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October 2020
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Budget 2010: Major public sector cutbacks are underway, however savings can still be delivered without hitting frontline services

The emergency budget has given us the first real indication of how and where the coalition’s major spending cuts are going to occur. Chancellor George Osborne has spelt out the agenda in recent weeks, explaining that, “decisive action to deal with Britain’s record budget deficit, estimated to be running at £149 billion annually with a structural deficit of £113.5 billion – is the top priority or else the country is on the “road to ruin”.

The new measures announced make it clear that the public sector has been singled out as a key area for cutting costs and making savings – a two year pay freeze for anyone earning more than £21,000 and a review of public sector pensions have been proposed, while in contrast a series of tax breaks and national insurance incentives have been made to try and stimulate private sector growth.

While departments won’t see their details of their individual budgets until October 20th, Mr. Osborne has stated that budgets for non-protected departments will fall by 25 percent over four years, a move that is likely to have escalated concern over whether wide-ranging cuts can be inflicted on the public sector without making redundancies, damaging services or the economy as a whole. As the government has already made high profile commitments to protect certain public services, including in health, education and policing, this 25 percent reduction has so far been defined purely in terms of eliminating waste. ‘Waste’ is clearly an important issue, and one that was highlighted by all major political parties during their election campaigns, but when it could refer to people’s jobs or public services, it’s easy to understand why there’s such concern over the cuts.

However, the truth is that there’s vast potential to reduce public sector costs simply by using existing government property more effectively – action that could even improve service provision. Delivering property efficiencies is a leading example of cutting waste, and although £170 million in property savings is already proposed for the current financial year, this figure doesn’t really do justice to the potential savings on offer. Done correctly, office estate transformation can deliver efficiency gains, improve the quality of the service that public sector employees are able to deliver, and make a meaningful contribution to Government’s sustainability targets.

For example, a significant contribution to the expense of government is the cost of running the 7.7 million square metres of offices that accommodates the UK’s civil service. New research conducted by specialist economic consultancy SQW suggests that substantially greater savings are achievable through deeper and accelerated implementation of best practice approaches to civil estate management. In particular, costs could be reduced by £1.4 billion per year within five years if the central government office estate was utilised more efficiently. Allowing for time to implement the necessary changes, this would amount to savings of more than £4.3 billion over the first five years. The savings relate only to the central government office estate that accounts for 10 percent of the overall £25 billion annual running cost of the entire public sector property portfolio.

More efficient property solutions would improve frontline service provision as well as achieving savings. This is possible by delivering a high quality working environment for staff and customers, resulting in higher levels of productivity, flexibility and customer satisfaction. They could also support cross-departmental strategies, which will help facilitate maximum savings across government.

Property efficiency solutions deliver an effective transfer of risk from the public to the private sector (where it can best be managed), and can offer savings to the taxpayer through contractual guarantees. One such example is the DWP estate, which has been managed by Telereal Trillium since 1998. Under the property efficiency approach and drawing on the DWP’s robust estate strategy, the size of the occupied estate has been reduced to 1.8 million square metres, a reduction of 0.8 million square metres (around 30 percent) that has been achieved despite a 2003 departmental merger with the Employment Service. The National Audit Office estimated that the DWP’s partnership with Telereal Trillium will eventually save around £780 million for the taxpayer.

And it’s not just financial savings that can be delivered through this approach. Substantial environmental and sustainability benefits can also be created through deepened and accelerated implementation of property efficiency solutions – for example, through reduced utilities consumption – thus allowing the coalition government to tick another box.

The budget cuts have provoked outcry in many quarters – indeed, the government always anticipated this would be the case. However, it’s clear that the pressure is now firmly on the coalition to demonstrate it can come good on its promise to protect frontline services, and the SQW research suggests there’s no better starting place than its own back yard.

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