Conducting the cuts

ONE OF THE MOST EYE WATERING statistics in the chancellor’s comprehensive spending review announcement was the Office of Budget Responsibility’s forecast of 490,000 public sector job losses. Others have reported on consequential job losses in the private sector – the collateral damage of public sector cuts – and have suggested that, over the next four years, rebalancing the public finances may cost up to one million jobs in total.

Unprecedented is an overused adjective. But, as these figures demonstrate, it is absolutely the right descriptor for the challenges facing public bodies and public sector accountants over the next few years.

So how are the troops responding? Are they chomping at the bit to defeat the deficit or are they cowering in the corner?Last week, before the spending review, I spent a day with more than twenty of local government’s leading chief finance officers, representing all of the different types of councils in England, Wales and Scotland. Local government, like so many other public services, was holding its breath ahead of the spending review with no illusions about the scale of the financial challenges coming its way. In that context it is a good barometer of the mood across the wider public sector.

The CFOs were thoughtful, focused, ready for the challenges, and absolutely determined to make a difference. Some of the headline conclusions of their discussions were:

• Localism. Councils must respond as positively as possible to the tough financial settlements and demonstrate that decision making rooted in local needs and priorities really is the best model for securing high performing public services.
• Joined-up leadership. Strong leadership is critical. That means officers and elected members working closely together with a shared passion and commitment to deliver the best possible outcomes for local communities.
• Efficiency. Councils have a very positive track record of delivering year-on-year efficiency savings. It is essential that this work is continued and accelerated in order to minimise cuts to public-facing services.
• Vision. Medium and long-term planning are essential. Councils must develop a clear vision of what the organisation and its services will look like downstream when funding is expected to restabilise.
• Engaging and Listening. Councils must redouble their efforts to involve local people and communities in decision making about needs and priorities, design and planning of services, allocation of scarce resources and cuts.
• Joined-up Budgets. Pooling and sharing resources across public bodies has significant potential to lead to more efficient and effective services to the public.
• Managing Risk. Councils must be realistic about the scale and volume of changes which they attempt to engineer in response to reduced funding.
• Financial Skills. Councils must maintain effective finance functions and also develop greater financial awareness and competence in the general managers responsible for managing front-line service budgets.
• Maximising Value. Councils need to maintain a focus on the significant resources at their disposal rather than on the funding reductions at the margin. The challenge is to deliver as much value as possible from the resources available.

Overridingly CFOs are realists. No one is pretending that rebalancing the public finances can be achieved without very real pain. But how skilfully the challenges are tackled and managed is a hugely important variable. Accountants will be closer than ever to the centre of the action and will, I believe, make a defining contribution for the good.

Steve Freer is chief executive of CIPFA