Paul Connolly is Director of the MCA Think Tank
2015 is a crucial year for the public sector. The General Election has passed, and economic growth continues, but still the looming threats of Brexit, Grexit and Scoxit remain. If the challenges of the last Parliament were significant, going forward they will be even greater.
Since 2010, the Government’s deficit reduction approach has been dogged, but not especially strategic. Health, education and overseas aid spend were protected. So every other area had to find disproportionate savings. This pattern is set to continue, resulting in an increasingly lopsided public sector.
This is just one of views expressed in the Management Consultancies Association’s (MCA) Special Edition of its Annual Report, which also argues that 2015 is pivotal year for public sector and its advisers.
MCA firms have an important role to play in the reform of the public sector, and services provided to it. They are currently developing robust standards for ethics and client satisfaction. As a result of fiscal retrenchment after 2010, spend on MCA consultants fell from £1.8bn to less than £1bn. Last year, it rose again. But officials and taxpayers can be confident the rise represents value.
The Cabinet Office has reformed how departments purchase consulting. The system isn’t perfect, but consultants and departments have taken significant steps forward to ensure a more outcome based approach. For instance, MCA member firms are keen to promote innovations such as payment by results, and departments are now more thoughtful, making more strategic buying decisions to ensure that they only buy the expertise they really need.
The MCA’s Special Edition also says that the new Government needs to develop a more principled approach to prioritisation, moving beyond the disfigurements of blanket protections combined with tactical cuts.
Take local government. The sector found around 30% savings in the last Parliament. It will need to do even better in this one. With the central Government grant to councils potentially evaporating by 2020, radical overhaul is needed. Substantial fiscal devolution to councils is being contemplated. The MCA has called for a conference on local Government’s future. This would help councils develop an understanding, in the context of scarcity, of what they should do, what they should discontinue and what citizens should do themselves.
MCA members note significant transformation appetite among local government leaders. Consultants are supporting demand management, digitisation, shared services and inter-agency collaboration.
The health sector is also gearing up for reform. Consultants are helping integrate care, redesign A&E and digitise services. Reform is urgently needed. Health spend is protected, but the NHS has grown in real terms every year bar one since its establishment. NHS England’s survival is predicated, in CEO Simon Stephens’ plans, on £8bn of new money and £22bn efficiency savings.
Moreover, given the lack of political or public appetite for additional taxation, future NHS spend increases mean reductions elsewhere. Public sector lop-sidedness will become entrenched and worsen.
To address this, the NHS must undergo radical prioritisation – a principled analysis of what is in scope and what is not. Prioritisation should be accompanied by a shift towards prevention. The NHS is a health service that sometimes looks like a sickness management service. Costs associated with lifestyle conditions like obesity, smoking and alcohol-related illness could be reduced by changing behaviour. Hospitals are expensive, reactive forms of care. Local health economies should be incentivised to move resources towards more community-based provision.
The NHS also needs relentless digitisation. Improvements in Digital management of caseloads and patient records will improve efficiency. Wearable technologies help manage long-term conditions. Analytics can promote innovations in treating genetically inherited conditions.
Improving local authority and NHS performance will require input from the private sector, including service outsourcers. So will schooling. Head teachers now enjoy significant commercial freedoms, but need support in exercising them. Yet outsourcing’s reputation is poor. Outsourcers have helped transform many services. But high-profile scandals have created a curious condition in which government publicly pillories failing providers, but continues to use others, almost surreptitiously, without promoting the case for doing so. More open and balanced debate is needed to ensure outsourcing plays a proper and valuable part in reform. Outsourcers must maintain high ethical standards and should also provide the most transformational offerings. Creating a parallel, slightly cheaper public sector of TUPE-ed staff won’t be enough. Outsourcers must help government truly reinvent services.
While consultants still assist with crises, most programmes they now support are long-term and transformational. MCA firms are currently developing robust standards for ethics and client satisfaction. Consulting firms work best where they are tackling complex problems, marshalling multi-skilled teams, then get paid by results, leaving clients in better shape through knowledge transfer. This use of consulting is becoming more commonplace. It needs to be, as the challenges ahead are enormous, especially the deficit.