Accelerating reform: CBI calls for change

The CBI warns that collective action and faster reform is urgently needed as the 2015 Spending Review approaches. Peter Cheney considers its ‘Moving up a gear’ policy paper.

Public sector reform must be stepped up with greater urgency between now and the next Assembly election, according to a frank assessment of progress from the CBI. ‘Moving up a gear’ follows on from the ‘Time for action’ policy document, released by the CBI in September 2010, and emphasises that rebalancing the economy must involve opening up more public services to competition.

Without systemic change, Northern Ireland’s private sector “will not recover as quickly as it needs to nor will our public services be fit for the 21st century.”

Despite the Executive’s commitments to rebalance the economy, the CBI says that “the real work has yet to be done”. Northern Ireland has only a two-year window of opportunity before further spending cuts in the 2015 Spending Review and business leaders want the Executive to make the most of the public’s current appetite for reform.

Payroll costs take up around half of public spending and therefore have a major bearing on Northern Ireland’s budget. The CBI supported the public sector pay freeze and now wants the Executive to go further and consider regional pay arrangements.

An average public sector pay rise of 3.9 per cent between 2011 and 2012 was “unsustainable and undermines efforts to rebalance the economy”. Retaining final salary public sector pensions will also cost Northern Ireland £260 million per annum.

Average sickness absence in the public sector stood at 10.7 days in 2011-2012 and the Programme for Government aims to cut this to 8.5 days by 2015. The CBI strongly believes that this target must be met, especially as the national figure is already much lower: 4.5 days.

Structures

Progress on reforming housing, health, education and justice is welcomed but there is “a concerning absence of momentum and lack of joined-up thinking” in government.

Poor literacy and numeracy are major concerns for CBI members. Political divisions over education policy are “symptomatic of the fundamental problem that still permeates” i.e. a lack of strategic, cross-party thinking on the challenges that Northern Ireland faces.

“In an Executive which still retains the threat of a mutual veto,” the report states, “it is incumbent on the parties to find collective solutions.” The CBI does, though, appreciate the joint working between DETI, DEL and the Department of Education on skills and training.

Public sector technology is also under-utilised. Around £470 million was invested in the C2k managed ICT service for schools between 2000 and 2011 but inspectors have found that around half of post-primary schools are not using this properly to support learning and teaching.

OFMDFM had pledged to agree any changes to post-2015 structures of government by December 2012 but this target has been missed. The CBI wants to cut the number of departments and emphasises the need for a strong ‘department of the economy’.

Justice Minister David Ford is praised for pursuing cuts in legal aid in the face of “significant” opposition from the legal sector. The report supports the re-introduction of prescription charges (now costing £30 million) with means-testing to allow some exemptions for people on low incomes. Concessionary public transport fares for older and disabled people, meanwhile, cost £33 million each year.

The absence of water charges remains by far the most expensive ‘free’ policy, costing £280 million per year. The Executive has postponed domestic charging until at least 2016 but the CBI wants the debate on the future of water charging to start well before the next Assembly election.

Partnership

Four areas for greater public-private partnership are outlined: planning; procurement; alternative sources of capital; and opening up public service markets to greater competition.

To improve performance in planning, the CBI has set up an exchange programme for planning managers and businesspeople which would help the two sectors to share their skills.

Likewise, a joint CBI-Central Procurement Directorate working group has identified “quick wins and solutions” which will be rolled out throughout the rest of 2013. These include the standardisation of terms and conditions and the creation of an “indicative pipeline” of government projects.

Cuts to capital funding represent a “significant blow” to the construction sector and the wider business community. New approaches are needed and the CBI welcomes the commitment to look at revenue and alternative finance models for the new health and social care centres.

The Executive has to consider capital funding in a collective and strategic way as infrastructure projects take place over a 10-20 year horizon. In September, the CBI itself will publish a report to identify major infrastructure projects. “Planning as far ahead as the next election cycle,” it states, “is simply not acceptable.”

Opening up public services to private sector (or voluntary and community sector) operators has saved 10-30 per cent of costs in other UK regions but little progress has been made in Northern Ireland. The outsourcing of support services for the PSNI stands out as a success story, having saved £11 million per year and freed up 220 officers for front-line duties.

Next steps

In January this year, Sammy Wilson told the Assembly that the CBI had not presented any “workable ideas” on providing public services through the private sector. In response, the CBI puts forward four specific proposals:

• open the Land and Property Services Agency up to competition;

• prioritise the most flexible providers in health and social care;

• privatise more non-core areas e.g. the running of visitor attractions and

e-invoicing; and

• a dedicated efficiency and reform working group for Northern Ireland.

The doubling of rates debt to £160 million over the last five years and the write-off of another £53 million in debt is “unacceptable” at a time of tight budgets. The Liverpool Direct model could be used as a template for reform. Opening up a service to competition does not necessarily mean privatisation; Liverpool Direct is a joint venture and mutual models are used elsewhere in Britain.

A draft code of practice for outsourcing in Northern Ireland is “anti-competitive” as employers are obliged to offer “no less favourable” terms and conditions to employees transferring from the public sector. The Cabinet Office dropped that clause in 2010 and the CBI is calling on OFMDFM to follow suit.

The efficiency and reform group would act as an internal consultancy in government. The Performance and Efficiency Delivery Unit has had a “limited” impact and “falls short of what is required to deliver the transformation of services needed”. The group could bring in external staff where necessary and should “spearhead” the changes that ministers want to implement.