Efficiency savings

Some fourteen months ago, in a piece entitled “Get real Read“, I was critical of the government efficiency saving proposed by Dr Martin Read It turns out that I find agreement from a respected economist in the form of Professor David Blanchflower. The Professor writes a weekly column for the New Statesman and in the edition of 19th April he attacks the proposals by Peter Gershon and Martin Read for the wooly thinking they are:

“First, a new government should stop any major new spending on IT projects and cancel existing projects which are not worth completing.

Hard to see how contracts that have been signed can be stopped. Penalty clauses might well be invoked, which would increase spending, not reduce it.

Second, a new government should be negotiating significant reductions from its major suppliers.

Gershon says that the government needs to go to its suppliers and say, “I can’t afford this contract any more – I need to spend less.”

Great idea. I plan to go to my mortgage lenders and tell them times are tough, so I would like them to halve the interest on my mortgage.

Third, a new government should outsource its back-office processing functions without any delay to realise substantial savings.

Most of this outsourcing has apparently already been achieved. Few if any savings here.

Fourth, a new government now needs to take the same tough approach to costs that has led to substantial savings in the private sector.

The private sector over the past year has reduced employment by more than half a million. To save £6bn, you can fire 200,000 public-sector workers who are paid, say, £30,000 a year on average. A really bad idea.

Fifth and finally . . . stop trying to micromanage delivery and allow all providers . . . to innovate against some broadly defined outcomes.

Hard to see how this can generate any savings quickly, or what it means for teachers, nurses, civil servants or policemen. Hopeless.”

I’ve attacked these proposals before, particularly the third, since outsourcing the back office is just giving money away to suppliers – we need to rationalise the back office to make savings, which can never provide quick wins for central government, since it may require changes to legislation and will definitely require improved processes.

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