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Deloitte: Productivity key as public sector ’recalibrates’ to lower spending levels

15 October 2015

The UK public sector faces a decade of recalibration to adjust to lower spending levels, according to a report by Deloitte, the business advisory firm, and Reform, the think tank.

The report – The State of the State 2015 – is Deloitte and Reform’s fourth annual report collating data on government spending, economic figures and interviews with public sector leaders.

Productivity
Deloitte calculates that boosting productivity and freeing up just one hour of public sector workers’ time each year can deliver savings of £72 million. Broken down across the devolved governments of the UK savings could stand at £57.7 million in England, £7.2 million in Scotland, £4.3 million Wales and £2.9 million in Northern Ireland.

Mike Turley, UK and Global Public Sector Leader at Deloitte, said: “Productivity is a challenge for the whole economy but little attention is given to its role in mending the public finances. Public sector staff work hard, but helping them work smarter could see considerable savings. Embracing technology, avoiding repetition of efforts and making evidence-based reforms can all help ensure staff time is spent as productively as possible delivering front-line services. Improving productivity should not be a one-off, it should be a continuous process for the future.”

Andrew Haldenby, director of the independent think tank Reform, said: “This is a new era for the Welfare State. Public money will be tight for years to come. The UK public sector will keep getting leaner, fitter and more productive.”

Debt
Deloitte’s report calculates that government debt currently equals £23,428 for every UK resident and, if debt interest kept rising at its current rate, the Government would be spending more on servicing debt than on public services by 2034.

Turley said: “Such a high level of debt exposes the UK to risk from further financial crises and interest rate changes. The level of debt is also a burden on the taxpayer, debt interest this year alone is more than the government spends on policing and justice, and for future generations, a child born at the height of the financial crisis might still see this debt legacy on the Government balance sheet into their adulthood.”

Financial distress
Aggregating the warnings from various central and local government watchdogs, Deloitte’s report estimates that over 200 frontline public sector organisations could be at risk of financial distress and require intervention in the course of this Parliament. Half of these are NHS trusts but distress signals are also evident in local government, police and further education organisations.

Turley said: “The financial distress signals from public sector watchdogs suggest a turbulent time ahead for public services. Some will require either support from others in their sector or financial support from central government. Each of the UK’s central and devolved administrations need to be clear on the risk of financial failure in the public sector and plan for intervention.”

The mood in local public services
The State of the State 2015 also included interviews with over 40 local public sector leaders, collectively responsible for over £16 billion of public spending, on the challenges their organisations face and how they have adapted. The responses find:

  • Having dealt with cost reduction in the last Parliament, local public service leaders expect the redesigning of their services to dominate the coming five years. While recognising this will be a challenge, most are optimistic about the years to come. 
  • Morale among staff has suffered as a result of redundancies, pay freezes and limited promotion opportunities. Local public service leaders say the need to keep talented, skilled staff is greater than ever.
  • Local public service leaders expect their organisations will have retrenched into core, statutory activities by 2020. Many expect to see more cross-sector working, a broader mix of public service providers and leaner public sector organisation more clearly focused on their mission. 

Turley said: “Local public service leaders speak with pride about how they have coped since 2010, but the work continues. The next five years will see challenges in redesigning and refocusing local public services and those leading them are optimistic about managing this. But it will require strong political leadership and honest conversations with the public about what the public sector can, and cannot, continue to provide.”

End

Notes to editors

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

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 www.deloitte.co.uk/about 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.

Mark Smith
Deloitte LLP
+44 (0) 20 7007 7082
+44 (0) 75 9004 1301
marksmith@deloitte.co.uk

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