Next week will see the new Government’s first major political set piece (if you leave aside the PM’s recent International Investment Summit.) (1) When Chancellor Rachel Reeves announces the full details of the Budget, we’ll get a much clearer sense of Labour’s plan for government and, crucially, the financial outlook for public services in the Parliament ahead.
We already know what the core tension in this Budget will be. On the one hand, Labour has a remarkably ambitious headline economic goal: a mission (2) to kickstart economic growth and ultimately “secure the highest sustained growth in the G7.” On the other hand, the party ran a deliberately cautious General Election campaign, explicitly ruling out a host of potential tax rises and avoiding excessive spending commitments. Given the incredible pressures on public services – from overflowing prisons to an overburdened social care sector – this is a challenging tightrope for the new government to walk.
Predictions for the Budget
Some features of the Budget are already clear, given what we’ve just outlined. We’re likely to see a flat spending round for most departments – with budgets generally not moving far in real-terms – funded by the proceeds from very limited GDP growth (3) and some as-yet-undetermined tax-raising measures. There’s also likely to be higher capital spending on things like fixing up schools and hospitals (as signalled by the PM in a recent interview) (4), viewed as a long-term investment to support that key growth ambition.
But fundamentally, our assessment hasn’t shifted much from the predictions and warnings in our Austerity 2.0 (5) blog in March. Public services will be pushed to find major efficiencies in the years ahead, partly because a flat real-terms budget settlement isn’t as ‘generous’ as it seems. The already significant demands on services like social care, health or education are set to keep growing. Labour’s more expensive manifesto commitments – like 13,000 new police personnel – will have to be paid for. And, unlike in recent parliaments, the scope for public sector pay constraints has been more or less exhausted.
The previous waves of austerity were incredibly challenging. However, there was at least plenty of low-hanging fruit to cut in pursuit of savings. This time around, that’s not the case. Public sector leaders who haven’t already been planning efficiency savings will find that the new Budget won’t give them any choice but to start working on it. That’s a big challenge, but it’s also an opportunity. There will now be a mandate for change and reform – we’ve seen this particular in health – which thoughtful leaders should capitalise on. At Leapwise, we’ve been working with public sector organisations to get ahead of the fiscal challenge, and from this work believe there are six key areas leaders will need to focus on to respond to this budget constructively.
6 ways public sector organisations should respond to the Budget
- Identify ‘investment-ready’ projects
- Reduce and manage demand
- Transform inefficient processes
- Work with partners
- Think strategically about workforce
- Explore new tech
1. Identify ‘investment-ready’ projects
For a moment, put yourself in the shoes of a Treasury official facing countless pleas for extra cash. On one side, you’re presented with a reasonable, but expensive request for funds to support day-to-day service delivery. On the other, you receive a detailed funding bid for infrastructure improvements that will deliver medium-to-long-term benefits. Given the Government’s core growth ambitions, which is more appealing?
The financial upside of the growth mission is that capital spending seems to be back in the Treasury’s good books. It’s a shift that’s long overdue. The recent Darzi review (6) into the state of the English NHS found “chronic underinvestment in [NHS] infrastructure” that was affecting performance. And the same problem’s evident in other public services, from prisons to schools.
Much of the extra capital spending the Government’s might commit to will be highly targeted – ministers will have decided where and what they want to fund. But there will almost certainly be competitive bidding processes too, with government looking for projects with a good return on investment. For public sector leaders, this creates an opportunity and a responsibility. Preparing a well-evidenced list of ‘shovel-ready’ infrastructure projects could pay off surprisingly quickly – offering a welcome injection of much-needed funds. Thinking across the sectors Leapwise works with, we think local government could be an early beneficiary here.
2. Reduce and manage demand
One valuable way to deliver efficiencies is by focusing on demand management. Thinking about this for policing, in Leapwise’s work with Norfolk and Suffolk Constabularies, (7) we identified that 32% of their existing change projects could be stopped or paused without any frontline impact. This released 12 FTE (shifted onto other priorities) and provided £340,000 in cost avoidance. And we’ve written before (8) about how Humberside’s ‘Right Care, Right Person’ offered a local, then national and international means to reduce mental health demand on stretched police services.
Of course, demand reduction really should be business-as-usual. Given the financial pressures on the state and growing demands in areas like health, finding opportunities to reduce demand can free up resources for core services. Innovative projects that make the most of technology – like Humberside Police’s My Police Portal (9) which lets the public get ‘self-service’ updates on their cases – is one way of doing this effectively.
3. Transforming inefficient processes
In some areas, demand management is more challenging. For a school supporting children with special educational needs or a local authority managing social care responsibilities, the core work itself is creating the pressure. Here, demand management can only offer so much, so redesigning confusing and complex processes is a better approach.
At Leapwise, we’re passionate about what this kind of approach can offer. As we’ll talk about in a future blog, all our consultancy staff have benefitted from Lean Six Sigma training – a methodology that improves process efficiency by reducing waste and improving standardisation. And we’re currently working with organisations on a set of process efficiency challenges.
But process redesign is one area where financial pressures can, counterintuitively, be beneficial. With a tight budget settlement, there simply isn’t the luxury to pour more resources at every problem. Leaders who can articulate this to their workforce could find it easier to build support for vital process improvements. In other words, financial pressures can provide a common, external challenge that organisations can use to motivate change.
4. Work with partners
Partnership working can often feel like a buzzword. And sometimes – to quote a memorable phrase from some Global Government Forum research (10) – “collaboration by mouth” is what’s really going on, with lots of positive noises but little substantive action. And yet, just as shared financial pressures can help when building internal coalitions, cross-public sector challenges can create some shared imperatives too. For the foreseeable future, local authorities, schools, prisons, and policing are all ‘in it together’ in needing to find efficiencies.
We already know how effective public sector collaborations can be. In 2019, the Local Government Association produced a detailed shared services map (11), showing the dozens of ways local government had collaborated across functions. They pointed to £200 million in efficiency savings in that financial year alone, with £1.34 billion in cumulative savings from 626 partnerships beyond that period. Various London councils run shared services (including tri-borough arrangements (12) around hospital discharge and children’s care) and police forces like Norfolk and Suffolk have long done the same via formalised arrangements.
There are obvious limits to collaboration. There is a genuine risk of collaboration by mouth, of warm words but frosty interactions. But with shared financial pressures, there’s scope to look again at this agenda – the best collaborations really do benefit all sides and, above all, the public.
5. Think strategically about workforce
For many public sector organisations, workforce is one of the primary drivers of cost. Probation services rely on dedicated probation officers, schools need teachers, and social care depends fundamentally on an often under-valued care workforce. As we’ve already discussed, the painful efficiencies from holding down public sector salaries aren’t a sustainable option now – without profound recruitment and retention challenges growing.
Looking strategically at the composition of the workforce is still sensible, however. Public sector organisations can sometimes provide excellent services at lower cost, simply by using different workers. For example, the NHS is growing its numbers of physician associates. (13) These are trained staff, supervised by senior doctors, who give basic medical support and are significantly cheaper to employ than GPs. In policing, staff investigators offer the same benefits – they cost less than substantive detectives but are just as effective at handling some police functions. Changing workforce mix can provide impressive results.
On a separate issue, we’d also offer a seemingly counterintuitive position on consultancy spending. As you’d expect, we believe strongly that excellent consultancy work can really benefit public sector bodies. That means paying specialist teams to come in, do a tough job (with a clear timeline), and leave behind a legacy that helps those organisation keep improving in the future.
But far too often, public bodies pay consultancy rates to bring people in for ill-defined roles, at short notice (and high cost), where they’d be better off recruiting additional employees or hiring agency staff instead. In the face of financial pressures, outlay on consultants should be limited to the right areas – rather than being used as crisis response that leads to unnecessary overspending.
6. Explore new tech
When it comes to workforce, the AI revolution has added a whole new dimension. ‘Headcount’ – traditionally defined by how many FTEs an organisation employs – has become an arguably outdated concept. How should you count ‘robot workers’ that can handle or augment tasks (with appropriate oversight) that staff always used to complete themselves?
On the tech front, we’d repeat the message from one of our recent blogs on police efficiency. (14) The potential of AI and related solutions is huge. The Government’s RedBox tool created by i.AI, which helps civil servants analyse documents and produce briefings, is impressive (one of Leapwise’s new team members tried it out in a previous job). In policing, the Productivity Review (15) noted that an auto-redaction tool called DocDefender saved Bedfordshire Police enormous amounts of time – redaction of one phone download took 30 minutes instead of two days! And we know that other parts of the public sector, from health services using AI for screening to schools exploring generative applications, are all on the cusp of significant benefits as well.
However – one note of caution. Despite what the most techno-optimistic think tanks say, AI is not a silver bullet. Introducing and embedding AI tools into business-as-usual requires wise procurement, careful integration with complex legacy IT systems, and investment in training and upskilling staff. All of this takes time and, with poor planning, it’s much easier to get this wrong than right. Technology should absolutely be part of your efficiency plans, but it’s not a one-size-fits-all solution that can fix everything overnight.
After the Budget
On Wednesday, our predictions will be tested when the Chancellor shares her final Budget plans at the despatch box. What’s clear is that, barring any late miracles from Rachel Reeves, the financial squeeze is here to stay. Public sector organisations will have to redouble their efforts to find efficiencies in the coming five years.
But we’re confident that if leaders pursue the six options we’ve set out in this blog, they can manage this difficult period while maintaining good services for citizens. At Leapwise, we’re passionate about helping organisations work through these challenges and deliver change that sticks, even in tough times.
So, if you’re looking for support on your transformation journey or simply want to share ideas, please get in touch with our team.
