The Reluctant Armchair Auditor

Sorting spending fact from fiction

Archive for the ‘autumn statement’ Category

Living in the past or Fantasy Island

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It’s probably an age thing but increasingly these days I seem to living in a state of perpetual deja vu. Suddenly it’s the early 90s or 80s again as fear and pestilence stalk public sector land. So much so that I am considering looking out my Don Johnson pastel jackets, raybans and ditching my pringle socks. Loafers don’t need socks.

In many ways it’s a great shame that our national predilection for dressing up in ‘historic’ costumes for ‘living history’ weekends does not extend to reenacting public policy screw-ups. Nope. Each generation of political leaders can re-heat whatever garbage they think the electorate has forgotten about before serving it up fresh.

No one out there is going to get all grumpy because they’ve suddenly remembered that the Big Society sounds eerily similar to the good old days of … well the good old days. Yes, I do mean Back to Basics and the spinster on her blessed bike still cycling to evensong. Although in the Big Society presumably she would have had to deliver some home care support, done a shift at the nearest community asset and filled in some pot holes before getting to church.

Of course ‘no more boom and bust’  has had more outings than an Australian XI. This is even-handed grumpiness on my part. I’ve worked with and for politicians of all views (and none so far as I could tell). What unites almost all of them though is an inability to see the perfectly forseeable consequences of a given policy decision. Or, if they do own that skill, to be pathologically unable to utter in public what they must know to be true.

My first day back post-Christmas with my abacus has found me trying to help clients deal with the impact of CSR2010. My attention was drawn to a highly – unintentionally so – amusing set of comments by a minister from CLG. I’ll not name names because I’ve come to the conclusion that it only encourages them and the SPADs with whom they spend too much time.

Apparently it is only ‘lazy councils’ that will go looking for frontline blood to let to implement the cuts in council spending that CLG was in such a hurry to agree with the Treasury. Here’s the quote from the Sunday Times:

If local authorities cut out excessive chief executive pay, share back offices, join forces to procure, and root out wild overspends, they can safeguard key frontline services. Only lazy councils will attempt to use residents to boost their bank balances.

Let’s run an armchair auditor’s rule over those frontline service savers in some more detail.

‘ … cut out excessive chief executive pay … ‘

A great ministerial favourite this one. Let’s examine the premise. Reducing all Chief Executive pay to let’s say £120,000 – that’s a good £22,ooo less than the garbage comparison of the PM’s pay – would stop 9% reductions in council spending hitting the frontline? Really? A client of mine is looking for around £3 million of savings in 2011/12. Deleting every post in the corporate management team would barely yield 10% of the savings figure needed.

‘ … share back offices … ‘

Procurement takes time. Good procurement takes even more time. Merging back office functions sounds easy doesn’t it? I’m not sure any businessman or woman who has tried it would agree. Getting the Morrisons/Safeways issues sorted took years. Few, if any, of the organisations I am familiar with have not already got various partnering arrangements underway. In any event there’s a perfectly respectable stream of thought that argues that maintaining integrated back and front line functions serves customers better and at less cost too.

‘ … join forces to procure … ‘

There’s always more that can be done on procurement as lots of reviews have shown over the years. So I would cede some ground on this one. But I would offer just one thought. Great procurement depends on clarity about knowing what you want as a customer and having outstanding service providers working with you to achieve just that. At the minute everyone is so focused on putting out the fire in their part of the public service woodland that it’s getting near impossible to see the forest as a whole.

Frontloading cuts to encourage councils to be super innovative sounds pretty clever in a sixth form debating society in the real world in defies believe. In the few weeks now available to sort the 2011/12 budgets scope for innovative procurement approaches will be pretty narrow.

‘ … root out wild overspends … ‘

No evidence was offered here for the sort of overspend the minister had in mind. The thinking behind the quote is the most interesting thing though because it does the thing that upsets Mr Redwood so much. It confuses a structural problem – CSR2010 – with a current account issue. Sorting out an overspend means you return to the spending level of the agreed budget. Of course what CSR2010 does is to lower the budget ceiling. So just sorting out the overspend is not enough.

There comes a time in the life of almost all political administrations when the contest between hope and reality gets too obvious to avoid. Administrations at the end of their lives tend to the fantastical to avoid facing inconvenient truths. The deeper the problems the wilder the statements. It’s unusual for a relatively young administration to be reaching for the hyperbolic but I suppose it shows the depth of the problems it thinks it’s got.

The trouble is that the ‘trouble’ has barely begun yet.

I boggled on Sunday while watching the PM on the Andrew Marr programme. He said that sorting out the public finances was last year’s problem. This year’s was all about growth. That’s an unusually stark illustration of the gap in experience of almost everyone in our national political life. Announcements, interviews, news releases and leaks do not deliver anything except sentiment.

The problem is that the public finances have not yet been sorted. Doing that depends on the work of ‘lazy’ organisations at the sharp end. It’s going to be bloody.

Written by reluctantarmchairauditor

January 11, 2011 at 7:47 am

Greetings from the Planet Vulcan Earthlings

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Accountancy is a staid professional. I can see that. So any colourful intervention into the somewhat humdrum lives of finance professionals – even semi-retired ones like me – is always welcome.

I’ve just read this opinion piece from John Redwood reproduced on the Public Finance magazine’s website. Apparently all of my former colleagues busy cutting costs in the public sector are operating under some strange compulsion unwarranted by the different laws of financial physics that operate in deep space.

I was particularly struck by the following section of the post –

Whilst there are cuts in planned spending, total spending carries on rising in cash terms, so all the deficit reduction planned happens through increased tax revenues. The increases in VAT and National Insurance are an important part of delivering this tax-based approach. As we have seen, the main reason increased cash spending delivers some unpleasant cuts is the rising inflation. Bad public sector management in some councils and Quangos adds to the stresses.

Only a politician could have written the first two sentences. Or a practitioner of the old huckster’s art of misdirection: ‘Don’t look at these cuts, look over here at these tax rises.’

The only proper response to the next sentence is one I heard from a youngster on a bus recently: ‘Yeah, right.’

As for the last sentence. Well, there is already sufficient evidence from such well-known left-leaning journals like the Telegraph that cutting Quangos has nothing to do with deficit reduction either.

All of which leaves me with the ‘bad public sector management by some councils’ comment. Local government has consistently outperformed almost every other area of public services. Not only have services generally improved councils have also delivered year on year efficiencies. Real ones. The sort you can spend. A minimum 9% cut in local government funding is more than a bit of stress in the system and it definitely isn’t caused by poor management in any council however much government might wish it were.

Local government leaders have begun to wonder out loud what planet some politicians are living on. I think the answer is obvious isn’t it?

Written by reluctantarmchairauditor

January 6, 2011 at 5:43 pm

My twitching audit nose

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By means of excellent client management I had the chance to read the OBR Forecast and see the Chancellor’s Autumn Statement today.

I have to own up to being a bit bemused. My audit nose is twitching. What caught my eye are the claims about public sector jobs. There’s something odd going on here. The largest fiscal consolidation since goodness knows when with lower levels of public sector job losses than we have seen in other recessions?

Neat if you can pull it off. But even my friends over at the Institute of Directors are uncertain about the claim,

The really interesting story from the OBR is the slashing in public sector job losses from 490,000 to 330,000. This means that the projected public-sector employment losses are almost half those seen in the 1990s. The peak-to-trough reduction in public spending in the 1990s was 7.4 per cent of GDP. The comparable reduction now is 7.9 per cent of GDP by 2015-16. So the spending squeeze is on a par with the 1990s but the employment shake-out is far less. This is puzzling, even when we allow for a greater burden of the cuts falling on welfare spending this time around. [Source: Guardian Politics Blog at 2.04pm]

That’s this evening’s reading sorted out then.

Written by reluctantarmchairauditor

November 29, 2010 at 4:42 pm