“We are now entering the third generation of public services. The next stage of public service reform will be characterised by a radical shift of powers to the users of public services...”

“...Resources will be switched from the back office to the front line. Wherever it will improve efficiency and value for money, departments will be required to share services; adopt common purchasing policies; use office space more effectively; reduce quangos and sell off assets we do not need.”

Gordon Brown – Speech on Smarter Government, 7 December 2009

 

The Chancellor, Alistair Darling MP, delivered the Pre-Budget Report 2009 on 9 December. As the last such report before the General Election 2010 it was a significantly important document both politically and economically. With the UK economy struggling to exit recession (unlike peer economies) and with record levels of National Debt, it set out an ambitious plan to deliver economic stability and growth. At the heart of the proposals was, as widely expected, a raft of proposals to transform public services and deliver efficiency savings. These included:

  • Total spending in 2010-11 to rise by £31bn and then to fall by 0.8% between 2011-2 and 2014-5. 
  • Between 2011-12 and 2013-14, NHS frontline spending will rise in line with inflation.
  • £11bn of savings a year as announced in the Smarter Government White Paper to be delivered across the public sector by 2012-13 including savings identified as part of the OEP through improving back office functions, IT, collaborative procurement and property running costs.  £3bn of the £11bn are additional to OEP - these will be achieved by 2012-13 including through more efficient waste collection and disposal, streamlining arm's length bodies and through improving energy efficiency. 
  • New scrutiny of pay levels above £150,000 and bonuses above £50,000.
  • New requirements to publish salaries to increase transparency and accountability.
  • The creation of Infrastructure UK (IUK), which will help facilitate private sector investment in infrastructure, and help ensure that publicly funded infrastructure is effectively prioritised and delivered.  
  • Cuts to "major IT projects", such as the £12.7bn NHS centralised database of people's key medical details.  
  • Contributions to public sector pensions to be cut by £1bn a year.
  • Partial or full sale of Government assets. 
  • More land will be brought forward for development through improving local authorities’ five-year land supplies by carrying out comprehensive checks, publishing results and withholding incentive funding if they are not in place, and setting out at Budget 2010 what action might be required to secure delivery. 
  • Enhancement of the role of local authorities in planning and enabling housing growth locally, and in building new social housing, including examining the scope for local authorities to borrow against the revenues from new council homes to support the delivery of housing where this offers value for money, and considering interactions with wider reforms to the council housing finance system.

A new generation of public services

These financial proposals follow on from a range of pensions policy statements that have clearly signalled that a radical reform of public service delivery was required to deliver both the critically important financial efficiency savings as well as the structural reform that would transform service delivery for the 21st Century. From the Gershon Efficiency Review of 2004 to the launch of the Operational Efficiency Review in April 2009, Total Place Pilots to the very recent “Smarter Government - Putting The Frontline First”, it is clear that we are, regardless of Administration, entering a new generation of public services.

But while today’s Pre-Budget Report is focused on the financial elements and efficiency savings to be made from the reform of the public service, the legal challenges and opportunities that lie at the heart of these changes remain one of the largest issues facing all organisations in Local Government, the NHS and wider Public Sector.

Local Authorities and Health Trusts will need new skills to ride and survive the economic downturn. The next few years will see massive and sustained pressure on public sector budgets and staffing, and nowhere will this be more so than in support departments. Public sector bodies will need the skills and understanding to demonstrate that they are a proactive part of the solution, providing a positive contribution to improved and cost-effective delivery of essential services.

The details set out in today’s Pre-Budget Report, along with the supporting Operational Efficiency Programme and Smarter Government reports, set the agenda by identifying a number of areas where organisations must improve.

Bevan Brittan

As the UK’s leading legal adviser working across both Local Government and Health, Bevan Brittan LLP is uniquely placed to understand the legal challenges facing both sectors and has analysed these reports in detail and identified the skills and activities organisations will need to demonstrate if they are to survive, or even prosper, in the downturn.

Over the next seven weeks we will be providing an in-depth analysis of the issues and opportunities from the seven key legal areas arising from the proposed transformation of the public sector.

  • Service Restructuring - 14 December 2009
  • HR / Workforce Transformation - 21 December 2009
  • Property & Asset Rationalisation - 11 January 2010
  • Income Trading / Revenue Generation - 18 January 2010
  • Shared Services - 25 January 2010
  • Contract review / efficiency and refinancing - 1 February 2010
  • Outsourcing and Procurement - 8 February 2010

We will be providing you with analysis of each of the areas identified along with contact details of the members of our team who will be able to assist you or answer any questions you may have about how these changes will affect your own organisation.