Public sector efficiencies are easy enough to find, but taking out the cost will be more of a challenge

Anyone who understands how the public sector works knows that it can carry a fair amount of fat. Cost pressures have been more evident in local government than in central, and the former tends to be leaner as a consequence.

Government agencies (with or without a capital “a”), with their clearer focus on delivery, also tend to have put more effort into the pursuit of efficiency in their operations, but this is not a universal picture. Meanwhile the central civil service, with one or two notable exceptions, has struggled to manage productivity energetically and consistently. It carries poor performers, tolerates high levels of absenteeism and has mostly yet to introduce the simple disciplines of Operational Management.

And now our new government is challenging the value added by policy makers and score keepers – a large chunk of the staffing of the central departments. The exam question now is not just “can we do the same for less?” but “do we need to do it at all?”.

Finding the potential for efficiencies will therefore not be hard, particularly in central government.

In the back office good operational management might be expected to reveal over-staffing in the region of 15 – 20%, and that is before the policy wonks and score carders are sidelined.

In most of the more politically sensitive areas of front line services, there is still scope for greater productivity to be derived from simple Operational Management, sensible management structures and intelligent procurement of third party services.

But how will the over-staffing be translated into actual savings, when this means cutting staff numbers?

There surely must be a plan. Since a Conservative majority was forecast from 2008 to the end of 2009, we can all be confident that Tory party advisers, and the civil service strategists and HR people will have been developing a staff reduction plan. And it has to be a cunning plan, since:

• the traditional severance schemes tended to be generous, ie very expensive for the paymaster, the taxpayer
• the costs of severance, in the central civil service at least, are borne by current revenue, not accumulated funds, and this exposure would include lump payments – who knows whether a rapid programme of staff cuts would be affordable in the current cash strapped economy?
• Departmental budgets hold no provision for such large scale severance costs
• in any case the new arrangements being proposed - the Civil Service Compensation Scheme - are currently the object of dispute with the PCS and are likely to meet legal challenge, and the trade unions are likely to resist significant staff reductions with considerable energy.
  

And of course, taking people off the public sector payroll does not produce a simple saving, even after severance costs are included; it will reduce the tax take, add to the benefits load and might depress the economy.

So we can presumably safely assume that in the two years available to them these strategists have developed a plan that operates at both the macro and micro level.

At the macro level the big picture must ensure that the speed and costs of severance are affordable and produce real overall savings, not just a transfer of cost (and at the risk of being slightly alarmist not a significant stimulus for a second economic dip).

At the micro level there might need to be a new mechanism for cutting through the Gordian knot of Departmental funding constraint. The public that voted for small government will not be impressed to see progress impeded by Sir Humphrey style procrastinating disputes between Departments and Her Majesty’s Treasury.

Provided the payback calculations work, and since it’s all our money anyway, we taxpayers will probably not have a problem with severance being paid out of a central pot.

And the trade union resistance will have to be overcome, with the minimum of disruption to essential front line services.

I can’t wait to see this carefully crafted plan - that we can confidently assume to have been in development since 2008 - can you?

It would be a very unpleasant surprise to discover that there is no such plan after all, not least because it would indicate an unforgivable degree of ostrich-like behaviour within the civil service, and more importantly because it will delay by a very considerable period the achievement of democratically targeted savings.