On the money

Sir Peter Gershon’s review of public service efficiency for the Treasury is set to dominate political agendas for the next three years, along with the aftermath of this summer’s comprehensive spending review. Whitehall expects local government to serve up £6.45bn in efficiencies and productivity improvements by 2007/8; the ODPM is aiming for efficiency gains worth at least £835m a year across social housing.

But how readily can these efficiency savings be turned into cash? Luckily, there are a number of organisations willing to help councils do just that.

Procurement gains and more e-enabled transactional services are perhaps the easiest to understand of Gershon’s recommendations. These, we are told, should be seen as improving procurement to get more for your money, not as cuts. Nine regional centres of procurement excellence are available to assist authorities and will focus on driving skills and developing good practice.

Recent research carried out by Deloitte for the ODPM suggests that if e-procurement were applied by all local authorities, this could secure savings of £1.1bn.

Procurement consortiums are identified as a key way to reduce costs. For arm’s-length management organisations, properly managed, service-level agreements for central services will need to be a key part of the new approach to procurement. For the private finance initiative, the Treasury has developed a procurement pack with standard documentation, building on lessons learned from current schemes. And the Strategic Forum for Construction has produced the Egan Principles, which include concrete demonstrations of efficiencies in procurement.

A key efficiency recommendation is to rationalise “back office” services, such as finance. A good starting point here will be the proper definition of the total cost of back office services: CIPFA’s Best Value Accounting Code of Practice may help as it offers a definition of total cost including the analysis of costs on an internal cross departmental basis.

Gershon is clearly a huge challenge and the housing sector will need all the tools and external help it can get

For finance across the authority, good strategic management is essential for the new efficiency agenda. Here, CIPFA’s new financial management model may help. It measures an organisation’s financial management against 42 good practice statements, pinpointing areas for improvement.

Another area for attention is the productive time of frontline public service professionals, including absenteeism and time spent away from core service delivery activities. The ODPM aims to work in partnership with local government here, through its pay and workforce strategy; another focus for councils should be on improving sickness absence through negotiations on pay and conditions.

More generally, the Audit Commission has some very useful case studies on efficiencies and improving performance and is already undertaking project work in areas addressed by Gershon.

Gershon is very clearly a huge challenge and the housing sector – especially in local government – will need all the tools and external help it can get. Even then, success is likely to hinge, as ever, on the people in housing.

Efficiencies will not produce real gains unless they involve the kind of improvements tenants actually want, so councils will need to consult and involve tenants to determine what they do want. This means housing staff – front line and “back office” – will need to be committed to the cause.