Posted on Thursday 14 October 2010 by Ulster Business

By John Simpson

As the outcome of the Comprehensive Spending Review (CSR) is turned into decisions on spending allocations by the Chancellor and then, subsequently, by the Northern Ireland Executive, there will be concern about the longer-term implications.

If the CSR was treated as if this was an industrial problem of regaining lost competitiveness the debate would be about reorganising ‘production’ to remain competitive and improving efficiency. While the comparison is not perfect, this is often a secondary feature in a debate about public sector services: every organisation can improve efficiency almost all of the time. For industrial organisations, radical restructuring would be normal. The public sector is not an exception. Public sector rationale A critical distinction is necessary. If budgets are reduced there is an understandable concern that jobs will disappear. The public sector generates jobs, not because extra jobs alone merit a larger public sector but because the jobs are a means to providing services. There is a danger that the emphasis on jobs may deflect from a critical analysis of how the level and quality of public services might be affected. Uncomfortable as it may be to public sector employees directly affected, and while their concerns are important, the first step is to analyse how the best level and quality of service can be maintained. Ensuring that the public sector has enough internal discipline to remove inefficient working arrangements is difficult. An almost predictable reaction to debate about the public sector, even from those who are within the structures, is that there is over-staffing or inefficient or unnecessary labour intensive excesses. Pleas of understaffing are commonplace but rarely justified, while admissions of excess capacity are rare. Personal experience suggests that in the public sector there is a serious people (mis-)management problem. Why are critical comments so rarely directed at named targets? Is there a conspiracy of silence? If the analysis was applied to a commercial problem, the issue would be that a failure to improve competitiveness would mean that the business might close. Is the difference created by an absence of the fear of closure? The public service will continue even if the cost discipline is too weak. Public sector productivity If the performance measures of the private sector applied to the different parts of the public sector, the comparators would be critical. Job turnover seems low, excused absences are higher, and performance reviews and remuneration outcomes seem weaker. Administrative techniques are driven by security of outcomes while management disciplinary and performance techniques are cautiously and infrequently applied. The most recent sign of a tighter regime in the public sector has come with the creation of PEDU, the Performance, Efficiency and Delivery Unit. The investigations by PEDU need to be underpinned by expectations that major productivity gains are possible if working methods and work priorities are up for review. Applying the term productivity gains to management expectations in the public sector is not the language of every-day organisational planning. Yet, the concept does have relevance. Of course, some tasks are constrained by their very nature. Most administrative jobs do contain discretionary work methods and discretionary priorities. To deny these options is a sign of working arrangements where habits and moulds need to be questioned. A recent publication about the Northern Ireland Civil Service takes a novel approach to a review of civil service numbers. The authors have compared the changing number of civil servants with the level of departmental spending (otherwise known as DEL: departmental expenditure limits). In crude terms, this opens the door to an understanding of the amount of spending on services compared to the number of people responsible for that spending: an approximation to an estimate of gross output per employee. Opening the way to more focused analyses, this is an interesting start. In the four years from April 2006 to April 2010, civil service numbers (as FTEs) fell by 9%, or 2,400, to 23,200. In the same period, DEL spending rose by 33%. Danger of over-simplification That opens the door to dangerous over-simplification. It would be misleading, or wrong, to see this as evidence of a 42% improvement. First, the DEL spending totals should be corrected for inflation or price and wage increases. In corrected terms the spending increase would be nearer to 16%. Of course that makes no judgement about whether Government made good decisions on increased spending. That is a separate issue. Second, as the authors of the civil service report point out, of the reduction in civil service employment, 2,600 disappeared from the totals because the Water Service was reclassified as outside the civil service. In other words, civil service numbers actually fell by 650, on a like-for-like basis; a fall of just over 2%. Nevertheless, in real value terms, the output (or approved spending) rose by about 18% per employee (or about 4% p.a). This is a very crude measure but it does point the direction for more scientific exploration. A third caveat that should be applied is that much of the DEL spending is in the nature of wholesale funding to other public services. The gross transfers of funds from central Government to NDPBs (non-departmental public bodies) would mean that any measure of impact per employee would need to be more widely based. Positive changes One of the useful consequences of a new financial discipline in the public sector must be to seek cost comparators for different sectors of service where English or Scottish comparators are developed. There have been some significant structural civil service changes that embody the introduction of new technology and improved effectiveness in the use of manpower. Almost without emphasis, the local administration has introduced a raft of centralised shared services. Not every citizen is yet aware of the changes but this is becoming more understood. IT is under-pinning services such as the Centre for Shared Learning (for in-house training), Network NI (for direct communications), Account NI (for accounts services) HR Connect (for personnel records and payments), the Government Advertising Unit, Records NI, and still evolving Workplace NI to organise office planning. Nevertheless, the wider public sector still employs over 220,000 people. A start has been made on a major re-organisation. This comes at a time when not just the number of employees and their efficiency is under examination. Even the existence of some public services is now in question. In addition, there is now a debate about how restraint on public sector pay and pensions should be factored into the new CSR regime. What seems clear is that public sector employment is no longer a safe haven.

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