easyCouncil? Not so easy cuts

Barnet council is in the vanguard in the pursuit of significant changes and savings in service delivery, under the headline grabbing tagline ‘easyCouncil’.

Reports today that its programme of change will cost more this year than it will save should fill no one with great surprise. For several reasons.

First, the research literature on organisational change strongly suggests that, even if beneficial in the long run, significant restructuring rarely delivers savings in the short term. Transition arrangements carry (sometimes significant) costs.

Second, it would be foolish to deny there are areas where local authority performance can be sharpened up – as there are in all organisations. But the premise that the local authority sector is awash with easy efficiency gains – following 10 years of budgetary restraint and a regime of high profile challenge, audit and inspection – is deeply suspect.

Third, there is a limit to the savings available through efficiency gains. Unless we are in a context of continuous technological change, there will be an optimal way to allocate and organise resources (economists talk about the idea of a production possibility frontier – it is not possible to be more efficient with given technology). So at some point, if you are going to provide a particular service at all then you are going to incur the minimum cost. You have to (or at least should) pay the minimum wage, for example.

There is a separate argument about whether aiming for static technical efficiency is even the most desirable strategy. It may reduce costs to a minimum but it squeezes out the flexibility to respond to changing requirements and opportunities. Dynamic efficiency can, when looked at in cross-section, look like producing above minimum cost, but is a more sensible strategy for the long term.

We all know that local authorities are looking for huge efficiency gains or – just as likely – cost savings – from their own services or from contractors. Local authorities are approaching contractors with requests (or requirements) to provide the same or similar service as  they do at present for 25% lower cost. These are often services provided on contract through a competitive tendering processes. The idea that there are significant profit margins to be squeezed or massive inefficiencies to be removed, in a way that will deliver savings on that scale, is just not credible.

The only way that cost savings of this scale are going to be delivered is if local authorities stop providing  (or commissioning) services. If the government is serious about its cuts agenda then this is where we are heading. This version of Cameron’s Big Society will look very different, and will require changes to statutory obligations and a rethinking of the role of the state. That is an argument I discussed a bit further in Can the Big Society be anything more than BS?

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