Politicos vs bean counters – differing perspectives to cutting costs

A twitter response from Tom Gash (@TGCrime) at the Institute for Government to my last missive got me thinking further about how government allocates resources and perhaps more importantly how government reallocates resources when it is trying to reduce costs and cut back services.

Tom is a thoughtful man, particularly interesting on Criminal Justice. His response to my last blog on using PbR to assess the appropriate allocation of resources between probation/rehabilitation, and prison was “Thanks for this – agree migration strategy essential. You’d forgive HMT for not wanting to gamble on this right now…”.

My first reaction of course was actually no I wouldn’t forgive HMT for not wanting to gamble on this right now. If we are to reduce the costs of government we need to reshape it, and using outcome approaches can give you a low risk way of testing the reshaping of services and changing your resource allocation, without having to dual run prevention and acute services and run the risk of over spend.

I realised on reflection that this misses the point. From HMT’s perspective the normal solution to cutting costs is simply to stop doing stuff. Remove it from the budget and it ceases to be. While there are arguments that such reductions build up cost pressures for the future, they may be un-evidenced and the impact not easily forecast, so may come across as special pleading. This is obviously rather more politically troubling than reshaping services, but it is lower risk from a simple management of inputs perspective. It appears reasonably reliable and you don’t have to spend time doing due diligence on a reshaped model that someone is convincing you will save you lots of money if you only invest now (in fact the old “invest to save” argument has been so often used, so often not saving at all, that one would forgive Treasury for a degree of cynicism).

For politicos the situation is reversed. Simply cutting services is uncomfortable and unpopular. It is therefore a time for buck passing (for example giving local authorities more freedom, aka responsibility, at the same time as cutting their budgets), disparaging the receivers of the service or benefit to be cut, or trying to do it as quietly as possible. Reshaping services behind some grand vision on the other hand is much more interesting.

What are the implications of all this?

–       The first and most obvious is that large scale reshaping is therefore extremely difficult and requires huge political capital. So those areas that don’t get that political investment may end up with standard cost cutting as a default.

–       Second, where wider service reform is brought forward, the bean counters may seek cost cutting at the same time, as part of the deal. For example, the drugs PbR pilots or the present probation work. My suspicion is that this will lead to risk averse behaviour and may not lead to the level of innovation that we’d hoped for.

–       Third, supporting service areas in building their financial arguments around reshaping services would appear to be a useful contribution, as are outcomes based contracts, but as we’ve already seen, these may not be enough.

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