There was a collective gasp across Whitehall when the latest savings targets were announced ahead of November’s Spending Review. Chancellor George Osborne confirmed that the Treasury would be writing to secretaries of state of non-protected departments asking them to model savings of 25% and 40% by 2019/20.
Civil servants know better than to deny that budgets can even be reduced by this amount, or worse, bury their heads in the sand and pretend it won’t happen. Whitehall is in no doubt of the chancellor’s determination to reduce spending as part of the government’s much referenced “long term economic plan” – so it’s time to get practical. How should government departments and other public bodies approach the exam question set by the chancellor?
There are already cross-government programmes to generate back office efficiencies, improve procurement and make better use of government estates. These are worthwhile, and will yield significant savings. It will also be important to ask searching questions about all areas of departmental spend. Officials should be bold enough to stop things: outdated or inadequate services; public bodies which could be funded in other ways; or initiatives which are no longer a priority. Just because things have been done in a certain way for years is no reason for them to continue, and perhaps the recent change of government and resulting reshuffle will provide the opportunity for a rethink.
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However, the bulk of government spending is on public services, and it is here where costs – and services – need to be transformed. It is clear that trying to make simple efficiencies – doing the same things a little bit better, a little bit faster, a little bit cheaper – will not produce the scale of savings required. And many opportunities for efficiency have already been taken as part of previous Spending Reviews and Budgets. To reduce spending on the scale demanded by the Spending Review, departments will need to achieve transformation: a radical change in both what is delivered and how.
To transform services, public sector leaders should step back and review the purpose of the services for which they are responsible, and who they exist to serve. It is crucial to understand what service users in 2019/20 will want and need, and to tailor services accordingly. Simon Stevens, the chief executive of the NHS, is right to ask his staff to “think like a patient”, because it helps them design services around the needs of users rather to suit doctors and NHS managers.
Many users want more control over the services they receive, and want to interact with them at a time and place of their choosing. Digital services have huge potential in this respect: I can book a squash court at my local gym on my phone late at night – so why can’t I book my hospital appointment the same way? I can text photos to my family on the other side of the world, so why can’t I text the police a photo of my stolen bike? Recent successes such as GOV.UK, and new processes for applying for passports and driving licenses gives a taste of what is possible. Not only are online self-service portals better for users, they are also cheaper. And crucially, they free up specialist professionals to help people with more complex needs.
The benefits of technology are not limited to the way that services are provided. Big data can help target public services too, from identifying the interventions most likely to support a job seeker back into work, to predicting the types of books needed in any given library. Officials looking to save money should think about how to exploit technology to build better targeted, better tailored, better value services.
Transforming public services also requires integration at a local level. The government’s Spending Review document mentions health and social care in particular. Again, success will have benefits for both users and the public purse: not only will an elderly relative get better care if the local NHS services join up with their local authority-run care home, but better coordinated medical care delivered in that care home will prevent an unnecessary admission to hospital.
The integration agenda will be accelerated by devolution, as city deals and metro mayors give communities the power to coordinate services across a geographical location to meet the needs of the local population. During the process of developing their savings plans, officials should work across departments to develop both how services can be integrated at local level, and what requirements they have for the devolution reforms.
Finally, officials should ask whether services are best delivered by the government at all. Some evidence suggests that private and third sector providers can deliver the same or better performance for the same or less money. Public sector markets are maturing all the time, and some are becoming increasingly competitive and innovative. The inevitable increase of public service outsourcing will have profound implications for the shape and role of the state as it continues to transition from provider to commissioner. This different role requires different skills. Instead of delivering services, the public sector will be specifying outcomes, negotiating contracts and managing suppliers. In order to succeed as a smaller, more strategic, commissioning state, urgent work to build these commissioning capabilities is required.
The challenge of achieving 25%-40% savings in unprotected departments is daunting. But, by transforming services – by understanding service users, harnessing the power of technology, and working across government both nationally and locally to integrate services – significant improvements can be achieved, at the same time as reducing costs.