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Deloitte and Reform release road map for public-sector reform

A new report suggests five overlooked ways for the government to tackle the deficit.

In a new report entitled The State of the State 2012, the business advisory firm Deloitte and Reform, a think tank, suggest five rarely acknowledged areas for public-sector reform in the UK. 

The timely publication – which follows David Cameron's speech on Tuesday reaffirming the government's commitment to "getting our deficit down" – claims that up to £8.5bn per year can be saved by bringing public-sector fraud prevention and detection rates in line with those in the private sector.

By reducing levels of aged and written-off debt and improving working capital management to repair its balance sheet, the government can save up to £10.2bn per year by improving cash management.

Looking at areas of spending under pressure from demographic changes, such as welfare and health, and examining further asset sales, including infrastructure, would also help the government reduce its net liabilities and achieve surpluses in the next parliament, Deloitte and Reform argue.

Meanwhile, the report says that the government should aim for a public-sector productivity growth rate of at least 0.3 per cent in 2012 by improving flexibility and accelerating changes in the workforce and capital spending. It must press ahead with reducing the public-sector headcount and transferring workers to mutuals, ensuring this is sustainable with improvements to skills and capability.

Finally, Deloitte and Reform suggest that the government should increase the proportion of locally raised council spending year on year and improve financial management skills at the local level.

David Cruickshank, chairman of Deloitte, said:

The government’s borrowing target is on track but the arithmetic is finely balanced and the margin for error is very small, particularly with the current levels of economic growth. Fiscal plans hinge on finding ways to unlock corporate investment. Business certainly has a role to play but the state must also consider how it can make its own contribution to fiscal sustainability through productivity improvements.

Mike Turley, public-sector industry leader at Deloitte, said:

In these tough times, it is vital that the state takes a lead from the private sector and looks at how it can be more rigorous. When large corporates face cost pressures, they confront every area where cash is lost unnecessarily. Cash is king for them and it should be for government.

Andrew Haldenby, director of Reform, said:

Eliminating the deficit in this parliament is only half the battle. The UK needs continued austerity in the next parliament and very likely beyond to get the national debt down to safe and affordable levels. That must mean tough decisions on health and welfare entitlements, plus a rigorous reform of the public-sector workforce in order to transform its productivity.