Ian Hasdell: 50,000 job losses – the harsh realities hit the public sector

As we countdown to the Emergency Budget on June 22, it is already very clear that leaders in the region's publicly funded organisations will face many tough choices in the coming months.

The new coalition Government is starting at pace to demonstrate its commitment to implementing its ideas for dealing with its biggest challenge – reducing the UK's enormous debt. According to the European Commission, this is likely to hit 12 per cent of GDP during this year – larger than that of any EU country, including Greece. That is a very worrying prediction.

In Yorkshire and the Humber, more than 50 per cent of the economy is either in the public sector or directly funded by it. That is now unsustainable and the region's public sector, its supply chain and stakeholders should be bracing themselves for further high impact measures in the Emergency Budget, on top of the spending cuts already announced.

Spending priorities will need to be revised sharply downwards, translating into year-on-year real terms cuts in expenditure of at least 30 per cent over four years and perhaps more, depending on the extent of the protection afforded to front line services such as education and health.

We should expect commercial-isation and externalisation to become the new vocabulary of the public sector in the region.

Among the measures that the government will be considering putting in the Budget for public sector organisations in our region are a set of mandatory actions such as making it compulsory for the public sector to outsource non-core activities; share common services – particularly back office ones – between public sector bodies; sell surplus land and buildings; cancel large IT projects and properly collaborate on the procurement of goods and services.

There is also a chance that the Government will insist that public sector organisations deploy less than 15 per cent of their expenditure in the back office – compared to the typical profile which, for many, is around 40 per cent.

The new Government will also be keen to address the productivity deficit of the public sector in this region and elsewhere because lowering the cost base of the sector alone will not be enough.

According to the Government's figures, productivity in the public sector has fallen by just over three per cent in the last decade, which

has simultaneously seen sustained cash growth.

The net consequence is that many public sector organisations are fast becoming financially unviable as organisations.

The new government recognises that this productivity deficit must be reversed.

In relation to the region's councils – collectively the largest part of the direct and indirect expenditure in question – they will simply have to stop automatically defaulting to a service provider role, whether

the domain is internal services or those outward facing services that are provided for local residents.

There has to be a greater recognition that businesses, charities,

social enterprises or a combination of providers can deliver much

better citizen outcomes at lower cost.

Our councils will need to address more actively the public mood which is increasingly sceptical towards local government, and its high levels of spending, with recent research showing that less than one-third of

people agree that they receive good value for money from their local council.

The only logical outcome of this austerity drive across the sector is that there will be major reductions in the public sector workforce over the next two years and beyond – with at least 50,000 such jobs at serious risk in the next 12 months.

But the new agenda also offers positive change and opportunities for public sector organisations in the region.

Austerity can be a creative platform for increased efficiency,

productivity and financial self-sufficiency, resulting in better

outcomes for local residents.

Additionally, the new Government is speaking a language of localism and devolution of power, which may result in a regional public sector that is more responsive to the needs and priorities of the areas and people that it serves.

A great example of this is the proposed general power of competence for councils which has the potential to free them from much of the control currently exercised by Whitehall, offering them greater decision making autonomy. Many in local government will want to see this introduced quickly.

Overall, I am hopeful that this could just be the start of a golden age of modernisation, innovation and transformation of the region's public sector bodies.