International lessons on austerity strategy

This blog provides a preview of the content of a paper, just published in the International Journal of Public Sector Management. The paper was written a year ago and some of the predictions have now materialised.  If you want a copy of the paper please let me know. For those specifically interested in procurement strategy, the lessons learnt present a real cause for concern as the research suggests no other country has ever successfully embarked upon a strategy so radical and yet so fundamental to overall success. 

Some have suggested that the recent recession is probably the worst recession in 100 years.  The Office of National Statistics acknowledged it as the longest period of decline in UK output since records began in 1955 and there are predictions that the worst of the impact on jobs and unemployment in Europe is yet to come. Fears of a ‘double-dip’, heard daily, now have materialised, and the over-riding concern of the UK government appears to be speedy deficit reduction.

In its repsonse to the financial crisis the UK government centrally imposed public sector cuts on local government which go beyond political and managerial leaders direct experience. English local government is now faced with a 28% reduction in central government funding over a four year period.  With front loading this means councils are projected to have a shorttfall of £6.5bn during 2011/12. 

Ministers claim the reductions can be achieved without a deterioration in frontline services if a four-pronged cost reduction strategy is followed, namely, reducing senior staff pay, improved procurement, back-office shared services, and removal of non-value adding jobs; this strategy has been criticised as lacking an empirical basis.  Although the scale and perceived need for urgency in addressing the deficit is somewhat unique there are examples of how other countries have addressed finacial crises which could be drawn upon.  The paper now published in the International Journal of Public Sector Management reports on an investigation of lessons learnt from other countries responses to previous and the current crisis.

Discussions have been well rehearsed elsewhere on potential responses and what should be done in addressing the recession. The paper’s contribution is that it reports lessons from others in the international local government community, highlighting examples of what they have done and the impact. The evidence cautions that local recovery can be expected to be significantly longer than one political cycle, that social impacts will be greater than expected, and there is over-optimism in some of the strategic tools being adopted in the UK’s deficit recovery.  It is intended that these lessons are constructive in shaping responses to the current and future financial crises.