Coping with the squeeze on public spending

The squeeze on public spending looks set to continue. The government plans and medium term assumptions show we are now in the fifth year of a 10 year fiscal consolidation. If this strategy is to be believed, public spending will fall to 35% of GDP in 2019/20, which will be its lowest level in 80 years. Of course, the Election in May could change this but there is little sign in the UK of any major anti-austerity popular movement gaining ground, and whatever party or coalition comes into power they will continue to govern with tight control over spending.

For local government this means more of the same. Social care and waste spending will continue to take a greater proportion of resources, which means the burden will fall on other council services. Funding for these other services will have dropped by 43% between 2010/11 and 2019/20. Councils have taken many of the ‘easier’ decisions to date by taking out layers of staff through voluntary redundancy programmes, reducing back office function and increasing charges wherever possible. To deliver future savings, councils need to make real cuts to service provision. Many management teams are already struggling to find the time to spend in dealing with day-to-day activities rather than going through options for further cuts. However, without detailed options analysis there is a danger that the wrong services are cut, whilst others avoid substantial reduction by ‘salami-slicing’ across all departments.

Many managers think they are carrying out option appraisals but, in truth, their analysis is not reliable, does not set out the real options or is designed to reinforce an already agreed upon position. Too many option appraisals:
  • do not develop, to the required level, all the available options;
  • do not convert service impacts into real costs, build in all the whole-life costs or take into account the other consequential impacts of an option;
  • fail to apply qualitative consideration in a consistent or structured way to options being considered.
The analysis required does need to be proportionate, but that still means that a robust option appraisal will need sufficient time input. Too often the resources are not available. As a result short-cuts are taken which can end up with the wrong decision and significant resources required to correct or mitigate the original decision.

Without a consistent, rigorous methodology public bodies will find their decisions challenged by pressure groups, suppliers and regulators. Conversely, an effective structure and documented process provides the evidence base to support what are often very difficult decisions.

For further information, please contact Nick Bennett.