Will it be cuts or reforms?

COMPREHENSIVE Spending Reviews didn’t previously mean a great deal to many people.

They were of interest to finance professionals in government and specialist journalists but were not headline news.

This year it will be different. The announcement that the Chancellor will make on October 20 will affect each and every one of us, whether we are taxpayers, or recipients of public services, or both.

It will be profoundly important, not just for public sector bodies and their employees, but also for those who run and work for private and voluntary sector organisations.

Why? Because this spending review will fire the starting gun on the longest and deepest programme of peacetime cuts in modern history. The cuts are inescapable, because as a nation we have been living well beyond our means, and we have no option but to scale back public spending, as well as raising taxes, in order to balance the books and restore confidence in the Government’s ability to manage the public finances.

Human nature being what it is, many public sector organisations have been waiting for the allocations before deciding where, how and when to cut. But once the Chancellor has announced the settlement for the next three years, there will no longer be any excuse for inaction. Tough decisions will be required, and will have to be taken quickly.

We should not expect too much detail in the announcement, but we should get a clear picture, at a high level, of which areas of government will bear the lion’s share of the pain and which will fare slightly better. Crucially, we will learn how the cuts will be spread over the next three years: will there be really deep cuts in 2011, or will the pain be “back-end loaded”, biting more deeply only when economic recovery is more assured?

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Like many others we believe that Britain stands at a cross-roads. If the spending review leads to significant cuts in isolation from significant reform, public services will deteriorate. But if the review breaks the state’s monopoly over public services, drives competition and pays only for results, our public services could be transformed.

The leaders of public sector organisations now face a key challenge: will they take the easy option of reducing services across the board, or will they grasp the nettle of public sector reform, changing the way services are provided and thereby improving efficiency and productivity without undermining the most important frontline services?

This is a once-in-a-lifetime opportunity to revolutionise the provision of public services in the UK. It could herald a new era of innovation and co-operation between the public, private and voluntary sectors.

It is in all our interests that leaders in the public sector rise to the challenge. In doing so, they will both need and deserve our confidence and our support.