COMMERCIAL PROFILE, PwC:The public service is facing more tough choices as it copes with the changed financial realities, writes John Dillon of PricewaterhouseCoopers
THE PUBLIC SERVICE continues to face the critical challenge of seeking to enhance service delivery while simultaneously demonstrating increased efficiency and value for money. As with any sector, this is no easy task.
The latest Exchequer revenue figures contained the welcome news that the public finances are stabilising. However, the funding deficit, arising from day-to-day Government spending still needs significant realignment. Therefore we cannot afford to let ourselves become complacent. The hard work needs to continue relentlessly such that, alongside different ways of generating revenue and jobs, substantial shifts in governmental spending and efficiency are still achieved.
The most significant categories of current government expenditure of €54.9 billion are in the areas of social welfare (€21 billion), health (€14.8 billion) and education (€8.2 billion). The public service pay and pensions bill is forecast to be down 7.2 per cent on 2009 levels. Nonetheless, it still represents 34 per cent of current spending.
Public servants have, consistent with most sectors, experienced substantial cuts in pay and conditions. Coupled with mechanisms to control staff numbers and incentivised early-retirement schemes, they have incurred pay increases forgone, a pension levy (averaging at nearly 7 per cent of pay) and pay reductions effective January 1st, 2010, of between 5 to 10 per cent.
Despite these measures more tough choices still need to be made, both in terms of volume of spend and how the required public services are provided. This involves a blend of measures, for example increasing efficiency by using fewer resources to deliver services in the same way; embedding innovation so that services are redesigned to deliver the same outcomes better through increased productivity; and prioritising for the future by taking decisions to reduce or eliminate spending.
A key element of reform is an efficiency programme – an old chestnut, taking the steps to do more with less.
An obvious starting point will be to focus on improving operational efficiency. Reducing duplication, sharing services and redeploying resources to the front line. All of these elements are referenced in the Croke Park Draft Agreement. However, considerable effort by all will inevitably be required to work through the detail of implementing these steps, in a systematic, measured and focused way.
Clarity of expectation will be so important at the outset. Unambiguous targets should be agreed upfront, coupled with clear communications, timelines for delivery and accountability benchmarks.
Unlocking significant and sustainable spending reductions requires strong political leadership at the highest level. It sets the tone and puts “doing more with less” at the top of the agenda, alongside the delivery of services. To do this effectively, strong project governance and commercial insight at all levels is required. Transparent and independent appraisal is also a necessity to satisfy public support and credibility. Any independent oversight in this regard should be broadly based, with impartial participants who are recognised for their success in implementing reform programmes.
Ask any chief executive – growth and innovation are likely to be among the top three drivers of an organisation’s future. A starting point for this needs to be the development of a culture and mindset that fosters continuous improvement as a strategic imperative – that has real meaning for each individual employed within the organisation. The public service is no different.
Innovation is critical in redesigning services to deliver the same outcomes better, through increasing productivity. It is difficult to measure productivity in services generally, but if it is to be improved then a number of steps will be required. Firstly, the need to rebuild trust within the public service is so important, and a task that shouldn’t be underestimated. Continuous, meaningful engagement with public servants, coupled with clear communication explaining the objectives, merits and rationale for the transformation programme are essential. Secondly, there is a need to incentivise efficiency, and make it an integral part of the culture of public service organisations. Price-based mechanisms and accountability measures could help facilitate this. Ultimately, this is a matter of sustained political leadership and collective will. Examples such as Casemix or the National Cancer Strategy are worth examining in this regard. Thirdly, there is a need to find better ways to implement best practice. The Government already supports the provision of independent information on profiling best practices. The real challenge is ensuring these are adopted in practice. Finally, the sharing of resources and physical assets can be a way to increase productivity and reduce costs.
An overall savings target is essential and, in the context of the fiscal deficit, it must be achieved.
However, it is far too easy to stop or cull programmes without thinking through the consequences. Similarly, cuts in one area made without consideration for the related services can risk worse outcomes. A consistent, robust, evidence-based approach is the best way to achieve lasting consensus and success.
Ultimately, the current fiscal crisis presents an opportunity for the public service to reassess its activities and role, and determine where it wants to be in, say, 2020. In assessing its future role, the following key questions could be addressed: what should the public service look like in 2020?; what type of public services do we need, want or value?; what can we sustainably afford?; how should we deliver?
The opportunities for the public service to improve efficiency and productivity are extensive. However, this alone will be far from sufficient. The key focus needs to be on doing things differently, and on doing more with less.
There is also no shortage of reports and commentaries on how the public service can and should reform. The real question is how well will the public service respond?
Implementation is the key. Innovation, collective will and sustained political leadership are central to this.
