Hitting the headcount – is it a solution or hysteria?

Monday, March 01, 2010

As councils battle to balance their books in the face of ever growing demand for services, Dean Carroll examines the gulf between those who advocate cutting costs by cutting jobs and those who say that's the last thing that should happen

While the most negative soothsayers predict Greek-style collapse, more optimistic commentators suggest the UK's public finances are well placed to recover once economic growth returns.

Increased tax revenues may again outbalance welfare and debt servicing payments in the next few years, but escaping record government borrowing is likely be a project stretching across a generation rather than a parliament. Bleakly, a number of local authorities have decided not to wait until the next spending review and the inevitable Whitehall instructions for savage cuts.

In Birmingham, an emergency plan to save £70m could mean 2,000 job losses.
At Nottinghamshire County Council an additional 1,000 jobs may be axed as part of a modernisation programme. The council plans to cut back operations with increased technology, reduced management and fewer buildings. The Tory-run authority claims £200m could be saved and redirected to frontline services over five years.

The plans come after 500 redundancies were announced as part of efforts to save £85m over the next three years to balance the budget.

Essex County Council is also planning to shed 275 management posts, while at Cambridgeshire County Council, 300 posts are to be axed to help achieve a £95m saving. The squeeze controversially includes a £3.8m cut in the adult social care budget and a 2 per cent reduction in spending on children's and young people's services. In fact, a Chartered Institute of Personnel and Development survey suggests that a third of all public sector employers are already cutting jobs in the first quarter of this year.

It is difficult to see how service levels can be maintained – let alone improved through the holy grail of innovation, as championed by ministers – when whole areas are being wiped. Recognising the paradox, associate director of the Work Foundation Alexandra Jones says the only options for councils are recession-tested private sector approaches like reducing some staff to a four-day week and ensuring that examples of best-practice efficiency are exported across the whole of local government.

"Total Place has demonstrated that there are savings to be made if councils and their partners change the way they do things," adds Jones.

Crucially, the willingness to adapt depends not only on council leaders and officials. Professional bodies and public sector unions also have a place at the table and early indications are that they will fight against the grain. The Association for Public Service Excellence (APSE) insists that for every £1 spent by the public sector at least £1.64 is ploughed back into the local economy.

"Job losses ultimately drag down the public finances by replacing tax revenues with benefit payments," says APSE chief executive Paul O'Brien.

"Killing off programmes such as those that tackle obesity may be viewed as part of the media's public sector non-jobs campaign, but they are an effective investment in the longer term health of communities; we need to stop the hysteria."

Even so, Economic Secretary to the Treasury Ian Pearson admits that resources will be "switched to new priorities" and some programmes "stopped altogether", although there will still be the expectation that key services are "delivered and, also, improved".

General secretary of the TUC Brendan Barber feels more attention should be paid to boosting government coffers – perhaps, through a permanent domestic transaction tax on the financial services industry. The widely expected 10 per cent drop in public sector spending will be equivalent to 200,000 job losses, claims the TUC.

"It is not fair to lower the living standards of public servants, who are not responsible for the economic crisis," says Barber. "Big cuts are not inevitable – much more can be done by looking at the revenue side of the account as well as the expenditure side. This debate is being projected in terms where the private sector is described as having taken the biggest hit and yet public service workers have been getting away with it and now need to pay their share of the price for the recession. It's a pretty ugly and inaccurate way of seeing things."

Elsewhere, collaboration is being touted as the panacea. Like innovation and best practice, the term might seem hollow and managerial at a time when the real crunch will be felt at the coalface. In Newcastle upon Tyne, for example, some two thirds of the city's workforce is employed by the state. Director of IPPR North Ed Cox warns councils of the perils of spending cuts in deprived areas that will hit communities disproportionately hard.

"There remains a legitimate concern that while the media and the south of England talks about recovery, the rest of the country – particularly in regions where public spending represents a very high proportion of GVA – slips into a double-dip recession. We need to understand far better the local impacts in the north of England. And councils should resist the temptation to seize a political opportunity to make heavy cuts at such a critical moment."

The divide between those lobbying against cuts because of their potential to undermine economic recovery while crippling public services and those firing the starting gun for the deepest budget reductions in decades still shows no sign of narrowing.