Whichever party wins next month’s UK election, austerity will continue. Experts tell Will Green that public purchasing will play a crucial role.
The starting gun has been fired in the race to take control of the nation’s finances, but what could a change in administration mean for procurement?
Chancellor George Osborne set the tone by describing in the budget that borrowing for 2014/15 was £90.2 billion, but under a Conservative government would fall to become a surplus of £5.2 billion in 2018/19. This would involve spending cuts of £30 billion.
Labour leader Ed Miliband attacked the chancellor for failing to fulfil a 2010 pledge to eradicate the budget deficit within five years, and said the Tories were “planning massive cuts”. But whoever is in power after 7 May will face the challenge of cutting spending if they are to reduce the deficit, as all the major parties have promised to do.
During the first televised ‘encounter’ featuring Miliband and prime minister David Cameron, the Labour leader said: “There will have to be spending reductions outside priority areas like health because we have to get deficit down.
More of the same?
The Conservatives told SM they could not yet provide details on future procurement policy, but judging by the past five years SM anticipates more of the same.
A Cabinet Office report published after the autumn statement said there was potential for savings of £15 to £20 billion in 2019/20 through increased uptake of digital services, selling off government property, tackling fraud and expanding the work of the Crown Commercial Service (CCS).
Bill Crothers, the government’s chief commercial officer, says he has an “aspiration” that CCS take on £10 billion of central government spend over the next five years, up from £3 billion currently. He says the big challenges are around capability, becoming a better customer and better supplier performance.
“My reading would be that driving commercial competence, efficiency, sensible procurement and contract management will be common whatever government it is,” he says.
This appears to be borne out by Labour’s task force on public procurement, which appears to build on the work of the Cabinet Office. It recommends a “professionally resourced procurement and contract management function within the civil service” and says “a Labour government’s approach to public procurement needs to be strategic rather than ad hoc”. It includes targets for SME spend and the promotion of social value in tendering. The party has also carried out a “zero-based review” of public spending, referred to by Miliband, which says at least £172 million a year can be saved by forcing police forces to purchase jointly and more than half a billion pounds could be saved through greater purchasing collaboration by councils.
In another report Labour says: “While the CCS is expected to achieve efficiencies in terms of items of common repetitive spend, the emerging view from Whitehall is that its existence will not help to get the professionalisation of department’s procurement in order.”
CSS ‘key to reform’
However, Colin Cram, a procurement expert and advocate of centre-led purchasing in the public sector, believes the CCS is key to reform. He says public procurement represents around 12-15 per cent of UK GDP and while the government has policies around this spend, it does not have the means to implement them.
“Government is talking about getting value, reducing the costs of procurement, getting social benefits, apprenticeships, and still don’t have a mechanism for implementing those,” he says. “They can’t control local government spend and how well that is done, they can’t control how well NHS procurement is done.
“You need a model where some things are done centrally. Some will be geographically based and some things are done locally. You would probably need it under the umbrella of something like the CCS, but could give an amount of devolution.”
Such geographically-based purchasing is exemplified by the government’s announcement that Greater Manchester Combined Authority will be taking control of its health spending.
Steve Burton, head of category, social care and health, at ESPO, one of the UK’s largest public sector purchasing consortiums, says local government faces a “challenge” in procuring health services. “But it is also a great opportunity,” he says.
“Whatever the complexion of the government, austerity looks set to last into the next parliament,” he says.
Nick Temple, deputy chief executive at Social Enterprise UK, agrees austerity will be central. “How do you do more with less?” he says. “How do you get innovation in procurement and transform services so you can improve efficiency, but in a sustainable way? Otherwise we’re on a race to the bottom.”
The CBI says “major structural change” will be needed in public services to cope with an ageing population and tighter purse strings. “The next government will need to find essential cost reductions while embedding a culture of innovation in public services,” says a spokesman. “Procurement teams have a crucial role in securing these goals.
“Any shift in delivery – such as integrating health and adult social care services – will need government to adopt more collaborative relationships with its suppliers. The next government must ensure staff have the commercial capabilities, knowledge and leadership to get the best results from these reforms.”
Burton agrees the challenge is delivering more for less but is concerned about “unrealistic expectations”, while Temple calls for stability. “Central government can have a direct effect on how these services are procured at a local level, through changing the infrastructure,” he says. “I think a lot of our members would not have a particular beef with any particular party but would say some consistency and no massive changes would help them know what they’re going to have to respond to.”
Cram is concerned by the possibility of a minority government. “If you get a paralysis, then you’re going to have a major problem because the civil service will struggle to get decisions from politicians. The civil service will maybe run slower in reforming itself. This is about fundamental reform of the way you manage procurement. It never used to be, but it is now because procurement represents 25 to 30 per cent of public sector spend.”
Crothers pays tribute to cabinet minister Francis Maude for “taking a bold stance” in terms of government procurement but believes “this agenda of commercial capability and improvement has to a large degree become depoliticised”, symbolised by the appointment of John Manzoni to the new post of chief executive of the UK civil service. “He has taken on the mantle” says Crothers. “This is the civil service sorting this out.”