What is it?
In last year’s comprehensive spending review, the government set Whitehall departments and local authorities an ambitious target to improve value for money across the public sector.
This was to collectively make savings of £30bn a year by 2010-11 on 2007-8 spending levels, through improved use of resources, smf to make all of this money available for frontline services.
This amounts to a target saving of 3% a year from 2008-11, higher than the 2.5% set for councils and their public sector counterparts from 2005-8.
In practice the target is tougher still, as the entirety of the saving must be “cashable” – that is to say it must actually save money. This rules out achieving greater value for money for existing levels of spending.
In 2005-8, public bodies were only required to make half of their saving “cashable”. (For more on this, see What is efficiency?)
While all governments have periodically sought to improve value for money for public expenditure, the current administration has put a particular focus on efficiency, at least since 2003 when it commissioned Sir Peter Gershon to carry out a review into public sector efficiency.
Prior to the review, all government departments had been set value-for-money targets, while the Best Value regime, introduced in 2000, set a target of 2% annual savings for local government.
However, the significant investment of the 2002 spending review, which included a 7.3% real terms rise for health and a 6% increase for education between 2003-4 and 2005-6, increased the premium on demonstrating money was being well spent.
The Gershon review reported in 2004 and was released to coincide with that year’s spending review, which set out government expenditure plans for 2005-8.
As part of this, public bodies were collectively ordered to make £21.5bn of annual efficiency gains by 2007-8 on a 2004-5 baseline. For local government, the total annual saving required was £6.45bn, though 40% of this total would apply to schools and 15% to fire authorities, leaving 45% to councils (around £3bn).
In November 2004, councils received an information pack detailing how the efficiency programme would work.
They were asked to provide an annual efficiency statement detailing how much they had saved the previous year across each service area and their corporate activity, and how much they expected to save in the coming year.
The Audit Commission would assess these statements as part of the use-of-resources section of the comprehensive performance assessment.
What is efficiency?
Public sector efficiency can be seen as the ability to translate a given level of resource into the best possible outcomes for service users, with the least possible waste.
Gershon divided efficiencies into two types: cashable and non-cashable savings. The former involve reducing the level of resources required to achieve a given outcome; the latter means improving outcomes for a given level of resource.
Gershon calculated that over 60% of his £21.5 billion target was cashable, releasing resources that could be ploughed into frontline services, while non-cashable savings should also benefit users by improving outcomes.
Gershon saw a variety of areas in which public service bodies could make efficiencies.
1. Back office services such as finance, human resources, facilities and IT support:
· Gains could be made by standardising processes and sharing services across and between organisations.
2. Procurement, including the purchasing of social care
· Gershon argued public sector procurement was in need of improvement and could provide savings in various ways, for instance by public bodies pooling their procurement functions on a regional basis.
3. Transactional services such as dispensing benefits
· Savings could be made through one-stop shops enabling people to have face-to-face contact with a variety of service providers under one roof, and making services available online.
4. The impact of government policy, funding and regulation on bodies delivering public services
· Efficiency gains could be made reducing the burden of regulation on providers and cutting the number of civil servants involved in regulatory activities. In total, Gershon identified scope to cut 84,000 civil service posts.
5. The productive time of frontline staff
· Frontline workers could be freed from administrative work through hiring more support staff and investing in IT.
What has been achieved?
According to the government, this has been successful. In October 2007, when it published the comprehensive spending review, the government said that annual efficiency gains had already topped £20bn putting the state on target to surpass the £21.5bn figure.
Councils achieved their efficiency target a year early – by the end of 2006-7, they were reporting cumulative efficiency gains since 2005 of over £3bn, and in 2007-8, they were forecasting further efficiency gains of almost £1.2bn.
In adult social care, councils recorded £111m of efficiency savings in 2004-5 (£81m of which was cashable), £203m in 2005-6 (£132m cashable) and £212m (£175m cashable) in 2006-7. They predicted making £232m (£204m cashable) in 2007-8.
In children’s services, councils recorded £51m (£38m cashable) in 2004-5, £76m in 2005-6 (£60m cashable) and £94m (£74m cashable) in 2006-7. They predicted making £99m (£89m cashable) in 2007-8.
In adult social care, council efforts to secure efficiencies has been supported by the Department of Health’s Care Services Efficiency Delivery team.
This was originally treated with some suspicion in the sector because it was based in the DH’s commercial directorate. This meant civil servants, mainly from private sector backgrounds, were advising directors with lengthy careers in social work on how they should be making savings in social care.
A much more co-operative arrangement ensued after CSED was transferred in 2005 to the DH’s Care Services Improvement Partnership, which is responsible for promoting improvement in social care.
CSED has launched a number of programmes to support councils drive efficiency in adult social care:-
- Home care reablement – reablement is designed to ensure people who enter the care system – for instance after a hospital discharge – regain as much independence as possible as quickly as possible. It is based on short-term interventions – which tend to combine intensive home care with occupational therapy – which should limit people’s need for ongoing care services. Reablement is becoming increasingly prominent across all English councils, and CSED’s research shows it has been successful in reducing demand for care.
- Assessment and care management – this has examined ways for councils to streamline their assessment and care management processes, including having a single point of contact for all incoming referrals.
- Demand forecasting and capacity planning – this is designed to help councils predict future demand for adult care services and ensure there is sufficient supply of services to match this.
- Better buying – this is designed to help councils achieve efficiencies in the commissioning of home care services by providing councils with tools to cost services and procure services in the most efficient manner, for instance by “zoning” – where providers cover particular local areas.
- Effective monitoring and modernisation of home care – this is designed to help councils monitor their contracts with home care providers, through an automated system for monitoring the time spent by home care workers in delivery services, backed by automated invoices, scheduling, payment and payroll.
- Transforming community equipment and wheelchair services programme – this promotes a “retail” model for delivering community equipment services and wheelchairs under which service users deemed eligible are given a prescription which they can take to accredited providers. The idea is that removing councils’ provider role will release resources, and that a market model will provide users with more choice, incentivising service improvements. However, concerns have been raised by the Association of Directors of Adult Social Services over the level of efficiency savings that can be conceivably accrued, with councils still responsible for carrying out assessments.
· The Office of Government Commerce is responsible for supporting and monitoring the efficiency programme.
· The Audit Commission is responsible for assessing efficiency in local government.
· The Improvement and Development Agency supports councils in making efficiencies.
Social care sector disappointed by Brown’s plans for efficiency savings
Health department efficiency shake up
Adult services top choice for savings
Training chief blasts lack of social care expertise in health
Efficiency gains fail to fill in black hole
Directors call for cuts to be realistic
Gershon requirements puts voluntary sector at risk
Cut sickies to meet efficiency targets
Hunter questions capacity for efficiency savings
Efficiency teams swoop on councils
Echoes of past as departments try to balance savings and delivery