Facing up to the challenge of Facing up to the challenge of delivering more for lessdelivering more for less

Ross Fraser

Chief Executive

HouseMark

Government deficit reduction strategy poses real Government deficit reduction strategy poses real threats to:threats to:

New supply Improvement programmes Neighbourhood renewal Supporting People services Revenue – housing benefit reform Public sector pensions

Government rationale Government rationale

Need to eliminate structural deficit in 5 years Debt rebalancing - 80% of from cuts in public services ‘Salami slicing’ departmental spending set to continue Exceptions are NHS and overseas aid Front-line services will be protected Not just about cuts – a new approach to public spending Underpinning ideology is to shrink the size of the state activity and

spending

Next CSR (Next CSR (2011/12 to 2014/15) sets VFM criteria for 2011/12 to 2014/15) sets VFM criteria for spendingspending

Is the activity essential to meet Government priorities? Does the Government need to fund it? Does the activity provide substantial economic value? Can the activity be targeted to those most in need? How can the activity be provided at lower cost? How can the activity be provided more effectively? Can activity be provided by a non-state provider or by citizens? Can non-state providers be paid on the basis of results? Can local bodies, as opposed to central Government, provide the

activity?

Views of Government critics Views of Government critics

Government highly selective in its analysis of Canadian and Swedish ‘debt elimination’ experience

Up to 750,000 public sector jobs to go in next 5 years Danger of major reduction in new social housing Government plans will result in massive loss of social value and real

hardship Private sector growth will not compensate for cuts in public spending Real risk of ‘double-dip’ recession– even President Obama is concerned A more measured approach to cuts required

How should the sector respond? How should the sector respond?

Campaign for recognition of the social and economic value of our work Coupled with recognition that Government is unlikely to listen to a sector

that doesn’t respond to its agenda Develop new models – less reliant on public subsidy and benefiting from

more flexible asset management strategies - to finance new build Campaign for greater rent flexibility – higher rents could boost supply No option around cutting costs, but choices on how to do it Be clear about strategy - more for less or same for less or less for less

Reducing costs: Pitfalls to avoidReducing costs: Pitfalls to avoid

Destroying value in your organisation by ‘salami slicing’ jobs and services

Falling for the ‘front line = good’/‘back office = bad’ fallacy Loss of capacity required to remain agile and respond to future

opportunities Failure to engage with staff and residents about spending priorities Losing the focus on performance improvement, VFM and customer

insight Failing to meet regulatory standards – the TSA may be going but the co-

regulatory framework remains

Reducing costs: A measured response Reducing costs: A measured response

Plan ahead for your cost cutting strategy – it will be more effective Understand your cost base and where you can secure efficiencies Look for innovative ways of cutting costs Consult residents – not every service is important to customers as others Consult staff – most will accept wage restraint and/or short hours as

alternative to redundancy Maintain focus on performance improvement and meeting regulatory

standards

Reducing costs: OptionsReducing costs: Options

Procurement savings – there is so much more to go for here Shared services – front-line following the Total Place model or back

office Stock rationalisation – sector leaders are now beginning to act Exit from low priority services – as defined by customers Improve housing management efficiency

HouseMark data 2008/9 shows that direct costs vary by up to 70% Upper quartile performance - £196.33 per unit Lower quartile performance - £277.42 per unit

Reduce wage bill by flexible working, better absence management etc

Your sector bodies are here to help Your sector bodies are here to help

NHF and CIH are keen to develop new funding models CIH and NHF will try to get the best deal from HB reform and rent policy HouseMark benchmarking is the best ‘in depth’ data on comparative

costs and VFM in service delivery – even more important than ever Procurement for Housing can help you achieve real cost savings

A final plea: Recognise the true cost of redundancyA final plea: Recognise the true cost of redundancy

Every redundancy is a personal and family disaster for someone The impact on the local economy may be severe – in many parts of the

country, public services account for more than 40% of jobs Redundancy costs an average of £15k per employee with a further

recruitment cost of about £5,000 to £10,000 when the market revives Voluntary redundancy may cause more damage to a business than

compulsory lay offs Redundancies may be inevitable but can be minimised and should be

your last resort