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September 2018
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The Future for Public Sector Funding -Surviving the Storm

The UK public sector is facing its most serious funding challenge for many years.
Given the state of the public finances, major spending cuts are inevitable or costs will spiral out of control. While this is starting to be recognised at all levels, there is no clear roadmap of how to get there.

To date, the focus for improvement has been placed on large scale efficiency programmes including back office and shared service functions. Deploying information technology through efficiency-based transformation programmes has driven numerous successes and secured significant cash benefits. However, the new reality of reduced resources is of a different magnitude to anything experienced in recent times.

The public sector’s traditional response to funding challenges has been to top-slice budgets. This has shared the pain but has often risked throwing both strategic ambition and delivery of citizen outcomes out of the window. Reports such as the Institute for Government’s ‘State of the Service’ study demonstrate that the biggest issues have been a lack of focus on what those outcomes should actually be and a failure to clearly understand and prioritise the investments that deliver those outcomes most effectively. The result has been that although we have massively increased public investment, this has not produced the expected degree of change.

Significant change is clearly the only way forward but many organisations still struggle to either focus on or understand the potential impacts of their options due to a failure to integrate their strategic, financial and operational processes. The human aspects are as ever the most challenging consideration and to be successful we must integrate work across a wide variety of professional disciplines starting at the corporate centre.

As one example of the potential results, Birmingham City Council, the largest all purpose authority in Europe, has been working with HCL AXON through its joint venture Service Birmingham to support with all aspects of major transformational change, such as business case definition, benefits management, process design and organisational design, implementation and change management. The first part of programme is on target to deliver £518m cashable savings over 10 years, which will enable investment in improvement to front line services for Birmingham residents.

This example and others show that by creating an integrated solution, public bodies can connect political ambitions with the actual delivery of services and programmes. To make this happen, public sector bodies need to consider:

1. Strategy formulation – agreeing what’s critical and what’s not
2. Resource allocation – driving decisions by outcome aims but based on selected impact- assessed priorities
3. Planning process – delivering strategy-focused, options-based business planning, integrating financial/operational elements often for the first time
4. Performance management – evidence based interventions, supported by integrated financial and non-financial performance information, securing real value

It’s clear that as pressure increases on budgets, selecting investments by credibly linking them to outcomes will become ever more vital. Vague statements of aspiration with no evidence of effectiveness have to be things of the past. Critically in the current climate, while top slicing may begin to balance the books, indiscriminate reductions are very likely to impact delivery and ultimately fail to serve the best interests of the UK public.

By agreeing an integrated, strategic approach up front that makes sound investment decisions and maps these to measurable delivery goals, public sector leaders will be able to cut costs while delivering better, more impactful services. They will also be ready to use them in ever more effective ways to improve citizens’ lives when the economy stabilises.

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