With the axe hovering over public sector jobs, Public Finance magazine’s Mike Thatcher argues that it’s vital to retain qualified accounting staff at all levels in order to keep financial discipline

Whoever eventually gets the keys to 10 Downing Street following the continuing coalition talks following last week’s General Election, there will be one definite loser.

The public sector will suffer unprecedented reductions in spending over the next parliamentary term. Chancellor Alistair Darling admitted that, if re-elected, Labour’s cuts would be ‘deeper and tougher’ than Conservative Margaret Thatcher’s were in the 1980s. Labour want to halve the £167bn budget deficit within four years and has passed the Fiscal Responsibility Act to provide a firm and binding statutory basis for the reduction.

Meanwhile, shadow chancellor George Osborne has indicated that a Conservative administration would reduce the deficit more quickly. Labour would not begin cutting until 2011/12, to avoid choking the recovery, but Osborne believes at least £12bn can be found from efficiency savings alone in 2010/11. A Conservative victory at the polls will signal the end of ‘big government’, he claims.

Tough times ahead

Few public servants, however, see much of a distinction between Labour and the Conservatives in spending terms. Town halls, NHS trusts, government departments and quangos are preparing for the worst. They are hunkering down, freezing recruitment and aiming to look lean and mean for the dark days to come.

In local government, particularly, largescale redundancies are already planned. Birmingham City Council has announced 2,000 job losses, while a further 1,500 will go at Nottinghamshire County Council. In the NHS closures of wards and accident and emergency departments are proposed with a consequent impact on staffing levels. The government has been careful to stress that frontline staff will be given some degree of protection. It issued a White Paper late last year entitled, ‘Putting the Frontline First: Smarter government’.

Nurses, teachers and police officers are viewed very differently from the ‘backoffice bureaucrats’, including finance staff, whose numbers have grown rapidly during the boom years. Public bodies will be expected to share back-office services and, in some cases, to work under combined management teams. So there is likely to be huge pressure to reduce the headcount of accountants across the public sector. But there are strong arguments as to why this pressure should be resisted.

The prime goal for the next government is to reduce the deficit while ensuring that services do not deteriorate. Every penny has to be spent wisely and every public servant has to be deployed efficiently and effectively. But this requires proper financial oversight by experienced accountants. Politicians accept this argument in theory – whether they put it into practice will become apparent soon.

Labour ministers have for many years championed the professionalisation of the civil service including an expansion in the number of qualified finance staff. It may seem strange to private sector accountants, but it is only relatively recently that all Whitehall departments have complied with the requirement to have a fully qualified finance director.

Professional standards

The days of the gifted amateur are, thankfully, now behind us. The government recently claimed that a more professional approach in Whitehall had helped to reduce spending on management consultants by 30% over two years. With ‘Putting the Frontline First: Smarter government’ calling for a further 50% reduction in the use of consultants, there is an even greater need to recruit more financially qualified permanent staff.

The Tories, too, have lauded the finance professional. Osborne, for example, made a speech last year to the Institute of Chartered Accountants in England and Wales in which he called for a new ‘culture of financial discipline’. The role of central government finance directors should be strengthened, he suggested, ensuring that they are second only to the permanent secretaries in the hierarchy of power.

This argument applies at all levels and across all public services. The finance professional in local government has a particularly important role to perform. Councils are facing increasing demands – for social care, housing and council tax benefit – while their income is falling.

Councillors will need accurate financial information to help them take very difficult decisions. This will be much harder if the accountants have already left the building. Greater financial discipline in the public sector will need to be implemented by qualified accountants. Arbitrarily cutting the finance function would be a shortsighted and ultimately self-defeating move.