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The State of the State 2014-15

Government’s inflection point

The UK is half-way through a radical fiscal consolidation that will have a profound impact on public services – and the toughest decisions are yet to come. But the UK’s public sector is a world leader in reform, and governments around the world are watching as it seeks to carve out a more affordable model for the modern state.

This year's report finds:

  • Deficit reduction is on track but toughest decisions are yet to come
  • 2015 Spending Round represents a defining moment for future of public sector
  • The state needs to drive a productivity renaissance to help the public sector deliver more with less
  • UK public sector has gained global recognition for its programme to reshape the modern state into a more affordable model
  • Government needs to return public sector net debt to pre-crisis levels

Some 80 per cent of the Coalition’s deficit reduction plan involves public spending cuts. The plan is broadly on track, but the second half of the cuts, to come in the 2015 Spending Round, will be much harder to deliver and will have profound implications for many public bodies.

Eliminating the deficit – public sector borrowing:

Our interviews with senior executives in local public services reveal pride at how the cuts have been managed so far. But many speak of risk and the prospect of organisational and service failure in the years ahead.

Our State of the State 2014-15 report highlights the challenges the Government faces if it is to complete the deficit reduction plan successfully. We recommend three strategic lenses through which the next Government needs to focus its programme.

Three strategic lenses for the 2015 Government

The State of the State 2014-15 proposes that the next Government needs to focus is programme through three strategic lenses:

  1. Debt reduction lens: Government should assess all policy decisions for their impact on debt and liabilities.
  2. Productivity lens: Government should support the public sector in making productivity gains.
  3. Talent lens: Headcount reductions in the public sector make it more important than ever to have the right people with the right skills in the right jobs.

The four primary challenges for Government

  • Recast the UK’s governance in the wake of the Scottish referendum
  • Finish fiscal consolidation and support the public services through profound budget reductions
  • Drive continued economic growth
  • Bolster national security

The State of the State in numbers

  • £1.6 billion: The value to the public purse of every one per cent of public sector staff time saved through a productivity measure.
  • £1 billion a week: What the UK state already spends on debt interest – more than it spends on education.
  • 2044: The year the UK’s spending on servicing debt will overtake spending on public services – if it fails to eliminate the deficit.
  • £1.63 trillion: The state’s net liability at last count (2012-13) – an increase of £283 billion year on year, and the biggest rise since the start of public sector-wide accounts in 2009-10.

The view from Deloitte

“The UK is half way through a far-reaching fiscal consolidation programme that is reducing the size of the state.

“The public sector reform required to achieve the second half looks set to alter the way that many public bodies operate. And the Scottish Referendum has triggered a fundamental rethink of how power is devolved across the UK. In the next five years, the UK and its public sector will change profoundly.

“Governments around the world are watching ours to learn lessons.”
Mike Turley, Public Sector Leader, Deloitte

About The State of the State report series

Now in its third year, our annual State of the State report aims to provide an independent and accessible view of the UK public sector.

Deloitte and Reform have gathered and analysed material from public sources – including the government’s accounts, public spending data, the Budget, the Autumn Statement and official economic forecasts – into a single snapshot. We augment that data with insight from roundtable discussions and interviews with executives from across the public services.

Our aim is to create a report that helps facilitate a more informed and constructive debate on the operation of the UK state.

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Key contacts

  • Mike Turley
    Public Sector Industry Leader
    +44 (0)20 7303 3162
  • Ed Roddis
    Head of Public Sector Research
    +44 (0)20 7007 2920

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