In today’s Pre Budget Report, Alistair Darling has set out a continued commitment to existing investment in education, health and other major public sector programmes for the foreseeable future. As expected, he is protecting major high-profile programmes, but this will inevitably need to be paid for by deeper cuts elsewhere.
There is also a commitment to sell assets that can be managed more effectively by the private sector – good news when linked to the drive for efficiency and the emergence of new service delivery models.
There was actually more reference in Darling’s PBR speech to the problems that were inherited a decade ago, than the achievements to date or initiatives for the future. This will clearly be one of the key battlegrounds in the run up to the General Election…
Support for tackling fuel poverty continued and will be welcomed by low income families. The new boiler scrappage scheme and tax free selling of energy back to the grid sound like the types of initiative that will pave the way to consumer acceptance of greening measures. This is no bad thing if we are to achieve residential market recovery prior to 2016!
No change to VAT for residential refurbishment is a huge missed opportunity to soften the blow of redirected budgets within the HCA from housing improvement programmes. At a domestic level, this could have been a major coup. No continuation of the stamp duty holiday up to £175,000 is a false economy – we’ve not seen the shift in the housing market to justify this – if anything it should have been increased to £250,000 indefinitely.
Greater flexibility in the way local authorities can use their budgets will create a more efficient use of resource and enable prioritisation of funds.
Even more intensive collaboration between the public and private sectors means that the performance of the public sector will need to be benchmarked against the private; this will create a more focused commercial model. There is also the prospect of much smarter use of public assets to help unlock schemes and create different business models with the public sector sharing in both risk and reward.
A commitment was made to greater skills training opportunities for unemployed under 24 year olds, by shortening the period before training kicks in, to 6 months from 12. How the programmes will be achieved is not yet clear.
Despite major increases in resources, the NHS now has to deliver efficiency. This means both a clinical process review on productivity and a clearer match to its estate needs. By using best practice activity modelling reviewing facilities management operational costs and reducing floor area of delivery, savings can and will be made. To put this in perspective, the surplus NHS property (out of use or functionally inactive used buildings) broadly equates to the entire area footprint of Tesco’s UK business at approximately three million square metres.
The Operational Efficiency Programme is still looking for around a 30% reduction in central government office accommodation through better space occupancy (from14.5 to 10 square metres or better per full time employee). This would reduce running costs for this part of the estate by approximately £1 billion per year. There is room for other departments to follow the DCSF’s lead that has cut London HQ costs by £10 million per annum.
A fresh look at strategic asset management of the estate can deliver significant operational savings as well as generating capital receipts. Councils should also take an in-depth look at their current property maintenance provisions, as smart procurement and streamlined delivery can deliver savings. Asset led change can deliver efficiencies and act as a catalyst for wider organisational transformation using new ways of working.
Graham Kean is partner and head of public at consultants EC Harris LLP