Labour needs to get serious about tackling government waste

by David Butler

With memories of seasonal excess still fresh in the mind, it is perhaps a good time to talk about waste. Waste reduction (or efficiency) is too often given as an easy means of freeing up funds; rarely is life so simple. However, there are opportunities for savings, both public and private, and a number of ancillary benefits available from a good waste reduction strategy.

In their pre-Christmas report on the Government Accounts 2011-12, the National Audit Office highlighted over £20bn worth of fraud losses in the public sector with £13bn in write-offs due to fraud and error. This, combined with the long-term funding pressures on the government coffers put a premium on waste and fraud minimisation.

One means of reducing fraud and waste is to improve the whistleblowing culture. At a recent meeting of the Communities and Local Government Committee, Head of Counter Fraud at the Audit Commission, Alan Bryce told MPs that fraud prevention relied on whistleblowers. Last June, the law was reformed in the Enterprise and Regulatory Reform Act 2013 to give protection to workers judged to reasonably believe that exposures are in the public interest. While this protection is welcome, the lack of definition and guidance over the exact meaning of public interests means that it will be left to individual employment tribunals. A government interested in fostering a whistleblowing culture should  offer up clearer guidelines in consultation with trade unions, employers and legal experts. In public procurement, central and local government should ensure that whistleblower protection and clear channels for highlighting issues are built into contracts. Changing a cultural norm is not simple, but further legal changes and smart public procurement are a good beginning.

Waste can occur within hierarchies due to knowledge often being dispersed within an organisation. Some hierarchical structures are not necessarily conducive to aggregating knowledge. As Chris Dillow suggests, decentralisation of functions within government may help resolve these issues. This means that experimenting with new means of delivering public services, such as the Lambeth model, or, more prudently, applying the methods that led to the model. It also means that the Party should resist the urge to ditch the use of market mechanisms within the public services whilst rethinking some of the less successful iterations of PFI.

Within the public sector, technology offers new opportunities for waste reduction as set out in the new IPPR report Building Tech-Powered Public Services. The author Sarah Bickerstaffe highlighted a number of case studies and lessons for using technological innovation within public services. For example, ‘Digital pens’ used by the United Lincolnshire Hospitals NHS Trust to record data about patients have reduced administrative burdens on staff and improved productivity. Elsewhere, ADL Smartcare, pioneered in Sheffield, has enabled 10 per cent of staff to be redeployed in other areas through allowing staff without training in occupational therapy to make initial assessments of patients. Innovations like these can ensure that resources and workers can be employed more effectively within the public sector.

It is worth remembering that waste is present in the private sector too. Improving entry and exit of firms from markets is vital for weeding out inefficiency. This means bulking up the competition authority and thinking carefully about the barriers to entry potentially created by new regulations within a sector. As Disney, Haskel and Heden found in their study of UK manufacturing 1980-1992, ‘external’ restructuring (exit of inefficient firms and entry and growth in market share of efficient firms) accounted for 50% of labour productivity growth and 90% of total factor productivity within the period. Improving the working of markets, including firms entry and exit, needs to be part of a waste reduction strategy.

Waste reduction, as a political topic, manages to combine facile platitudes with a copious amount of unsexy detail. Despite this, it is imperative in an age of austerity that substantial efforts are made to minimise waste (and fraud) across the economy through technology, decentralisation and whistleblowers. The potential of more efficient and effective public services and a better whistleblower culture mean Labour must invest in a waste reduction strategy.

David Butler is a Labour party activist

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One Response to “Labour needs to get serious about tackling government waste”

  1. uglyfatbloke says:

    Fraud is important and Ed should certainly be on the case, but the wilful waste is really much more significant…HS2, the replacement plan for Trident and the ludicrous new tank programme (Britain has n’t built a decent tank since Centurion) will cost a fortune and achieve nothing of any value. The same goes for the two carriers, but it’s probably too late and we will end up with two massive white elephants.

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