Cuts go deeper than just cash

5th March 2004 at 00:00
Efficiency is the new watchword in central government. After several years of spending growth, the Treasury is putting renewed pressure on the public services to prove their efficiency.

Speeches and policy papers from all three main parties claim that savings can be made in bureaucracy so that the money can be better used elsewhere.

Like earlier efficiency waves in the 1980s and 1990s, the Government's tight financial position is leading to talk about how to squeeze costs.

Efficiency is emerging as a major theme in the 2004 spending review. There was a leaked report from the Gershon review on the same day as the Conservatives announced their spending plans. Sir Peter Gershon, asked by the Treasury and Cabinet Office to carry out an efficiency review of the whole of government, took action to cut its running costs by 15 per cent and to improve the productivity of front-line services. Savings of this order could be enough to keep the Government spending increasing without excessive borrowing or further tax rises.

The new drive in central government comes on top of existing actions to control running costs. The Learning and Skills Council's reshaping exercise was made necessary by the capping of its administration budget at pound;218 million between 2003 and 2006. Likewise, the current savings in the Department for Education and Skills' children's and young people's unit.

The Gershon review will raise the stakes for all parts of central government from 2005. It is highly likely that the 2004 spending review will include further targets for government departments to cut running costs and that this will lead to further rounds of efficiency savings.

Cuts in central government are one thing. Increased productivity in the front line is another. The proposals for improving school productivity make interesting reading for anyone in colleges. It is said that e-learning could reduce the time teachers need to prepare for classes. Greater use of classroom assistants is also suggested. School productivity translates into ways to substitute teachers and increase their contact hours. These sorts of proposals are controversial and are likely to generate a reaction in the schools sector. The issue is not a new one for colleges.

If colleges have learnt anything about finance in the past decade, it is that there are no easy solutions. Government has spent 10 years putting relentless pressure on colleges to do more for less. For much of the decade, funding allocation has assumed an automatic, annual efficiency gain. Some colleges inherited inefficient systems and staffing levels from their local authority and made simple savings to meet these targets.

But even quick wins involve redundancies. And, once made, they cannot be made again. At various points, there have been promises of new, efficient ways of doing things. Open learning, e-learning and learning on employers'

premises have been promoted as quick cures to making savings. Repeated college experience is that mainstream, group learning is often cheaper than the alternative and that where the alternative is cheaper, it is a poor quality one.

The financial pressures on colleges have enabled many managers to develop plenty of practical expertise in improving efficiency. There is a well-developed culture of benchmarking costs and activities. The theory behind this benchmarking was established in the late 1980s by various long-forgotten organisations in the course of a previous efficiency drive.

This theory confirms that college teaching costs are a function of a few simple formulae.

Improving teaching efficiency involves reducing pay, increasing teaching contact hours and group sizes or cutting course hours. Colleges have tried one or all of these approaches in the course of the past decade with varying effects. In some cases, the cost of making savings has been felt in course quality and has resulted in adverse inspection findings.

The choices are rarely simple and generally have consequences attached.

Take group sizes. It has long been an option for urban colleges to increase average group size by refusing to run courses for small groups. The same course may be offered elsewhere. Such decisions make financial sense but often inconvenience students and employers. Travel times lengthen.

Complaints are sent to the LSC and ministers. A tougher line on efficiency from the Government will increase the pace of this sort of rationalisation.

If there are savings, they won't be easy ones.

The Association of Colleges represents those that have been making these sorts of efficiency decisions for years. Colleges know that there are no magic solutions. Changes to structures and regulations plus capital investment may make it possible for colleges to reduce overhead costs but the wins are rarely quick and long-term savings often involve short-term costs. We have suggested areas where action could be taken but urged caution in counting winnings before they are banked.

Colleges face a challenging future in the next five years because of the pressure on government funding. And, while their track record shows they are well placed to manage their budgets carefully, it will stick in the throat of many people in colleges if they are put under intense pressure to make savings at the same time as funding for university teaching increases by 30 per cent.

Julian Gravatt is director of funding and development at the Association of Colleges

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