Sunday, February 15, 2009

Bankrupt Britain

Reading the Sundays used to be so much fun. Now they just make me anxious. The Sunday Times profiled `Bankrupt Britain' a report by Malcolm Offord, a respected city economist, which states, essentially, that getting the Government's books under control will mean real cuts in annual public spending of 60 billion by 2014 and 100 billion by 2020 plus, probably a top rate of tax of 50%. On a similar note, both the National Institute of Economic and Social Research and Capital Economics point to annual shortfalls of 60 billion on the Chancellor's numbers.

Using today's level of spending as a start-point, this would mean a cut of of ten percent by 2014 and fifteen percent by 2020. This means a very different decade for the public sector. While the 2000s were years of massive growth, particularly in health and education, the 2010s will probably see not slow-growth but real cuts. Not just freezes in recruitment but redundancies in schools, hospitals, social work departments. It will also mean the end for gold-plated pensions.

It will also herald a new era of public sector reform. This never really got going in the 2000s, partly because there was enough cash coming in to conceal low productivity and reduce urgency but also because, politically, the Government was divided on the issue. But the blazing platform of the recession and its aftermath will change all that. The `social contract' between taxpayers and the public sector is already changing. People will not accept a decline in the quality of public services and will expect reform to bridge the financial gap.

And what will this era mean for the third sector and social enterprise. For many, it will not be pretty. The first instinct of public sector managers is to cut external contractors, particularly smaller, weaker ones, to the bone. Blood-ties to colleagues in public services will see that it is external partners' budgets which are first in the queue for a kicking from commissioners.

But, for those, that survive that kicking (which I believe, anecdotally is already starting) there may be opportunity in adversity. Because of this recession, we will, I believe, find out just what `bad businesses', in truth, many public sector agencies actually are. We will see just how shockingly wasteful and ineffective councils and the NHS can be. Indeed, Sir Digby Jones forthocoming programme, which features Jobcentre Plus, will, I believe, be the first of many. And, on a deeper level, the truth about large parts of the the public sector will come out: that it is inherently prone to inefficiency and, in many cases, unjustifiably protected from competition.

Once the cat is out of the bag (and it will come out, I am sure) the search will really be on for new solutions. Because the truth, and it is something that many of us working close to public services have known as self-evident for years, is that even with less money, a lot more could be achieve than is being achieved with public money right now. The next Government will follow the intimations of Liam Byrne and spin out large numbers of staff into new entities which have three years to thrive or be taken over. Contestibility will reach into places previously considered `inner sanctums' of state dominance - schools, health, welfare.

There will be blood on the tracks, sure. Unions will be very upset. So too will those silly people at the Association for Public Services Excellence. We will see a lot of good people, for the first time, thrown out of work. But, it could also herald a step-change and an opportunity for fantastic providers from the third and private sectors to introduce delivery models that give the public the services they have deserved for a long time.

Will our sector be up for this challenge? Parts of it will not. Indeed, it is not for all organisations to be leading public service reform. There are others whose cultures and practices are so similar to the public sector that they too will be burnt up when the crisis hits. But, there are many who can and do deliver, and which will further improve once the opportunities open up. My experience of public sector tendering tells me there will be no shortage of organisations seeking to take up the challenge once things properly open up.

So, if you're in the public sector, it may be time to don your hard hat and get your business into shape. For your recession is only a few months away.

No comments: