The next few years will be a bleak time for the UK
public sector as its funding is slashed in an attempt to claw back
the budget deficit. Chartered Institute of Public Finance and
Accountancy president Jaki Meekings Davis tells Carolyn Canham
about the lessons the current administration can learn from the
past.

Jaki Meekings Davis CIPFA

The UK’s Chartered Institute of Public
Finance and Accountancy (CIPFA) is the world’s only professional
accountancy body focused specifically on the public sector.

With about 13,700 members and 3,000 students it
is a relatively small organisation, but with the economic downturn
driving the UK government into a deep budget deficit, CIPFA members
are in a prime position to help design and implement vital public
spending reforms.

This is not the first time the UK government
has experienced economic woes. When new CIPFA president Jaki
Meekings Davis qualified in 1979, there was a similar economic
downturn, resulting in public sector cuts, and Meekings Davis says
there are several lessons the current government can learn from the
past.

 

Starting out

Meekings Davis entered the public sector
straight after leaving university, joining a Leicestershire County
Council graduate training scheme for accountants.

“I don’t think I’m a typical accountant and I
wouldn’t have gone into the accountancy profession,” Meekings Davis
says. “But I was interested in being influential in public finance
and resource allocation, which is what it’s all about at the end of
the day. If you influence the use of money you can actually change
the way the services for society are run.”

Meekings Davis gained the CIFPA qualification
in 1979, a period that was similar to today in terms of economic
downturn.

The International Monetary Fund had been called
in to help the UK in 1976 and the Conservative government’s
election in 1979 heralded significant changes to economic
policy.

“It was very similar times to now in that the
country was in a period of significant political change and the
government was beginning to look at quite radical solutions,”
Meekings Davis recalls.

“For the public sector, that was a very bleak
time. My jobs at that time were all about planning and delivering
quite radical proposals for cost reduction and improving the ways
in which services were delivered.”

Meekings Davis’ career took her from local
government to the water industry, to what is now the Environment
Agency, then to Southampton City Council where she worked in
technical services.  This was followed by a move to Wessex
Regional Health Authority and the National Health Service
(NHS).

Meekings Davis still works at the NHS part-time
as a specialist commissioner, charged with putting controls and
parameters around investments in specialised services.

Looking back to the tough days of 1970s,
Meekings Davis names a number of lessons today’s government and
public sector can learn about how to manage the inevitable cuts to
public spending.Quote from Jaki Meekings Davis

Many of the lessons are incorporated in
guidance on leadership in hard times released recently by
CIPFA.

The guidance emphasises the importance of
having a sound information base upon which decisions can be made.
It also stresses the importance of understanding what the cuts will
mean to services.

“It is very easy at a national level to say we
are going to cut all services by 1%,” Meekings Davis explains.

“But some services are so huge that a 1% cut
could probably solve much of our financial problems as a country,
whereas a 1% cut to a small social housing landlord’s budget could
mean they are no longer viable as an organisation.”

Another important lesson is to be transparent
about the basis on which decisions are made.

 “If possible, you should make sure the
public and stakeholders recognise the facts used as the basis for
decisions, thereby avoiding the conception that ‘bean counters’
have come up with spurious figures,” Meekings Meekings Davis
explains.

“It is about agreeing on the processes by which
you are going to make the cuts and thinking about your
communication strategy. Nobody wants to see the types of events you
saw in Greece. It is not drip-feeding information to people, but it
is about preparing them for the decision that are ahead.”

Meekings Davis says another lesson from the
1970s is to be prepared to have an open and forthright debate.

“In the 1970s from what I recollect, there was
this sense that the dictate that came down from above was not
really open to challenge. I think the coalition government will
allow us to have a debate,” she explains.

“Whilst there may be this opportunity to
influence decisions, it can’t go on for too long because we have to
make decisions and begin the task of reducing costs, but it’s
important to respect there are different points of view and
sometimes there will need to compromise.”

 

Big changes

Meekings Davis says it is also important
to recognise some macro decisions must be made at a national
level.

“If the government pushes down savings to a
local level we will most probably end up with ‘salami slicing’,
while some big decisions about public expenditure and public
productivity are needed,” she adds.

“If the government were to take those
decisions, it would offer greater opportunities for savings.

“One example is that most public sector
organisations have contracts with the private sector – private
finance initiatives or public private partnerships. Those contracts
will run in many cases for 25 or 30 years so we are committed to
them and they will have a rate of uplift – [retain prices index –
RPI] minus a deflator.

“But the world has changed significantly since
those contracts were first entered into and public sector
management costs are being cut – pay freezes, pay cuts – whilst the
contracts with the private sector are still being uplifted by the
original RPI formula. 

“This type of disparity needs to be addressed
and can only be done at a national level. There needs to be a
national debate between the government, the Treasury and
industry.

“Another example of an important national
debate which needs to be had is about a review of our employment
laws – our working week and some of the benefits of employment. In
some ways, we have awarded ourselves a recurrent bonus rather than
a non-recurrent benefit of a healthy, thriving economy.

“We have gradually reduced the working week and
increased annual leave. If I were  an international financier
I might be asking if the UK could work a bit longer and  in
doing so increase productivity, thereby negating the effects of
some of the disinvestments that we are making. This is an important
issue for the public services, in particular, where demographic
pressures consume additional resources in just standing still.”

Meekings Davis says one difference between now
and the 1970s is the public now accepts there is no alternative to
making cuts.

“In the 1970s, there were still people who
thought there was an alternative. I just don’t think they are there
now, I think the populous is ready. They might need a bit more
information, but they know we have got a big change coming,” she
says.

“The debate now is over the pace with which we
are going to do those changes and how much of it is done by cuts to
the public sector and how much by changing systems such as welfare
or taxation, or letting economic growth absorb some of the
pressure.”

Quote from Jaki Meekings Davis

sustainable future

While Meekings Davis and CIPFA in
general will be spending much of their time helping the public
sector navigate the upcoming cuts, the new president also has three
personal goals for her one-year term, each including the term
‘sustainability’.

The first is influencing and assisting the
national debate about fiscal sustainability – making sure the
government has the information it needs to make the best
decisions.

Meekings Davis is also highlighting the
importance of ensuring CIPFA is a sustainable organisation.

This involves ensuring the member base remains
strong, identifying new initiatives around reducing costs and
allowing better access to education and training services,
including the international market.

The third theme is helping members sustain
themselves throughout the period of public sector cuts.

“Many people at the top know how to invest
money and hopefully they have invested it wisely, but that is quite
different to making the cuts they will now have to do,” Meekings
Davis explains.

“We are encouraging some of our members who
have experience in that area to articulate how you get those
personal skills.  We have got a series of development
programmes underway and will establish networks to try and support
people throughout this period.”

Looking ahead, Meekings Davis says she would
like to think there will be no great reorganisational changes in
public services “because they can be an excuse for doing
nothing”.

“I would like to think we can influence the
government to understand that keeping things relatively stable and
moving in a managed, intended way is better than creating chaos
because you never fully understand what the impact of your changes
will be,” she adds. I would like to think that we have influenced
the government to understand that productivity changes are as big a
way of solving this financial problem as cuts and tax
increases.

“It’s a marathon, not a sprint – that’s a
totally different skill set and time frame over which you judge
success and I think the acceptance of the pace of change will be
one of the big challenges ahead.

“Some of the changes we need to see could take
a long time to be established. It is about recognising that you
will not see major change in nine months and if you do see change
in nine months, you probably have it wrong.  There will be
some low hanging fruit, but the big changes will take some time and
detailed planning and we need to be realistic about that.”