Often the last to be hit in a recession (because they usually look after their own jobs before anyone else, the public sector in Scotland will get a taste of financial hardship too in the coming months & years ..
The Scotsman reports :
Public-sector bodies will have to learn to work together
Published Date: 26 March 2009
By Gary Devlin
THOSE of us who work in and with the public sector have been looking at recent events in the financial services industry and the wider economy wondering how it all went wrong and whether the government response will be enough to put it right.
But watching from the sidelines, there is a danger we become distracted from the potentially disastrous impact the recession, and the government's response, will have on public-sector finances.
The fact is, the huge increases in government borrowing required to bail out our banks, combined with the inevitable recessionary induced reduction in the overall tax take, will mean less money to go round – potentially a lot less.
Earlier this month, this led Steve Bundred, the Audit Commission's chief executive, to speak out and alert local authorities in England and Wales to a potential "financial Armageddon".
This type of alarmist language is rare from such a high-profile figure, but the latest financial projections on public finances show that it is justified.
John Swinney, too, has acknowledged the squeeze on existing finances, forecasting near-zero growth in public sector funding in real terms over the period 2010-3.
Even this forecast is optimistic, however, as it doesn't take full account of the impact of the recession or Scotland's £500 million share of the additional efficiency savings recently announced by the UK government.
In all likelihood, we face a decline in public-sector funding of anything between 2 and 6 per cent. The higher estimate really would represent financial Armageddon.
Public-sector funding is only one side of the story. The public sector also faces increasing costs, from wage and energy inflation to the rising cost of drugs to the NHS.
As an ageing population, we also place ever-growing demands on health and care services, so the full picture is one of funding reductions at a time of increasing costs and increasing demand.
We have to face up to this challenge, and quickly, but the main political parties are currently operating in a period of political uncertainty. Politicians understand the seriousness of the problem, but also recognise that making unpopular policy decisions at a time of minority government and with elections for each of the next five years would be akin to political suicide.
Leadership, therefore, must come from our local authorities and health boards, which together account for more than 70 per cent of public service expenditure. The question is what they need to do to meet the challenge. The answer must emerge from a consensus (from all stakeholders) that the needs of citizens are paramount and transcend the existing complexity of the structures, roles and responsibilities of the myriad of organisations that make up our public sector.
With more than 240 separate organisations currently delivering public services to the 5.5 million people living in Scotland, this has to make sense.
Public-sector organisations must start to work more closely together to drive through change, become more innovative in building services around the needs of citizens, doing that in an integrated manner wherever possible, embracing private-sector practices and provision where it makes sense to do so. They also need to adopt more efficient delivery models and structures to support innovation and change.
Individual organisations cannot achieve the scale of the required reform on their own; they must be prepared to collaborate and relinquish control where it will benefit the needs of the citizen. The scale of the financial challenge dictates that there should be no red lines in transforming how our public services will be provided.
Let us not pretend that the scale of the transformation will be easy; job losses will be inevitable, structures and ways of working will change and public-sector pension arrangements will come under increasing pressure.
The specific challenge for our public-sector leaders is to have a clear vision and strategy that achieves the transformation required, and the courage and conviction to drive through the necessary reform.
• Gary Devlin is head of public-sector assurance at Grant Thornton UK LLP.
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