Are public sector cuts good news for the private sector?

Wednesday’s announcement of the government’s Spending Review was greeted in some quarters with howls of derision by critics who argue that the cost-cutting measures are leading Britain into a new age of uncertainty. But how fair is...

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Wednesday’s announcement of the government’s Spending Review was greeted in some quarters with howls of derision by critics who argue that the cost-cutting measures are leading Britain into a new age of uncertainty. But how fair is this view?

It seems to me that the government has approached the review in the same manner as any organisation would do at the outset of a successful outsourcing deal. By reviewing performance as a whole, and then identifying non-core competencies in each department, the Chancellor has found where fewer resources need to be committed, and has trimmed the fat accordingly.

The government’s decision to cut the Whitehall administration budget by almost as much as a third could, for instance, present Business Process Outsourcing (BPO) suppliers in the private sector with a huge opportunity as back office functions like accounts and data preparation are passed onto private firms.

However, it’s not just administrative processes that will be affected by the announcement, and it’s clear that there will be increased opportunity for outsourcers across the board to add real value across the board.

For example, HM revenue and customs will now be expected to find resource savings of 15% mainly through the better use of new technology, greater efficiency and, crucially, better IT contracts. Meanwhile, many more local councils are sure to follow the recent example set by Suffolk County Council, and look to outsource services in response to a 7.1% cut in funding.

The Chancellor also appears to have cited IT as the real saviour amongst the government cuts, through opening up the ability for departments to quickly communicate with outsourcers, monitor work and negotiate contracts.

If this week’s announcement told us anything, it’s that it will more likely than ever that government departments will look to take advantage of the ability to outsource work as well as collaborating and sharing services across departments.

In my view, if this week’s announcement holds any danger at all, it is that it could prompt the public sector to outsource cheaply, at the cost of improved service, in order to achieve quick gains over the next four years.

Regular readers of my blog will know that any project initiated on cost alone, is more likely to end in failure. However, if performed correctly, with the right diligence and governance in place it’s clear that outsourcing can achieve real results for the public sector- not just as a short term solution.

It’s true that the Spending Review was always likely to result in bad news for some, and there will be many losing their jobs as a result.

However, it’s also important to understand that, on balance, the government’s decision to examine how it should allocate its resources is not necessarily a bad thing - as any exponent of successful outsourcing can testify.