Reshaping public services - from the top

A new report urges public sector leaders to abandon traditional methods of cost cutting - shedding jobs - but should reshape their organisations and look to the Total Place initiative as an example of saving money

Public sector leaders must weather Britain's harshest economic climate since the second world war by facing up to the "myth" that they cannot make large-scale redundancies, according to a report out this week.

Business consultant Deloitte says Britain's public services need to look dramatically beyond traditional methods of defensive cost-cutting, such as salami-slicing departments, which demotivate staff and harm frontline services.

Instead, public managers and chief executives should use the spending straitjackets to banish the "myths" that funding cuts always damage service quality, that public sector organisations cannot make dramatic reductions in staff, and that workers are currently underpaid.

The report, 'New shapes and sizes: Reshaping public sector organisations for an age or austerity', chimes with the 'Smarter Government' measures announced by Gordon Brown earlier this week, which will see senior civil service positions slashed by a fifth over four years in a bid to save £12bn. However, it goes further in its rhetoric for change.

Stop having yesterday's debate

Keith Leslie, the principal author of the Deloitte report, said the key message of the paper was to reinforce the urgency of public body restructuring, given that cuts are already affecting the frontline: "The fundamental point it that we need to stop having yesterday's debate – there's no point in talking about the cuts that are coming, because the fact is that they are already here, and we have no time to lose.

"I've had private conversations with many senior civil servants who are already cutting back, because they've had to. They're frustrated because the rhetoric coming down from on high is not radical enough – and they can see the NHS and other frontline services suffering. Simply not filling vacancies and halting recruitment, which is the easier way to cut a budget, harms services. So we need to get the will to change things more radically."

The report says councils, agencies and non-departmental public bodies (NDPBs) will be in a much stronger position if they are allowed to fundamentally reshape their organisations, and will make for hard reading for the swaths of public sector workers already reeling from the effective pay cut and national insurance increases of last week's pre-budget report.

"Undeniably, such changes would be hugely challenging," the authors admit."Yet they could also offer opportunities to deliver reforms that might otherwise be resisted when it is 'business as usual'."

Organisational layers

The report says managers ask themselves frank questions about whether their agencies and NDPBs need to exist separately, whether major corporate services could be outsourced or shared with other organisations, and how many organisational layers exist between them and the public.

"Too often, organisations focus on reducing their size, assuming that if staff numbers are cut, everything else will take care of itself. A more proactive approach acknowledges that shape is equally important."

Total Place, a Treasury initiative evaluating the core services delivered to a particular location and analysing how improvements can be made across administrative boundaries, is held up as an example of its recommendations in practice.

Indeed, the report highlights how local government has rapidly increased the pace of shedding staff. A recent survey of English and Welsh local authorities showed that 59% of respondents had made staff reductions in the last six months, and 60% were planning to do so over the next year. Estimates based on a sample survey of authorities found that 14,000 council jobs could be under threat over a three-year period.

"I think the ball is in the court of the chief executives," says Leslie. "There's little difference between the approaches of both main parties, so the impetus is going to have to come from them. That's why we listed the 'myths' of the civil service, because it's the existence of these myths that prevents discussion and change."

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