Magazine article Public Finance

When the Going Gets Tough

Magazine article Public Finance

When the Going Gets Tough

Article excerpt

The publication of the government's Comprehensive Spending Review confirmed that incredibly tough times lie ahead for local authorities and other providers of public services, with cuts set to be every bit as severe as expected.

Even organisations that have been implementing changes ahead of these cuts will now need to ramp up their activity and make some tough choices.

As an insurer that works across the entire public sector, Zurich Municipal has been aware for some time that the risk landscape is changing, for local authorities in particular. Councils' responsibilities have broadened under the remit of 'local leadership' while their budgets were already being squeezed under the 'more for less' agenda.

In 2007, Zurich conducted research via Ipsos Mori to investigate what service providers and the public thought were the most challenging risks facing the public sector. We found that ' partnership working ' was the most significant concern, as more organisations started to work together to provide services.

This year - on the back of recession, increased demand on services and further anticipated cuts - Zurich again joined forces with Ipsos to take a deeper dive into the public sector risk landscape and find out what this means for public service providers and the communities they serve.

Our report, Tough choices: different perspectives on the long-term risks facing the public sector and wider civil society, looks at the risks likely to emerge over the next five years in local government, community and social organisations, education, housing, police and fire services and health.

We surveyed public sector leaders, risk professionals and the general public and considered these views alongside our own risk insights. The aim was to give a holistic pan-public sector view on the main risks that the sector and wider civil society organisations need to address.

For local authorities changing their organisational structure as they prepare to commission and outsource major services, the case for robust governance controls has never been clearer. Tough choices emphasises the need to develop authorities' organisational resilience, to help them foresee and withstand the main difficulties arising.

We identified six main themes that local authorities needed to address as a priority: the impact of budget cuts; the downside of short-term decisionmaking; the growing risk of reputational damage; the need for multifaceted workforce planning; the dramatic rise in supply chain and partnership arrangements; and an increase in continuity and resilience problems.

Our research showed that there is a 'triple front' of emerging problems for those responsible for providing public services: the impact of budget cuts; increasing demand for services; and uncertainty about implementing the government's 'Big Society' agenda, where volunteers and voluntary organisations are expected to fill the services shortfall.

While cost pressures naturally top the table of concerns, there are other associated difficulties driven by drastic budget reductions. The severity of the cuts might force potentially shorttermist decision-making.

Workforce savings will invariably be sought. However, redundancy programmes can lead to an overstretching of resources and loss of key talent, particularly in the absence of a strong succession plan. These effects can in turn quickly lower workforce morale and have a detrimental impact on service quality.

The impact of job losses might potentially be felt twice over if those affected become dependent on the state, putting further pressure on the very services they used to provide. …

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