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FINANCE SUPPLEMENT - EFFICIENCY TARGETS

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Everybody is in favour of efficiency, but defining it can sometimes be as difficult as delivering it. Mark McLaughl...
Everybody is in favour of efficiency, but defining it can sometimes be as difficult as delivering it. Mark McLaughlin questions the 'efficiency' culture

The public sector has rediscovered efficiency. This is good but it should not have to be rediscovered again and again.

Some councils struggle to complete their 'annual efficiency statement' and no one is quite sure what a 'non-cashable saving' is . . . is it like a 'non-drinkable drink'? So how do we make this efficiency plan work?

My advice to council members at Enfield LBC has been straightforward: public spending growth will have to slow. So after posting£11m of savings for 2005-06, the council should keep a strong balance sheet. And it should plan to generate more savings.

It cannot be that simple, so I venture out to listen to people telling us how they will only charge£1,200 a day to help us be efficient.

I find general agreement on the principle: we extract money via taxation, tax has gone up, public spending has gone up. We need to show tax money is being spent efficiently. But how do we show we are being efficient?

Procurement was meant to be the magic bullet. But how do you procure when there are no markets? How many adult social services managers can pick and choose between placement providers?

Procurement savings are achievable because there are working markets for many of our purchases. Even then, there may be unintended consequences. The rationalisation of supply will mean money leaves the local arena. This would not be a problem in London's healthy economy, but what about the effect on depressed local economies in northern England?

Can we use the private sector to make us efficient? Yes, but we cannot be like the private sector - the 'playing shops' exercises of the Birt-era BBC or early-1990s Brent LBC showed the absurdity of mimicry. Outsourcing - or its current euphemism 'shared services' - can be a solution to some problems of service costs, but can also mean leakage of precious time to contract disputes, or of public funds to the bank accounts of nouveaux riches.

The private sector moves towards efficiency at the cost of the failure of many producers. But the public sector cannot afford this creative/destructive process of natural selection.

If Ford or General Motors go bust - as they well might, like many hundreds of car manufacturers before them - these will be events of 'creative destruction' in how the market meets demands for cars.

But public services must operate outside the market. With serious needs to meet, we cannot afford destruction, creative or otherwise.

So with the market mechanism of limited use, we are subject to targets. And, just as water finds the easiest way to the sea, public servants will always try to find the easiest way of meeting centrally imposed targets. Targets work - they work at making people meet targets.

The Russian shoe factory is the best-loved example. Its apocryphal absurdity illustrates the futility of the Stalinist target culture. The central planners gave it the target of producing 1,000 shoes: it made 1,000 baby shoes. It then received the target of making 1,000 men's shoes, so it made 1,000 size 9 loafers. If it was told to produce 1,000 shoes in a variety for men, women and children, it produced 998 baby shoes, one pump and a wing tip. If it was told to produce 3,000lbs of shoes, it produced one enormous pair of concrete trainers. There is always the danger of being tempted to meet the target rather than the need.

And the current efficiency targets seem to involve wasting the time of the brightest in thinking up ways in which the rules can be bent to allow the admission of outlandish items as 'non-cashable savings'.

This solipsistic reaction shows the producer perspective still dominates local government. At one seminar, an example was given concerning a customer who had paid£2 to swim in a local pool but was unhappy about the cost. However, he was much happier on being told the swim was subsidised and he had received£5 worth of value.

In reality, if he said it was not worth£2 then he was right. The value judgement can only be expressed by the consumer, not the producer. If the consumer says a session is not worth£2, and if this is a general feeling among residents, perhaps this tells us the council is wasting its money on£5 swimming sessions that fail to satisfy people. Maybe the money should have been spent on fixing potholes or school computers.

So I began to fear that the whole efficiency debate would be framed in Marxist terms of costs of production, rather than the effect of the activity on the people served.

Costs of production can be measured, but outcome is much less easy to measure. It is difficult to place a value on what we actually want to achieve. Try and quantify the value of decently behaved young people. Many inputs are, similarly, beyond measurement because they are provided not by hard

economic calculation on the part of councillors and staff but by an active unselfish goodwill, a regard for and acceptance of others.

This leaves us with the need to be efficient in the absence of any easy ways to become efficient. It leaves us only with hard work, proper analysis, option generation, negotiation, imagination and, ultimately, acknowledging there are some things we cannot or should not do. It also leaves us with efficiency as an inadequate explanation for why we are doing them in the first place.

Mark McLaughlin Director of finance and corporate resources, Enfield LBC

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