Office for Budget Responsibility found for him (a combination of lower interest rates, higher receipts and improving growth). The second was that he decided to spend this windfall and not keep any money back – whether for reducing the debt, reducing taxes or even for a rainy day. The chancellor even managed, through a policy of ersatz tax increases (notably on business via the apprenticeship levy and a voluntary 2% rise in council tax to pay for social care) to boost some spending programmes. 

For some, this was all too much. They called it ‘The End of Austerity’. One influential think tank argued that the Spending Review “casts into doubt the government’s approach to improving public services full stop”, with reduced priority on efficiency and productivity, and that the government suffers from “a basic lack of confidence in driving productivity, based on a lack of information”. 

They conclude: “The Treasury and the spending departments don’t know the costs and outcomes of public services, whereas they do know what they spend. It’s much, much easier in these circumstances to focus on the spending message.” 

Well, OK, but only up to a point. 

For anyone involved in the administration of public services the sudden mood of plenty will seem quite alien. 

Behind all the headlines, much of the story remains the same. Most of the public sector, even as it faces greater pressure from a rising population and demographic change, must deliver much more for a lot less. Even if ministers have lost sight of the need for greater productivity and reform (and I doubt many of them have) then frontline managers, policy-makers and administrators certainly won’t. 

The next few years will be tough. But they could also be a time of great creativity and change. 

Our own work at the Management Consultancies Association (MCA) suggested three key themes that will be vital over the next few years as managers strive to meet the demands of funding reductions and rising public expectations. 

The increased £450m for the Government Digital Service suggests that it will be encouraged to build on its promising start. This is absolutely central if public services are to become as digital as they need to be. 

Much of the progress thus far has been in putting processes and transactions online. There is a lot more to do even there, as the announcements about HMRC showed.But MCA members argue that much more can and should be done. Digital provides a massive opportunity to re-invent service provision in a way that empowers citizens and frontline staff while also saving money. Health and education are leading examples. We can see a future in which there is far greater self-management of services in ways that bring them closer to users and avoid costly and inefficient ways of working. 

The second theme that we welcome in the Review is greater devolution, for both the nations of the UK and localities within England. This is now central to the government’s ambitions.

Osborne’s shift of power to the regions and to delivery agencies is nothing short of the reinvention of the UK state. And there is potential to go much further. 

If Osborne’s projections are right and the broad position for local authorities will be neutral in this Parliament – and that is a big if – then they will be significantly smaller than they were in 2010. Devolution provides councils with a larger share of local spend pots than they have nevertheless seen over five years of net reductions. Devolution also means extra responsibilities. To succeed, local authorities will have to be at the sharp end of a ‘networked state’, working with business and community groups, leading coalitions for change as much as directly delivering services. 

This will require different skills, new partnership arrangements and objective support from proven innovators, such as MCA members, who can assist with everything from customer segmentation and the promotion of self-help, to innovative managed service models. 

The integrated devolved powers should allow more cross-agency commissioning to address complex problems. Nowhere will this be more important than in health. The opportunity for joined-up actions at local level should lead to the renewed emphasis on public health, prevention, community and the integrated care MCA members have been calling for. 

And, finally, we need to see a greater push towards using the diversity of providers that is now available. External providers can introduce greater commercial discipline and sense of accountability. But, again, the drive must be to ensure that these providers introduce innovation as well as efficiency. 

Put these together – digital, devolution and diversity of provision – and we have a public sector reform agenda worthy of the name. The Spending Review only makes it more urgent.


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