Bracing for Impact: Preparing for Austerity 2.0

Bracing for Impact: Why UK Policing Must Prepare Now for Austerity 2.0 

Preparing for Austerity 2.0 

Once again, the Spring Budget has confirmed a bleak outlook for public expenditure. We set out how government departments, agencies and police forces can start preparing now for the wave of austerity ahead.  

We warned about austerity’s impact on policing in 2022 (1), but there are many other services under pressure. The Spring Budget announced real terms budget increases of 1% overall over the next 5 years, but growing demand for health services and defence expenditure is undeniable. The simultaneous announcement of £2.5bn additional health spending next year signals the reality that health alone will continue to swallow up any spend increases and – certainly outside health, possibly education, and defence – departments should probably be bracing themselves for flat cash budgets. This means significant cost reduction programmes, on top of those already in train after the civil service set a timeline for 66,000 job cuts (2) in autumn 2023. 

Woefully Ill-prepared

In truth, planning and preparation for spending reductions is not as well progressed as it should be, either nationally or locally. Some sectors and departments have half-formed plans, and a few have a clear roadmap, but most are still unclear on how they will fit within new budget envelopes, while protecting services. Everywhere, it is clear that there is little ‘fat’ to trim, so decisions are difficult. Financial resilience across sectors is also worrying, given reserves have dwindled in policing and local government.  

Our view is that the Budget reinforces the need for leaders across sectors to take three key steps: 

3 Essential Actions for Sector Leaders

1. Make a clear, evidenced case for spending
2. Bank ‘quick wins’ asap to create a war-chest for productivity improvement 
3. Change to save

1. Make a clear, evidence case for spending

All leaders will need to be adept at managing ‘big and small’ politics that play a large part in national and local spending decisions. Here, there is much that can be learned from watching and speaking to effective operators who have been round the spending review and budget cycle many times. 

It’s also necessary, however, to arm yourself in debates with the robust evidence that Treasury and other officials will demand. This means developing a clear picture of service demands and how these are changing, the cost and time it takes to service these demands, and the performance and public outcomes that can be delivered with different levels of funding. It’s essential that, unlike in earlier spending rounds, services make clear the likely consequences of spending reductions to ensure the politicians in the hot-seat have the information they need to make trade-offs. 

Leaders can develop this insight as a one-off exercise to support budget asks and internal allocation of core budgets – but it is even more powerful to create a replicable approach and evidence base that supports annual budget allocation choices in the hard years ahead. The Institute for Government and others have rightly argued (3) that it is important not to take a siloed approach to budget setting too. Understand where you will need to engage with partners and support their budget asks. For example, policing has a clear interest in ensuring adequate social services and drug treatment funding are in place.

What is achievable in terms of evidence will vary across organisations, depending on data and strategic planning maturity. Ideally, you will move towards having real time data that tells you whether your teams are working miracles with inadequate resources or underperforming; whether processes are smooth or grossly inefficient; and whether standards are attainable. This understanding allows organisational justice, genuine accountability for managers, and a starting point for where you target spending cuts and change.  

2. Bank ‘quick wins’ asap to create a war-chest for productivity improvement 

Leaders need to be careful here, but there will be some areas of discretionary spend where early tough choices are required. This might be a planned contract extension or hire that no longer feels business critical, or a project that might need to be paused.  

For every budget cut, it’s important to be clear on the possible service impacts – otherwise it is simply death by a thousand cuts! But there are major advantages to acting quickly on savings. And the key one is that you can start properly investing in changes that drive productivity – reducing costs without undermining service standards.  

The key choice to make on quick cuts is how far to allow your departments and teams to identify their own savings. In general, this is an effective approach – but it is essential to have some central grip on the cross-departmental impacts of spending reductions, and ways to centrally manage communication and HR impacts and maintain fairness. Ensuring that spending reductions align with organizational priorities is essential to safeguarding core objectives and maintaining service quality at optimal levels. It can also be helpful to get a fresh look at opportunities from peers or external experts – though this is only really needed where spending reductions over 5% are being sought. Once you are into this territory of deeper budget reductions, however, you will also need to look more fundamentally at services and consider significant change and transformation...  

3. Change to save

Myriad changes – from new processes, to technology upgrades to training – have the potential to reduce service demand or improve workforce productivity. The right answers will vary by sector and organisation, though our experience is that there remains significant potential in areas such as simplification of policy and process, even before automating change.  

However, there are some common themes on how changes should be approached. This includes being precise about which changes will drive the biggest productivity gains, and then using the new data capabilities described above to track results of different changes. It also includes the requirement for clear leadership of the agenda for change from the very top, a way of avoiding silo approaches across departments and ‘cost shunting’ (4), and the engagement of all levels of the organisation in identifying and driving improvements.  

We have written elsewhere (5) about other ingredients of effective change in adverse situations, but there is also something different about leading through austerity. Maintaining motivation for change is hugely challenging and employee engagement needs to be tracked. Effective communication and engagement, quickly resolving any unnecessary job security concerns one way or another and demonstrating the benefits of change for the public can all result in a workforce that feels more empowered and energised.  

Window of opportunity

Though hard and urgent, these steps to respond to austerity 2.0 are not impossible to take. And the urgency is now becoming apparent to all. The current election timescale means that the political incentive for government is to remain as vague as possible on the details of cuts for some time. But leaders will all have to prepare now for the realities ahead, whatever the outcome of the upcoming General Election.