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Sustainable public sector needs more than cuts

Delivering good societal outcomes will deliver real long-term value

The Government’s drive for cutting public sector costs may not result in long-term improvements to service delivery, according to Deloitte Public Sector Leader Cobus Scholtz.

Finance Minister Bill English delivered a predicted “zero Budget” today which included 2012-13 forecast core Crown expenditure to be $73.3 billion, a small increase from the previous year.

Mr Scholtz says the Government has largely continued on the “more for less” approach of last year’s Budget, but questions whether this will lead to better overall value from the public sector.

“Effectiveness of the public sector has been achieved by moving funds to higher priority areas such as education, but the real prize is still a public service that delivers greater sustainable value,” Mr Scholtz says.

In the 2010-2011 financial year there was a 1% reduction in back office costs but this amounted to a measly 0.03% of total government spending.

“Back office costs are small beer, comprising only about 2.5% of total government spend, so making any sort of significant dollar savings there is unrealistic. In any case, a modern, flexible public sector needs strong supporting functions, so we need to work on building that strength first and foremost.”

The front office has much greater opportunities for cost saving and long-term impacts on society, he says.

There are significant opportunities to reduce cost through collaboration in technology and face-to-face service delivery; smarter use of capital assets; simplified policy and legislation; and more flexible sourcing and distribution of resources across the country.

“But as any business person knows, true financial sustainability does not come simply from reducing cost – you must also be able to deliver value to your customers. In the public sector, the main source of value is societal outcomes such as healthier people, less unemployment and lower crime rates.

“Delivering good outcomes will ultimately reduce public sector costs and improve the overall base of the economy, making it easier to bear those costs. The investment in drug and alcohol treatment in prisons is a welcome step in this direction, and the Better Public Services initiative has fantastic potential.”

Mr Scholtz says the Government has an exciting opportunity for New Zealand to once again lead the world in delivering public services.

“But if we don’t grab this chance, we could cut away any hope of a truly sustainable public sector.”

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