11 July 2010

Seeing the redwoods for the trees

I was reading John Redwood's blog the other day - not something I am proud of, but it was one of the many random feeds I get via Twitter, following UK politics. For those of you unfamiliar with his work, Mr Redwood was one of the swivel-eyed acolytes of what became known as Thatcherism, who has rested on his laurels of being a businessman ever since being elected to the cushiest public sector job in the land, as MP for Wokingham, some 23 years ago. What caught my eye was his column on public sector cuts, and his view of the heroic stoicism with which the private sector has borne the recession, as opposed to the mewling and puking he perceives within the public sector as Osborne's austerity budget begins to bite.

John begins his story thus:

In 2008-9 many private sector companies faced declines in their revenue of 25% or more. This was all far more horrific than the cash figures for the public sector this year and next. I do not recall these companies appearing in the media telling us they would have to take lumps out of their service to customers, identifying in public ways they could make their service or product worse, or proposing strikes to complain about the loss of public revenue support.

Instead they got on with the difficult but essential task of bringing costs down to meet the reduced revenue. Managers and workers worked together to reduce stocks, cut costs without damaging customer service, accepted pay freezes or even cuts in remuneration for the bad times, lost pension benefits and bonuses, negotiated cheaper purchases from suppliers. They often also at the same time worked on how they could improve their service or product for customers.

Speaking as someone who went through that painful process, I can identify one very significant cost reduction that John seems to have euphemistically skipped over, and not one that people did willingly or voluntarily. What he might call a total "cut in remuneration", as the ranks of the unemployed swelled, putting pressure onto the already contracting public sector. Which is, of course, a rise in demand for their "service or product".

Which is where John's tidy analogy breaks down, because the public sector receives highest demands for its services at exactly the times when there is less money to pay for it. In fact, given the enormous expansion in responsibilities local government has absorbed over the last 15 years, despite being at the mercy of central government for 75% of its revenue, most of the work of the front line delivery of public services is doing exactly what Mr Redwood challenges them to do: improving the service they provide while getting less money to do it with.

The huge contraction in the UK economy was down to an enormous reduction in demand, following the banking crisis. The total opposite to what local government is struggling to cope with as greater demands are placed upon its services; I do remember sitting in an office when the phone stopped ringing, not something I can imagine they have seen happening at the Social Services offices up and down the land.

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