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Public sector spending needs further cuts, says report

Profound reform is needed if the UK’s public services are going to be financially sustainable for the future

Wednesday 11 September 2013

Public sector spending needs further cuts, says reportGetting more for less from the public sector is essential if the UK government is to avoid becoming unaffordable, according to a new report.

The current government and those that follow it will need to cut much deeper into spending on pensions, welfare and social care, according to The State of the State 2013 report produced by Deloitte and leading think tank Reform.

Nothing should be considered taboo for reform, according to the report, which says that although spending is projected to fall in the next five years, the demands of an ageing society will push it back up by four per cent of GDP between 2017-18 and 2062-63.

Last year the UK spent £46.5 billion to service public sector debt. This year it will spend £49.5 billion and by 2017-18 the figure will reach £71.3 billion.

Productivity is key
Boosting productivity in the public sector is going to be essential in the long-term challenge of putting the UK’s finances on a sustainable footing, says Mike Turley, head of public sector at Deloitte.

Behind Japan, the UK has the second lowest productivity rate, both for the private and public sectors, across the G7 countries. In public services, productivity has remained flat for the past 15 years.

“The problem lies in the fact that, in the public sector, outputs have only risen in line with inputs. We’ve always had to put in more money to get more from our public services. The public sector has grown and now does more than ever before, but only because it has had more money spent on it. As a result, productivity has remained static.” says Turley.

“Now, in the age of austerity, getting the public sector to produce more output with less input will be the central challenge for public services from 2013 and beyond. The Institute for Fiscal Studies has forecasted that departmental spending will fall by 18.6 per cent by 2017-18. The danger is that output will, as it always has done, follow suit.

“Our analysis suggests that to address the gap between 2010 levels of output in the public sector and the planned drop in funding would require every public sector worker to work an extra 42 days each year. This is, of course, unlikely to happen, but it demonstrates the scale of the challenge faced in ensuring the public sector keeps pace with drops in funding.”

New ways of working
New ways of working, delivering services and managing expectations about what the state can feasibly provide are all needed, according to the report. Turley points out that some of the changes needed to bring about increased productivity may well prove controversial. “But, given the position we are in, nothing can be considered taboo for reform,” he adds.

The report says the state needs to ‘work smarter’ to avoid the duplication of effort, the prioritising of cure over prevention and the belief that more money and more people are the solution to tricky problems.

“There has not been a consistent focus on that ensuring workers are truly delivering at the frontline and their efforts are directed toward the right outcomes. This needs to change,” says Turley.

Promise for the future
Deloitte says feedback collected in the report from the people leading councils, police forces and local NHS bodies is encouraging. Managers in the public sector are finding that austerity is forcing them to reconsider what they can feasibly provide, what citizens want and how best they can go about delivering it.“The innovation many are demonstrating does show some promise for the future of our public services,” adds Turley.

“The priorities public service leaders are setting out are also heartening. They are focused on improving performance, getting the right people for the job and are becoming more hard-nosed and confident in making the case for preventative policy measures or stopping services altogether.”

Technology can also play a part in boosting productivity, says the report. A Deloitte study in the US in 2012 showed that if the US federal government doubled its use of mobile technology - allowing public sector workers to work more efficiently - annual output by government workings would be boosted by an extra $50 billion.

“When the trend for decades in government has been to do more with more, doing more with less is going to require profound changes in culture, policy and delivery. In the coming years and in all debates around future reforms to the public sector, the central question must be ‘does this improve productivity?’,” Turley concludes.

Copyright Press Association 2013

Related links

  • The State of the State 2013
    The State of the State shows how government in the UK has grown significantly over the past 50 years, and demand for public services is set to continue growing in the 50 years to come. It argues that profound reform is needed to make sure that the UK public sector if financially sustainable in the medium and longer term.

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