Magazine article Management Today

Why Can't Government Be More like Business?

Magazine article Management Today

Why Can't Government Be More like Business?

Article excerpt

With the bottom line their constant judge, companies chase efficiencies and cut costs with relentless determination.

But can their methods win similarly positive results for public services, asks ANDREW SAUNDERS.

Just how business-like should government be? The question dates back at least as far as Margaret Thatcher's attempts to slim down the apparatus (and budget) of state in the 1980s, and it is currently dominating the thinking of our new coalition leaders, too.

For, as the UK labours to get out from under the burden of its historic deficit - set to hit pounds 1trn next year - radical reform of the public sector is once again right at the top of the agenda. Cuts in public spending of the order of 30% to 40% over five years are expected in order to bring our enormous debt under control. And when it comes to the knotty problems of doing more for less, it's axiomatic these days that the soft, flabby and overmanned public sector needs some urgent lessons in efficiency from its lean, mean, fit-for-purpose oppo's in the private sector.

Who knows more about cost-cutting and efficiency savings, after all - Whitehall bureaucrats, whose profligacy is legendary and whose status is measured by the size of their budgets, or captains of industry, for whom every penny spent on overhead is one less to invest or put in the bank?

PM David Cameron's view on this is plain - when he appointed BHS billionaire Philip Green to cast his entrepreneur's eye over incompetence and overspending in the public sector back in August, the message to the nation's beleaguered public servants could hardly have been clearer.

'There's a new sheriff in town,' he might as well have shouted from the rooftops. Only instead of a ten-gallon hat, spurs and a six-gun, this one was sporting a calculator, a brash suit and a merciless eye for saving money.

Of course, it is undeniable that public spending is crying out for a bit of commercial rigour. What private firm would have signed up to the pounds 12bn white elephant that was the NHS programme for IT, for example? Or all those PPP schools and hospitals, which we'll probably be paying for long after they have been knocked down and replaced? And would a profit-seeking service company really have been able to get away with claiming, as HMRC tried to recently, that there's nothing wrong with a system in which 6.5 million people have been paying the wrong income tax?

'There are large areas of public policy that can be quantified and objectified. In these cases, business principles can be applied very successfully,' says Lord Heseltine, who has experienced life on both sides of the divide as founder of MT's parent firm, Haymarket Group, and during a career as a Conservative Cabinet minister for nearly all of the 18 years from 1979 to '97. 'If you are building a road, for example, comparative data is available and you should be able to work out how much it is going to cost you per mile.'

But not everything in government is as simple as that. When it comes to notoriously complex and multidimensional challenges such as providing healthcare and education, just how far will the commercial metaphor stretch? Are business and government really comparable? And how successfully do tried-and-tested tricks and techniques for oiling the wheels in the private sector fare when asked to do the same for vast, complex and lumbering machinery of state?

'There are huge differences between business and government,' agrees Heseltine. 'Business has a very clear discipline in the bottom line. And while companies do do things that are not directly related to maximising profits, the cost of these 'non-essential' activities is clearly revealed by the management and accounting systems. It is all very simple. Government is not at all like that - the only bottom line is getting yourself re-elected. The thing that's missing in government is the absolute certainty of profit and loss. …

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