Delivering Change: The Public Sector in 2011

The independent Office for Budget Responsibility (OBR) has raised its estimate for economic growth this year to 1.8% and predicted growth of 2.1% for 2011. It also expects far fewer public sector jobs to be lost over the next four years than initially feared. These are all positive signs, but there is no doubt 2011 will be a challenging time for all public sector organisations as they try to deliver better public services more efficiently. Brave leadership and political courage will be needed to deliver change.

Almost all public sector organisations now know what they need to do. A small minority are still in denial, but the majority have realised just how difficult and painful the cost reduction measures will be and are getting on with the job at hand.

Those organisations that get out of the blocks quickly in 2011, taking decisive action, will rapidly see positive results and feel the benefits over the Spending Review period. Prevarication in 2011 on the other hand, will lead to difficulties in 2012 and beyond.

From our work across the public sector we know that construction, property and facilities management are still costing too much. Addressing these issues is one of the more effective ways to reduce costs overall, without impacting front-line services. Political pressure has the potential to constrain ‘spend to save’ opportunities - this is where bold leadership will be needed to drive through initiatives where the business case clearly stacks up.

On both a regional and national level, public sector organisations will need to show joined-up thinking and embrace innovation to unlock value from their built assets, for the benefit of local communities. Here we look at areas of opportunity for the public sector in 2011.

Local Government

In local government many people are finishing the year looking inwards, focusing on their saving commitments, the practical impacts of the changes on individuals, and working out the impact on their specific authority. The trend for 2011 seems to be to bring forward the savings targets, seeking to secure the efficiencies early, in many cases so that members can start planning towards the next election cycle.

There are some bright prospects within this challenging environment. Some will be using this process to address issues previously parked in the ‘too difficult’ box, so 2011 should start to see compromises replaced by robust solutions on services, processes and assets.

Expect to see tough political challenges brought to the fore such as highways asset management, clarification of the crossover between local government and health (particularly in the area of social care and adult safeguarding) and some of the old chestnuts such as the library service being reformed.

It should also be the year that we see public bodies really working together to share services and assets in an effective manner, focusing on enhanced supply chain management and integrated solutions.

Health

In health, efforts and concerns will rightly focus on organisational change and the efficiency requirements.

Innovative trusts are embracing opportunities - such as our four week rapid diagnostic assessment - to use private sector expertise and benchmarking information to deliver major change programmes and release cashable efficiency savings across the whole asset lifecycle.

There is a real sense of urgency within the sector as without action, the financial viability of many Foundation Trusts will be strained within just 12-18 months.

Private sector providers are working with tighter margins and reduced corporate operational headroom but increasingly there are signs that proven and well regarded brands are growing. We expect to this trend develop further in 2011.

Primary care reorganisation will take time to not only arrange but bed in during the second half of 2011. It is hoped this will enable closer commissioning to patients’ interests.

Affordable Housing and Regeneration

The affordable housing sector has had a difficult couple of years. Registered providers know there is hope for the future but don’t quite know how to get there yet. The main challenges for the affordable housing sector in 2011 will be how to:

Develop new homes

• Green existing and new housing
• Increase operational efficiency
• Effectively structure finance
• Mitigate the impact of the VAT increase in the New Year.

There is also some concern about how to respond to changes in regulation. It will take a while for registered providers to get their heads around the new conditions for development, but when they do the whole concept will
fly. We predict there will be more mergers; more sensible procurement (leveraging existing frameworks); and new entrants into sector from private sector.

Some innovative providers are already acting to ensure their organisational structures are effective and efficient, developing contemporary service delivery models, underpinned by effective property solutions, to maximise the benefits for their communities. We believe this sort of activity will increase in 2011.
We are also seeing developers starting to talk about building houses again, particularly in the South East. With commentators more confident that there is no ‘double dip’ on the horizon, hopefully we will start to see regeneration increasing in 2011.

Education and Children’s Services

In education and children’s services we will see an increasing number of ‘new’ providers in 2011, examples being the sponsors/promoters of free schools. A degree of uncertainty exists within local authority departments because they don’t see the degree of policy direction or know what the immediate future holds financially. However, education is always going to be a priority and will therefore be funded, if not at the record previous levels.

In the further and higher education (HE/FE) sectors, there is a lack of clarity over medium to long term funding. However, we are just beginning to see an acknowledgement of the ‘efficiency’ agenda breaking out rather than just a
constant requirement for more ‘input’ (in the form of cash grant/unit/ fee income). This is encouraging, but there is a great deal more to do. One of the challenges for the sector’s leadership in 2011 will be to find the resources to enable ‘invest to save’ initiatives - as there is real opportunity here.

While local authorities don’t operate HE/FE, they are closely linked in terms of the local provision, strategy and socio-economic well-being of the locality and as such the two have absolute synergy and should increasingly look to work together.

Central Government

With major cuts announced in the Spending Review across central government, identifying and generating savings from property and facilities management will be an absolute priority.

In 2011 we should expect to see workplace transformation projects across all departments and Non-Departmental Public Bodies. Examples such as the Department for Education’s Sanctuary Buildings and the BIS property rationalisation have demonstrated the major savings and productivity improvements that can be achieved.

We are also likely to see greater usage of the Buying Solutions frameworks across pan-Whitehall facilities management procurement, as a more efficient and effective way to deliver capital management.

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