Lies, damned lies and politicians

July 5, 2009

There is a conspiracy in the UK between politicians. No surprise there, you might think; but this affects us as individuals, companies and the outsourcing market generally.

The conspiracy revolves around the number ten.

Whilst the Conservative Party has admitted that its spending cuts will amount to an across the board ten per cent, it says that it is using Labour’s figures to calculate this. Labour in its turn, says that it will not cut but will go for “zero per cent growth”!

They know, we know, and they know that we know, that this is complete obfuscation. Labour is terrified of the results of the comprehensive spending review (CSR10) due next year; which is why its trying to avoid doing it. CSR10 will indicate that UKPLC is effectively bust. We’re not going to be talking about ten per cent cuts, its going to be between 25 and 30 per cent.

So, what to do? Governments of both political colours have already tried a technology-led approach to cost-cutting which involves re-platforming, undertaking business process reengineering to deliver efficiencies in operational departments enabled by the new systems.

An alternative is to outsource back office functions to deliver savings in technology, finance and accounting, human resources, procurement etc. However, with the CSR10 time bomb waiting to go off, this shaving the parmesan approach is now completely untenable. As a result, government must seek new ideas to transform their operating model from undertaking the whole range of services that they perform today down to a core of commissioning, policy, strategy, budgeting, and compliance.

This approach allows a fundamental redesign of how citizens receive their services. In the process, administrative and personnel costs can be drastically reduced.

Some departments and local government authorities favour the “grand outsource”, where everything that doesn’t fall into the commissioning and strategy unit, is outsourced to a single company, which sub contracts work out, and is the legal entity responsible for the risk associated with delivering those services. Examples of this include Essex and SouthwestOne.

I believe that this kind of approach is ultimately doomed to fail, as this requires one company to take the entire risk, both financially and to its brand, on to its balance sheet.

The answer, I think, must respresent a transformation; a step change, a fundamental rethink of the way in which the government interacts with its citizens, becoming much more agile in response to changing citizen demands, spending money on high impact services and redesigning how more traditional services are delivered so as to improve asset utilization and minimise overheads.

The government must immediately maximise the proportion of budget spent on direct service provision and optimise its activities to minimise administration costs. In so doing, it can minimise the impact on citizens in terms of number and quality of services available, without need for significant increases in tax.

Postscript: I wrote this blog on 4 July (happy Independence day to American readers). The headline article in the UK Sunday Times today (5 July) quoted Whitehall (civil service) sources:

Secret “doomsday” plans for 20% cuts in public spending are being prepared by senior civil servants, who fear politicians are failing to confront the scale of the budget black hole.

So, I’m not that far out…

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