With public funds tight, organisations are finding new ways around the shortfall.
Since 2010, the public sector has struggled with the impact of funding cuts. Local authorities’ grant from central government has been reduced by nearly 50% in that time, while per-pupil funding to schools has dropped by 8%.
As a result, public sector organisations have resorted either to dipping into reserves or offering a reduction in service. “Some local services have been pared back to the bone,” says Don Peebles, head of policy and technical at CIPFA. In 2018, for example, nearly 130 public libraries were closed, while volunteers run the others.
Other local authorities have moved from weekly to monthly bin collections. Schools are cutting back on cleaners, turning off the heating and resorting to crowdfunding to pay for textbooks. Cuts to the NHS’s capital budget mean that some hospitals have stopped repairing damaged buildings or buying vital equipment.
A new approach
But some public sector bodies have taken a different approach, looking for innovative ways in which to save money or even generate new income, without cutting vital services. It means that the skillset of a public finance professional has changed, says Peebles: “A finance professional now is likely to be more commercial and have more regard to how they can innovatively use their skills. It’s not just traditional stewardship of public money, which was always the guardian role that public finance professionals had played.”
1. Taking advantage of low-interest rates to buy property and rent it out
Since 2016, Spelthorne Borough Council has borrowed more than £1bn from the PWLB to fund the purchase of properties. It sees a return of 4.90% – nearly £10m in 2018/19.
2. Outsourcing back-office functions to the private sector
In 1999, National Savings and Investments (NS&I) outsourced IT Services to Siemens Business Services (since acquired by Atos), resulting in savings of £530m over 20 years.
“Not only can you control costs differently because you are procuring private sector rates that might not have public sector terms and conditions applied to it. You can also manage the contract differently and can bring service benefits to boot,” says Peebles.
3. Cloud computing – paying for third party storage and applications
Leeds City College has saved £750,000 by storing information on Google Drive rather than on a local server, and a further £1.35m by purchasing lightweight Chromebooks for students instead of conventional laptops.
4. Shared services: grouping together to share back-office functions
Hertfordshire, West Essex, Bedfordshire and Luton Clinical Commissioning Groups (CCGs) set up a shared HR service in 2014. In the first year, the service generated a surplus of £50k.
The Shrewsbury and Telford Hospital NHS Trust now provides both payroll and procurement services to the Robert Jones and Agnes Hunt Orthopaedic Hospital NHS Foundation Trust and the Shropshire Community Health NHS Trust. The procurement team made savings of £1.8m in 2017/19 through its adoption of lean methodology techniques.
5. Replacing paper processes with digital ones
Ashford and St Peter’s Hospitals NHS Foundation Trust has saved £3m a year by replacing its paper-based patient record system with an electronic version. The savings come from a combination of administrative costs, improved clinical efficiency and released storage.
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