A way of cutting public sector costs in a systematic and justifiable way – any model is better than the current political posturing

The BBC reports today that "IFS says worst of UK spending cuts yet to come" and indeed no matter how you do the maths, what political party you support, if any, there is indeed a long way to go to recover the UK financial position.

Sadly listening to all political parties we seem to be in the throw ideas at the electorate and let's see if any of them sticks mode. There must be a better more systematic justifiable way for political parties to establish strategy over tactics and with this what should we protect and what could be cut. It is something that we have to do in business all of the time, yet sadly in my seven years at the heart of Government I did not see this.

In my last budgeting exercise in the Cabinet Office pre the last election, we were rightly asked to come up with options for cuts for the next year's budget; various scenarios were to be presented. Given that most of the costs were people related you didn't need to be a genius to recognise that sadly people must go. Every function within the Cabinet Office went through the same process. However there was never a conversation about strategy or Ministerial priorities, just getting to a required overall number. Salami slicing is not a strategy for success and yet this is what is still being postured by all parties, but there is another way. The reality is if we want citizens to understand why cuts are taking place, or investments being made, the process has to be inclusive, systematic, logical and communicated.

First of all sensible investments and cuts cannot be totally driven by the centre of Government, we need to include those doing the jobs, even if their views are biased. It is absolutely right for those in say the NHS, or the medical bodies to have a strong voice on what should happen, after all they do the job day in and day out. So a simple process:

Phase 1 – Line item costs in every part of the public sector

• Each part of the public sector from their Minister, together with officials, associations, professional bodies should identify each core item of spend in their area – at a reasonable granular level. Saying GP's is too high level, or Bobbies on the beat is too high level. What we are asking them to do is to produce a list of items in priority order, their cost, and the value they create (if any)
• As ever this list should be understandable, should identify the cost to the public purse and preferably the number of citizens it touches
• This list will be used to compare and contrast with other items in other parts of the public sector.

Phase 2 – draw a line at the mandatory minimum set of requirements

• For each part of the public sector they should now draw a line at the point which signifies the mandatory minimum set of services, and therefore costs. It has to be the minimum, nothing optional, the point at which the whole service fails. This does not mean this is all the money people will get. Involving stakeholders in this debate is important for understanding and buy-in.
• We should be transparent, this should be published and a public debate should be promoted.
• At this phase we are also doing quick calculations on what does the public sector "minimum" spend look like when we add up all of the "minimums"

Phase 3 – compare and contrast

• At this point we are now asking if the items on the NHS list is more important than what is on the Defence list, or International Development list, in fact or all other spend items. Are we saying that fertility treatment is more or less important than community police officers or child benefit more important that elderly social care? Yes these are tough decisions but this is what strategy is about. What kind of country do we want to live in, how do we create that country with limited resources, what decisions do we need to make.
• We also come back to the affordability question. This is where we iterate around progressively removing activity/ tasks/ services from the list to fit the budget cap we are working to.
• Each one of these decisions should be defendable – "a" is more important than "b" because…

Phase 4 – thinking the unthinkable

• We now have a set of public services that we deem important for the country in the medium to long term, but it still might not fit the funding envelope. It is not common for people to shy away from tough decisions and accept a "budget task". i.e. a saving we must make but we do not yet know how to. So now we must drive through on aggressive efficiency
• Just because we say GP's cost £xbn doesn't mean they should get that money. We have to be innovative in our thinking. Why is it free? Why are there so few private GP's, why can't I buy my drugs online etc etc etc. Again for every part of the public sector it should be opened up to scrutiny and ideas for innovation.

Phase 5 – it's not just about cuts, laying future strategic foundations

• When you are in cutting mode, it can be hard to switch to investment mode yet this must also be done. Not everyone can see the big international picture, not everyone can see the subtle yet important social or demographic changes that are occurring. Experts with business leaders must now consider the long term changes, what investments must we make now to lay the foundations for the next twenty years. What policies must we adopt to cater for future threats and opportunities?

If we could do anything like this I think at least we would see there is some logical thought to the planning of Government. At least we could see why we are investing and why we are not. At least people will feel their job, or service, or benefit has been kept or lost because of logical thought and not just some political ideology and you never know we might just have introduce a bit of strategy into the political world of tactics, spin and the sound bite.