Pots claim kettle is "just too black"

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I’ve referred previously to the confidence trick which the words ‘efficiency savings’ actually represent.  Whilst all organisations always have some potential to improve their efficiency, unless the savings are specifically identified, an imposed target for efficiency savings is merely a euphemism for a budget cut.  In many cases it will result in cuts to services in one way or another.  Even if those ‘savings’ are re-invested elsewhere in the same organisation, arbitrarily imposed ‘efficiency savings’ are still cuts in the parts of the organisation where they apply.

There was a spat between the parties this week on the subject.  Labour, who are currently implementing an arbitrary requirement for a 3% level of ‘savings’ in the NHS, the Lib Dems, who want a further 3% ‘savings’, and Plaid, who want a further 4% of ‘savings’, ganged up on the Tories who want a further 14% of ‘savings’ with all three claiming that the Tories’ proposal amounts to a vicious cut to budgets.  All of the figures seem to have been plucked from the air, and all of them seem to be saying that they wouldn’t cut the overall total budget; they’d simply redirect the money elsewhere in the NHS. 

But if they’re all going to pull arbitrary figures out of the air, there is no way of knowing whether any of them are right.  And there’s an argument which says that if you’re going to do that, you may as well be ambitious about it.  Especially if you have zero expectation of having to deliver.

Digging an efficient hole

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I’ve referred to the question of “efficiency savings” in the past.  It’s invariably a political euphemism for “budget cuts”, because it’s a top-down exercise telling people what they must save rather than a bottom-up exercise based on real identified savings.  I’ve also previously referred to a report by the Auditor General, which highlighted concerns that 'efficiency savings' have all too often resulted in cuts to services rather than any real improvement in efficiency, and to a report which identified that one of the outsourcing companies more honestly explained how efficiency savings wouldn’t affect profits, because they’d just cut the services.

It’s not that I don’t believe that large organisations can always find ways of running themselves more efficiently – I’m convinced that they can.  (Whether that’s always a good thing or not is another question – getting the cheapest supplies from elsewhere may look like ‘efficiency’ but may not be the best thing for the local economy.)  It’s more that I don’t believe that simply imposing cuts to budgets and telling managers to do more with less will achieve that aim without affecting services in any way.  To pretend that it will is to be blind to the way things will actually happen as a consequence of demanding such savings.

It was disappointing this week to see Plaid joining the “efficiency savings” bandwagon.  For sure, assuming efficiency savings of £300 million makes the figures add up; but it doesn’t make them actually happen.  One person’s £300 million of unidentified savings is another person’s £300 million of budget cuts.  I can’t really blame Plaid’s opponents for jumping on the figure in the way that they have (although it’s totally disingenuous from parties who’ve done exactly the same on a regular basis); and I find Plaid’s defence of the figure no more convincing than the arguments put forward by other parties in the past.  In a manifesto which contains many good things (and I’ll probably come back to manifestos when I’ve had time to read and digest them), it’s an unfortunate hole to have dug.

Losing the plot

Tweet One of the things that struck me shortly after being first elected to the Vale of Glamorgan council in 1979 was the different approach to items of expenditure.  The larger items, sometimes in the millions, were generally nodded through, whereas the smaller items were the subject of much more debate.  I remember a lengthy debate at one personnel committee about whether an officer should or should not be sent on a course costing a few hundred pounds.  My suggestion that minor decisions of that nature should really be operational ones made by officers wasn’t exactly well-received.

There’s a general point here.  Most of us find it easier to discuss and deal with sums of money which are within our experience.  Hundreds and thousands of pounds are ‘real’ amounts of money; millions are just numbers.  I suspect this is the underlying reason why so much of what passes for politics is concentrating on the smaller sums rather than the larger ones – just think about a number of recent press releases from the Taxpayers’ Alliance or the opposition parties in the Assembly talking about expenses and salaries.  It’s not that salaries and expenses aren’t important; it’s just that they are close to being insignificant in the context of overall public expenditure.

In the same way, a lot of the debate around the proposed reductions in the numbers of local authorities in Wales has been around the number of Chief Executives or Directors of Education, and the cost of employing 22 rather than, say, 8.  But that isn’t where any real savings will come from.

(And, as an aside, it’s by no means certain that these particular savings will actually be realised anyway.  If, for instance, 8 Directors of Education each appoint an assistant to look after each of the former council areas, the result could well be that there is a reduction in the number of Directors from 22 to 8, but the number of people doing their work increases from 22 to 30.  And no doubt the 8 will expect higher salaries than the 22 in respect of their increased responsibilities.  There are an awful lot of devils hiding in the detail here.)

If there are significant savings to be achieved, they won’t come from simple reductions in the numbers of chief officers.  They will come from combining teams and reducing jobs at much lower levels in the organisation; they will come from harmonising systems and procedures; and they will come at a cost of a significant initial investment.

Last week, the Welsh Government produced a headline figure of £650million savings.  Reluctant as I am to agree with the Tories, I can’t help but feel that this is, as they say, a figure plucked out of the air.  I don’t know whether it’s an accurate figure or not, but what we can say with a high degree of certainty is that any savings that are achieved will largely come at the expense of jobs.  Jobs will be cut directly by dictat of the Labour government – and they seem quite proud of it.

But, hold on a minute – is saving money really the driver for local government reorganisation?  The savings seem to have become central to the debate, but wasn’t the original argument more about taking a strategic view and addressing the perceived failures in the services being delivered?  When did that argument turn into a financial one?  I was never convinced that reorganisation was the best way to improve performance in any event; but reorganisation aimed at saving money is almost certainly not.

Wrong priorities

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The announcements by the UK Government last week about rail finances serve only to confirm a lack of real commitment to public transport.  Faced with a demand which exceeds the supply at peak hours, their response seems to be the classic piece of economics – increase the price until the demand drops to match the supply.

There is scope, of course, to stagger the peak hours more effectively by encouraging companies to work more flexibly, and that would make better overall use of resources.  I doubt, however, whether upping the price of peak hour public transport is going to be the most effective or efficient mechanism to achieve that.

Pricing people off the railways will only increase roads congestion, and lead to yet more calls for more road-building.  What is actually needed is a plan to increase rail capacity, in order to reward and encourage the growing trend to the use of public transport, but they seem unwilling even to consider that.

Comparisons with the cost levels of railways in other countries may be interesting; but in themselves, I’m not convinced that they tell us much, since the circumstances are so different.  In any large organisation, there will always be some degree of inefficiency and therefore scope for doing things better, but it seems like the wrong thing to be putting centre stage at a time when we really need a cohesive plan for investment and improvement.

So, certainly there are smarter ways of handling ticketing in an increasingly computerised system, and it would seem sensible to pursue those; but we shouldn’t be waiting to drive out cost before we look at how we expand and improve the service.

Efficiency savings explained

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I’ve noted previously that the phrase ‘efficiency savings’ is generally a euphemism for budget cuts.  The two are not at all the same thing.  An efficiency saving is doing the same thing with less resource; providing a lesser service may well generate a saving, but it has little to do with efficiency.

The difference is often not recognised, but it was made crystal-clear last week by one of the UK’s biggest outsourcing companies.  Capita have been busily re-assuring their shareholders and investors that government pressure on them to reduce costs won’t affect profits at all; they’ll simply provide a reduced service.

It highlights the different priorities depending on viewpoint - protecting services versus protecting profits.  But it’s also an honest and straightforward appraisal of what will actually happen.  In practice, exactly the same thing will be happening with services provided ‘in-house’, but I doubt we’ll see the process described so clearly.  It’s a pity, because an honest assessment of what budget cuts actually mean would enable a more enlightened discussion about whether they’re acceptable or not.

Do we need to become less efficient?

Tweet Yesterday's story about the continuing increase in the number of NEETs is something which should worry all of us. To have so many people, especially young people, who see no hope of gainful employment in or near their communities is a depressing situation.

The traditional answer of the political right has been to encourage people to 'get on their bikes'; to become more mobile and move to where the work is. It's a solution which makes sense only to those who see people as a labour pool for the economy rather than as members of a community. It's the right answer for some individuals; but the wrong answer for a society or a community.

A more enlightened approach has been to lay on ever more training and education programmes, so that people are ready for work when it's available. But once people have been on one or more of these courses, and are still out of work, it's easy to see how the attraction starts to fade.

We've had a policy of trying to attract industries to the locations which most need the employment opportunities, albeit that that policy has been followed on an intermittent basis, with differing levels of enthusiasm depending on the state of the economy and the party of government. It's brought some jobs, and some of the companies have stayed and made a success of their investment. Others have proved to be more transient. The apparent successes of the boom years can quickly look hollow when things turn bad.

One of the most obvious responses to the economic downturn in the private sector - shortly to be imposed on the public sector as well through budget cuts – is to try and do more with less. Generally that means trying to achieve the same or more output with lower input; usually fewer staff working longer hours (or for lower wages, often by moving factories lock, stock, and barrel to lower cost countries).

That isn't just a product of the recession, though; it's a long term driver of a competitive economy to try and reduce input costs. The economy is built on an assumption that 'economic growth' will soak up the excess labour. That doesn't always happen in the good times; it certainly doesn't happen during a recession.

But if continued compound economic growth is ultimately unsustainable, as I believe it to be, then depending on growth to solve the problem of unemployment is a strategy which is doomed to failure. The current recession should have served as a warning to us, but the powers that be seem determined to ignore that warning and rush back to 'business as usual' as rapidly as possible. The outcome will inevitably be that we have a persistent and growing number of people who remain economically inactive for the foreseeable future. 'Efficiency' may make narrow economic sense, but it doesn't always make broader social sense.

There is an alternative though. If instead of employing fewer people to work longer hours we were to employ more people working shorter hours, we would be more effectively 'sharing out' both the available work and the rewards for doing it. (And, in the process, cutting the levels of tax on those who do work which currently go to support those who do not.) We'd also have a more equal society, and probably a happier one to boot.

No doubt many, especially those who do not yet understand that the dependence on growth is unsustainable, will see this as unrealistic. Or maybe just plain undesirable. My response would be that more equality is inherently a good thing. And the alternatives facing us if we wait until growth actually hits its limits are likely to be far, far worse.

School meals

Tweet The news this week about the extent to which school meals are still failing our children should surprise no one. I expect the situation to get worse in coming years as councils attempt to tighten their belts.

Carmarthenshire haas already decided to increase the charge for providing school meals by 5p above inflation for each of the next two years, whilst cutting the cost of providing those meals by 1p per meal. (Need I say that these are all misleadingly described as 'efficiency savings'?) I'm sure that they won't be the only authority looking to do something similar.

The response of some, according to the Western Mail story, has been to call for more regulation to standardise school food across Wales. I'm sure that could be done - if we really want yet more centralisation of decision-taking.

But, as I've pointed out several times recently, let's not pretend that continued standardisation and increasing central control has anything to do with local democracy.

Not efficiency at all

Tweet The coverage of, and reaction to, the report of the Auditor General has inevitably concentrated on its headline message about the need to reduce staff in the public sector. The overall conclusion is that the sector somehow needs to deliver more for less.

How practicable is that, in reality? I was interested in the conclusions of the report on the mass of so-called 'efficiency savings' which the government and local councils have claimed to be making over recent years. The key sentence for me was:

"The report has also highlighted concerns that 'efficiency savings' have all too often resulted in cuts to services rather than any real improvement in efficiency."

I can't say that I'm in the least bit surprised. Indeed, it chimes very much with a point I made some time ago. The phrase 'efficiency savings' is one that politicians - of all parties - seem to like. Just like cutting waste or reducing 'red tape' and 'bureaucracy' (or motherhood and apple pie) it's something that no-one can really argue against.

However, the way it is implemented is usually for a budget to be cut and the relevant budget holder told to manage on less. How that is achieved is up to the budget holder, and more often than not, the savings owe more to reducing (or 'redefining' - another good jargon word) the services being provided, rather then delivering them more efficiently.

The Auditor General has bluntly summarised what a lot of us knew already - that an awful lot of public sector 'efficiency savings' are nothing of the sort; they are cuts to the services being provided, just re-labelled to sound like something rather less unpleasant.

Does it matter?

At one level - no, not really. We all know that there is a need to re-evaluate priorities, and some of the savings being made (cutting the grass less often, for instance) are hardly major threats to the quality of life for most of the population. But at another level, I think it does matter. Politicians who pretend that budgets can be cut purely or largely as a result of being 'more efficient' or 'cutting out waste' are being less than honest with the electorate.

Public bodies which simply list all their budget reductions as 'efficiency savings' make it difficult for the public to identify where there are real cuts being made. And it's hard to have a proper discussion about priorities if politicians continue to give the impression that budget cuts can be somehow painless.

It would be nice to think that the report of the Auditor General, in highlighting the transparency of the politicians' cloaks, might usher in a more honest debate about the effect of budget cuts. I won't hold my breath, though.

Red Tape

Tweet Red tape is a little bit like sin – everyone's against it in the abstract, but not necessarily so certain when it comes to the specifics. For politicians, it's far too easy to make a glib commitment to abolishing red tape (and, yes, I know that some of my lot have done it as well), but I'm not sure it's always a terribly meaningful statement.

As a fresh young systems analyst, I was designing a new computer system and having enormous difficulty duplicating one of the reports being produced by a clerk in the engineering department. I sat down with her and looked on in some awe at the processes involved in producing the report, taking a full two days every month.

So I asked what happened to the report then, and was shown the drawer in the filing cabinet where it was stored every month. But who looks at it, I wanted to know. The answer was that nobody looked at it, but about three years previously, the director had asked for the information and it wasn't available, so they had continued to prepare it every month, just in case he ever asked for it again.

Unnecessary and irrelevant clerical activity – that's one of the things which most people think of when they talk about red tape. And I'm sure that lots of organisations have examples of something similar to that I described above. The other favourite is 'unnecessary rules and regulations'. But how much of what is so readily dismissed as 'red tape' really falls into those sorts of categories?

I'd hazard a guess that the answer is 'not as much as people think'. Far more often, one person's red tape is another person's protection.

I've heard some employers, particularly, complaining about the burden of red tape on their businesses. Things like European Directives about Environmental Protection, or Working Hours. Things like Maternity Pay, and discrimination legislation. Of course it would be so much easier for companies to compete with the rest of the world if they didn't have to worry about treating their staff fairly or safeguarding the environment around them.

But that isn't what I'd call red tape.

Jack Straw got into trouble recently for suggesting that some police officers would prefer to sit at desks doing paperwork than getting out and solving crimes. He made his point in an unfortunate and cack-handed fashion. The Tories love to talk about freeing police from red tape, and seized on Straw's remarks. Of course, life would be easier for the police if they didn't have to record details of the people they stop and search for instance. But it would be a lot harder to deal with suggestions of bias or prejudice in the way that the individuals being stopped are selected, or about heavy-handed policing.

That isn't what I'd call red tape either.

So, like everyone else, I'm against sin. But before I try and abolish it, I'd like to make sure that it really is sinful.

Efficiency savings and job cuts

Tweet It's hard to disagree with the notion that organisations, including public ones, should do things in the most efficient way possible. So the phrase 'efficiency savings' has a nice friendly ring to it; much nicer than the idea of 'cuts'. In practice, however, they frequently amount to the same thing - the way the government achieves its 'efficiency savings' is simply to cut budgets and tell the budget holders to find a way of managing on less money. Whether they do so by actually achieving the same outcomes for less money, or by changing the outcomes, is entirely down to what they can actually (as opposed to theoretically) achieve.

One of the major elements of the government's proposed efficiency savings in this week's budget is something called 'extended collaborative procurement'. A lovely piece of jargon; but what I think it means is that if public bodies work together to buy their goods and services, they can purchase those goods and services in fewer, bigger, contracts, and they can manage both the procurement process and the implementation of the contract with fewer staff, as well as getting lower prices by buying in bulk.

Simple, and effective; and clearly a genuine efficiency saving. But it isn't the whole story, because there are other consequences of this.

The most obvious is that bigger contracts are more likely to go to bigger companies – and bigger companies are likely to be less local – so money flows out of local economies into the 'headquarters' of the organisations concerned. The jobs in those headquarters are often better paid than the jobs of the operatives delivering the goods or providing the services. And that differential in salaries is one of the reasons why those places which serve as headquarters for large companies tend to have higher GVA per head than those areas which only have the staff delivering the goods or providing the services.

I'm aware of two instances recently where companies headquartered in Carmarthen have lost out in bidding for contracts to the public sector, to be replaced by larger companies headquartered outside the county. I don't doubt that proper procurement processes were followed, and that the public authorities concerned have duly made their 'efficiency savings' by awarding the contracts in the way that they have. But is the decision 'right' in overall terms for the local economy?

There are times when, for a slightly higher cost, and by awarding a larger number of smaller contracts, public bodies can keep more of the money and jobs locally, and the overall effect on local GVA per head will be more positive – and I'm utterly convinced that too many public authorities are looking only at the short term cash savings which can be achieved, rather than at the greater picture.

It's not helped by government – including in this case, the Assembly Government. Whilst the left hand of the Assembly Government (Economic Department) has talked a great deal recently, as a result of the economic summits, of encouraging public authorities to 'buy local' (quite rightly), the right hand (Local Government Department) seems still to be encouraging local authorities to join bigger and bigger purchasing consortia to achieve more and more 'efficiency savings'. They can't both be right – and it isn't what I would call 'joined-up' government.