Is it safe to make cuts in the current economic climate?

June 18, 2010


Ian Ellis is executive chairman of Telereal Trillium. The opinions expressed are his own. Join Reuters for a live discussion with guests as Chancellor George Osborne makes  an emergency budget statement at 12:30 p.m. British time on Tuesday, June 22, 2010.

The government is clear that reducing the public sector budget deficit is top priority and Tuesday’s budget will give us our first real indication of how and where public spending cuts are going to occur.

While there’s a consensus about the need to reduce debt, opinion is greatly divided over whether it’s safe to make these cuts in the current economic climate, with some commentators suggesting that deep cuts could bring about dangerous consequences such as job losses, damage to frontline services and even the possibility of a double-dip recession.

The dilemma is clear – how can wide-ranging cuts be made without hurting frontline services or the economy as a whole, without making redundancies and without causing public outrage?

Eliminating waste is one thing, but when ‘waste’ could refer to people’s jobs or public services, it’s easy to understand why there is such concern.

Yet there is in fact strong evidence to show that substantial savings can be achieved without impacting any of the above.

For example, the cost of running 7.7 million square metres of civil service offices is immense, and while this is already a government focus area, new research conducted on behalf of Telereal Trillium, by SQW suggests that best practice approaches to civil estate management could bring about savings far above and beyond those currently proposed.

In particular, costs could be reduced by 1.4 billion pounds per year within five years if the central government office estate was utilised more efficiently.

Allowing for time to implement the necessary changes, this would amount to savings of more than 4.3 billion pounds over the next five years.

Furthermore, the savings relate only to the central government office estate that accounts for 10% of the overall 25 billion pounds annual running cost of the entire public sector property portfolio – emphasising the vast potential for further savings.

More efficient property solutions would improve frontline service provision as well as achieving savings and safeguarding jobs.

Yes, the new budget was always going to be a difficult pill to swallow, but the government will go a long way to reassuring its doubters if it opts to focus initial spending cuts in areas such of this, using best-practice management to achieve a high quality working environment for staff and customers, that will actually result in higher levels of productivity, flexibility and customer satisfaction.

Picture credit:  Chancellor George Osborne walks out of Treasury in Westminster, central London, May 12, 2010.  REUTERS/Andrew Winning

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