Article
Cheap as chips
The Gershon report says new IT will make the quick savings it requires. But is service being compromised? David Walker reports
You would not call it a resistance movement - yet - but there are signs that the Treasury's demand for big efficiency savings is provoking sharp dissent. As autumn draws on, managers are saying of the £21bn target for 2008: it can't be done, or at least - contrary to what Sir Peter Gershon said in his report to the chancellor in July - it can't be done without harming public services.From the offices of West Devon borough council in Tavistock to the glitzy suite of an international consultancy in San Francisco, voices are being raised in doubt and dismay.
David Incoll, the West Devon council chief executive, says the demand for 2.5% efficiency savings a year has to mean cutting frontline services. "A significant proportion of our residents in Devon are elderly," he says. "They need and expect face-to-face services, for which call centres and information technology cannot substitute."
The consultants, reluctant to be named for fear of losing Whitehall contracts, cite studies that say Gershon's assumption that new IT saves money is wrong. IT may pay off in productivity gains, but only in distant years, well beyond the Treasury's three-year timetable.
Last week, health minister John Hutton dismissed reports that the integration and renewal of NHS IT - which includes the gigantic task of putting patient records and appointments online - would end up costing £30bn, or five times the official projection. But no one, especially the NHS IT supremo Richard Grainger, claims this project is a cost saver in the short term. Over the next five years, the NHS will not just have to pay for equipment but for extra bodies and top to bottom retraining in GPs' surgeries, hospitals, primary care trusts and authorities.
On a bright July day, Gordon Brown sought to trump the Conservatives and the Liberal Democrats with Labour's promise of 100,000 civil service job cuts and big savings in administration costs, not just in Whitehall but in local government and the NHS. It is darker now. Political events have knocked Brown's authority, especially the return of Alan Milburn to Tony Blair's side as election chief. The Treasury's competence in delivering these big savings is openly derided.
Some pity is extended to the man in charge of the efficiency programme, John Oughton, the chief executive of the Office of Government Commerce. He looks like piggy-in-the-middle between the Treasury and the frontline.
Take the Department of Work and Pensions (DWP). It is meant to sacrifice 40,000 jobs, but finds itself with a new secretary of state and, possibly, big shifts in policy on pensions. Phasing out pension credits - the means-tested scheme - and increasing the basic pension would, in theory, allow staff numbers to be reduced, but only over several years.
Blair wants fewer people on incapacity benefit. Getting them back to work will take more, not fewer, officials to investigate their circumstance and provide personal support - but jobcentres are being closed in pursuit of efficiency gains. The DWP's permanent secretary, Sir Richard Mottram, may face the dilemma of either giving No 11 its efficiency gains or No 10 its cuts in the number out of work because of disability.
Managers at the Child Support Agency - potentially a hotspot again as the "fathers' rights" lobby becomes vocal - fear that they cannot keep up if they have to deliver the stipulated jobs cuts.
Gershon's report said savings could be made by streamlining the way public bodies buy £117bn worth of goods and services from the private sector each year. But it now turns out that his script on procurement is not the same as the one being acted out in the Office of Fair Trading (OFT).
It is anxious. "Where the public sector is focused on short-term value for money gains, there may be a risk that competition is reduced," says a report commissioned by the OFT. But without "short-term value for money gains", the Treasury's targets are unreachable.
The OFT is less worried by everyday council contract letting (which, it admits, no one has much data on) than by council deals on sewage and waste disposal, defence spending, NHS purchases of drugs and procurement of IT. It bemoans "an overly strong focus on price". What it wants public bodies to do - at a time when they are under immense pressure to make savings - is concern themselves with the structure of private markets and themselves take steps to encourage new firms, especially small and medium-sized firms, to bid for contracts.
The OFT, which has acquired extra independence under Labour, has the capacity to make a fuss, even refer matters to the Competition Commission, which would be severely embarrassing for the government. Efficiency versus competition is a battle the Treasury would rather avoid.
· David Walker edits Public, the Guardian's magazine for public executives. To subscribe email publicsubs@guardian.co.uk