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Public sector reform critical to supporting economic recovery

10 May 2012

  • New report brings together over 500 set of official and publicly-available data to show first complete picture of the state of the state
  • Report outlines potential savings of £18.7 billion through improved fraud prevention, cash management and productivity

The State of the State 2012, a new report by Deloitte, the business advisory firm, and Reform, a think tank, providesafresh analysis of the UK’s public finances and public services. It sets out additional challenges facing Government, and potential savings that will be critical to economic recovery.

Applying a business lens to over 500 sets of Government data, the report creates the first ever snapshot of the state of the state and asks what Government should do if it were a big business.

The report identifies five rarely acknowledged areas for urgent public sector reform. It suggests the Government can improve its financial and business management to:

  • Save up to £8.5 billion per annum by bringing public sector fraud prevention and detection rates in line with the private sector;
  • Save up to £10.2 billion per year by improving cash management in Government. This includes reducing levels of aged and written off debt and improving working capital management to repairs its balance sheet;
  • Reform areas of spending under pressure from demographic change, such as welfare and health, and examine further asset sales, including infrastructure, to reduce the UK’s net liabilities and achieve budget surpluses in the next Parliament;
  • Target a public sector productivity growth rate of at least 0.3 per cent this year by improving flexibility and accelerating reform of the workforce and capital spending. Government must press ahead with reducing the public sector headcount and transferring workers to mutuals, but ensure this is sustainable with improvements to skills and capability;
  • Increase the proportion of locally-raised council spending year on year and improve financial management skills the local level to support the move of service delivery to the local level.

David Cruickshank, chairman of Deloitte, said: “The Government’s borrowing target is on track but the arithmetic is finely balanced and the margin for error is very small, particularly with the current levels of economic growth. Fiscal plans hinge on finding ways to unlock corporate investment. Business certainly has a role to play but the state must also consider how it can make its own contribution to fiscal sustainability through productivity improvements.

“Applying a business lens to the Government’s data, our analysis shows that there is ample opportunity to improve financial controls, optimise cash management and repair the balance sheet to make a significant contribution to economic recovery.”

Mike Turley, public sector industry leader at Deloitte, said: “In these tough times, it is vital that the state takes a lead from the private sector and looks at how it can be more rigorous. When large corporates face cost pressures, they confront every area where cash is lost unnecessarily. Cash is king for them and it should be for government.

“Looking at the business of government we identify some new issues it needs to tackle straight away to help save money and rebalance the economy. Setting a goal for tackling fraud and error, ensuring debtors pay on time and improving contract and cash management to minimise losses, must be new priorities. The volume of money that government handles means that poor financial management is costly, but it also means there are huge opportunities to improve and save.”

Andrew Haldenby, Director of Reform, said: “Eliminating the deficit in this Parliament is only half the battle.  The UK needs continued austerity in the next Parliament, and very likely beyond, to get the national debt down to safe and affordable levels.  That must mean tough decisions on health and welfare entitlements, plus a rigorous reform of the public sector workforce in order to transform its productivity.”


Notes to editors

About Deloitte
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

About Reform
Reform is an independent, non-party think tank whose mission is to set out a better way to deliver public services and economic prosperity. Reform is a registered charity, the Reform Research Trust, charity no. 1103739.

We believe that by reforming the public sector, increasing investment and extending choice, high quality services can be made available for everyone.

Our vision is of a Britain with 21st century healthcare, high standards in schools, a modern and efficient transport system, and a free, dynamic and competitive economy.

Media contacts

Mark Smith
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020 7007 7082 / 07 590 041 301

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