Brown's savings plan How will GBP12bn of cuts impact on services?

THE GBP3bn efficiency savings Gordon Brown has announced inaddition to those already outlined in the Budget are the warm-up actfor tomorrow's Pre-Budget Report (PBR) and the starting point for anelection campaign that will be a battle over fiscal responsibility.

The size of the government deficit - to be confirmed in the PBRas more than GBP175bn this year - has sharpened the appetite forpublic spending cuts, particularly if there is also a cull of veryhigh earners.

The Prime Minister's plans for "smarter, more efficientgovernment", intended to release in excess of GBP12bn a year overfour years, play unashamedly to the gallery. A review of toplevelcivil service pay to achieve a 20per cent cut in senior salaries isbilled as preserving excellence at the front line while makingsweeping changes in administration. In theory, this has thepotential to slash bureaucracy without substantial damage to thequality of services. In practice, however, this sort of pay cutcannot be achieved in the short-term without expensive severancepackages which produce the double whammy of spending public moneyfor a loss of expertise.

Plans to cut consultancy fees by 50per cent and marketing by25per cent also promise much at first glance. The rising bill forconsultants suggests that much of the work we expect our highlypaidpublic servants to do is being farmed out. On the other hand, somedecisions require highly specialist expertise. With 123 quangos alsolined up for execution, there is a need for objective assessment ofhow to secure the best advice and regulation of services.

The potential to save GBP600m in the cost of telephone calls andpaperwork from putting more services online is a case in point.There are massive problems with the NHS IT programme in Englandwhich are likely to lead to the system being set more modest goals.Therefore, the figure for targeted savings must be questioned. MrBrown's confidence in his figures is the result of expert advicefrom the internet entrepreneur Martha Lane Fox.

Putting services online ought both to cut costs and improveaccess, producing long-term benefits and savings. The same is trueof the proposal to transfer around 10per cent of civil service jobsfrom London to "cheaper locations". There is a severe housingshortage in London and the south-east of England and a lack ofhigher value jobs in much of the rest of the country, so transferwould have important long-term benefits. In the short-term, however,the savings to be made from cheaper office accommodation must beoffset against the costs of relocation and the slump in the value ofcommercial property which will reduce gains from the sale of Londonoffices and other assets.

The requirement for ministerial approval of all public servicesalaries over GBP150,000 will be popular, but the argument that therewards for those at the most senior levels must be competitive hasbe taken seriously if public services are to attract and retain high-quality staff.

The most important question is how GBP12bn taken out of publicservice costs will affect services. Detail is required because thegovernment's claim that it has already saved GBP26.5bn since 2004through the Gershon review seems to be over-optimistic, given thequestions asked about many reported savings by the National AuditOffice in 2007.

Efficiency savings must be made but if the election campaign isto become a bidding war of public spending cuts, it is essentialthat the risk to frontline services is fully assessed so that thosewho depend on these services are not harmed by a programme ofefficiencies.