Local government: beating the cuts

The coalition government may think that its forthright manner outlining its planned spending cuts is the best way forward for local government, but bold announcements without specifics has led to a climate of greater uncertainty for its staff.

Very little has happened since the government’s audacious slash and burn statements for the public sector, apart from mounting concern over job security. There’s a very real possibility that many finance staff will lose their jobs but when and how remain ambiguous, for now.

October’s comprehensive spending review will, many hope, clarify in greater detail the specifics of the cuts. So far, what we do know is that local government’s budget is to be reduced by £1.2bn, with the highest estimates for job losses put at as many as 700,000 across the public sector. Many of these losses will undoubtedly affect accountants, but most public sector experts suggest finance will be the least hard hit due to the fact that finance teams have never been overstaffed. Of course, that still remains to be seen.

In September the GMB union warned that Sheffield City Council’s plans to make savings of almost £220m over the next four years will lead to more than 1,000 job losses and would be a ‘major blow’ to employment prospects in the area. The council has not yet put a figure on the potential job losses.

What works in accountants’ favour however is that robust financial management underpins much of the coalition government’s strategy, meaning that arguably some accountants with specific knowledge will be in greater demand than ever before.

Unless individuals have been cosseted somewhere dark and impenetrable for the past two years, no one should be surprised by the imminent changes in the public sector. The extent and speed of the cuts, however, are unexpected.

“We are all tasked with making savings so there’s lots of pressure on support services, including finance,” says one senior accountant at a city council in northern England, who preferred to remain anonymous in the current climate. “The finance function is looking to downsize at the moment and bring in more consultancy support as and when it needs it. There are radical changes. It’s too much money to be innovative.”

What’s clear is that there will be fewer services and a much smaller government infrastructure, but the tasks and duties carried out by accountants won’t disappear.

Roles and responsibilities in finance teams will alter with workloads increasing, but some accountants may no longer find themselves working directly for government or even within the public sector.

Models of service are expected to be different and, although it’s still unclear how they will change, the likelihood is that many financial services currently provided by in-house finance teams will be either outsourced to private businesses, like accountancy firms, or completely hived off to the private sector. Some finance services will remain in-house but they are likely to be bundled into shared services hubs. Such changes will reduce headcount.

Nonetheless, accountants with strong public sector experience and a level of commercial acumen will be sought after by those private sector organisations looking to tender for those public services to be farmed out. Accountancy firms and outsourcers are already jostling for potential control over public sector finance services and are scouting around for the best talent to grab accountants in the public sector.

Paul Woolston, head of government public sector assurance at PricewaterhouseCoopers, says: “Those doing the audits [for the Audit Commission] will have a good chance of being picked up by firms that do the work. We have already been receiving CVs from those at the Audit Commission.”

Indeed, the announcement that the Audit Commission, which employs around 2,000 staff (roughly 75% of which are accountants), is to be abolished in two years sent a clear and chilling message to finance staff that ministers are leaving no stone unturned to achieve the spending cuts they want to make.

Intentionally or otherwise, the Commission’s planned disposal could kick start an exodus to the private sector rather than run the risk of being left behind and, potentially, out of a job. A sharp loss of staff would jeopardise the commission’s important work in improving the financial management of public spending.

“That’s one of the risks that they are running. But it’s a calculated one,” says Chris Harris, a director at CIPFA, the public sector accountancy institute. “After the spending review things will be clearer, but I suspect not totally clear.”

Still, Harris, like others, is upbeat about the prospects of public sector accountants, especially if they are willing to embrace change and broaden their skills. “It’s important that all the tasks are still done. For our members it means the options are more open even though the people delivering those tasks may be with a different organisation.”
The good news is that there are also opportunities for accountants who wish to remain within the public sector, primarily for those with concrete experience of transformation and efficiency projects.

“It’s never been more important than to retain a strong financial presence in the public sector,” says Matthew Hayfield, specialist in public sector finance appointments at Reed Finance.

For those that remain in local government – not all finance services will be outsourced or privatised – they are now in the unique position to help transform local government’s approach to financial management and to reposition the finance function to exert more influence over strategy and business decisions.

Not everyone thinks it’s a good time to consider a move to the private sector. “We don’t see it as a pessimistic market,” says Stephen Rea, manager of local government finance division at Badenoch & Clark. “I don’t think the best route is to jump over to the private sector. They should identify opportunities and make themselves attractive. In the private sector there are a lot of people available and looking for jobs still.”
What Rea is encouraging accountants to do is not just talk about their job description, if and when they have to reapply for their current positions in local government (which is a very real possibility), but to describe the outcomes of their work to demonstrate how they can add value to the organisation.

Other finance opportunities will open up under the austerity budget too, says Gillian Fawcett, head of public services at ACCA. “The NHS reorganisation, where it’s passing down funds to the GP consortium, will need more finance skills so there will be opportunities,” says Fawcett.

It sounds straightforward but the transformation will not be an easy one. “We are ratcheting up the level of support to our members, and they will need it over the next two to three years. No one is under any illusions,” adds Harris.
The outlook is bleak but there are glimmers of chance and opportunity for those willing to grasp them and step up a gear. It will involve hard work in a fast changing environment and few people like too much change all in one go. The one thing that should keep finance staff positive is that it all revolves around tight financial management; something that only accountants can do well.

Power to the people

Local government has make £1.2bn worth of cuts to its overall budget, but no individual local authority will face a drop in their revenue grant of more than 2%. Government is to hand over management to councils so, as the government says, they can “concentrate on local priorities and protect the frontline”.

Moreover, by January 2011, all councils will publish online details of their spending over £500. This will mean local taxpayers will be able to see how councils are spending money and encourage “greater efficiency and shining a spotlight on waste”.

What finance skills are needed now?

It’s unlikely the public sector will ever look the same again, so public sector accountants need to think about what skills they have and what they lack if they want to stay in the public sector or move to the private sector.

Employers will be looking for specific skills for those that want to remain in government, particularly commercial experience, but also transformation experience, procurement and outsourcing knowledge.

Mark Robinson, senior manager at Hays Senior Finance, says: “Local government employers will need more commercially focused accountants who are able to assess outsourcing or partnership opportunities, develop business plans and improve financial performance management of contracts. Those currently working within the sector will need to show initiative in order to add value to their organisations at a time when they will be under resourced.”

Robinson adds that knowledge of shared services or shared management teams, will also be crucial to the change process.