The future may not be bright but its getting clearer
More clarity is starting to emerge around the savings now. In some respects this is a help, not because the outcome will be pretty but because at least you can do something about it if you know.
What is emerging is that the ability to make £6 billion savings almost overnight will and can only happen one way. We talk about saving 6 billion and it is important to understand what this actually means in practice.
Government budgets will have been set sometime back against a set of needs to deliver a set of outcomes. So the costs of IT, staff, buildings etc. Those budgets would have been agreed. Now 6 billion will need to be removed from the budgets overnight. As you can imagine, the government departments are not sitting on 6 billion in unallocated cash. So to make a saving, they have to stop spending. Obvious right?
So how do you stop spending overnight? Well, its like being asked to realise the equity out of your house overnight. Its almost impossible and if you do manage it the equity realisation will be so expensive that you dont actually get the money you need due to the urgency of the process.
In gov terms they simply cannot get rid of staff to make those kinds of sums for a number of reasons:
1) That staff reductions at the lower pay grade levels would have to be vast to make any impact on the 6 billion. Then you are left with no staff to delivery any services or support the frotn line protected staff.
2) The time needed to get rid of staff and the costs of the process can eat up so much of the savings that any in year (which is what they want in the 6 billion) will be eaten up.
3) Ridding yourself of middle and senior management leaves government with few people with the skills to manage things ongoing or more importantly make the major savings decisions.
So if its not staff where will the savings come from?
Well its going to be the private sector. Yep, government savings will be made at the expense of the private sector. Projects will have to be stopped, consultants fired, pencil orders cancelled.
Now you may not think this is such a bad thing. But this is only because the media has done such a good job af demonising contractors, consultants and major suppliers. But not all government suppliers are poor, not all contractors are bad and expensive. See the link here? For every bad contractor or consultant there is a civil servant overseeing them and hiring them.
So you bin all of these. So who implements the changes needed to deliver the major savings? Not the civil servants, they are the ones who hire the experts in the first place and its not because the civil servants are lazy, its because they do not have the change skills in the quantities or levels required.
So where next? Well the liklihood is that contracts willstart to be binned. Notice periods and termination agreements will not be honoured. They have no choice. Nobody signs contracts that allow one party to walk away half way through delivery free. And that is exactly what gov will have to do.
The effects of all of this will be dire. Businesses will go bust, individuals will lose jobs. The flow down is going to be significant. The argument I have now heard is that the suppliers will roll over and just take it as they see things in the long term and want to do business later when things improve. Thats great if you are one of the major suppliers with deep pockets. But the SMEs will simply not survive. The major suppliers will simply bin their employees to protect costs.
Its an interesting flow.
Government puts too many people into the public sector
Banks take too much risk and put economy into a spin
Government bails out banks to prevent economy meltdown
Failing economy lowers tax revenues gov debt gets out of control
Banks stop lending (take lower risk)
Gov starts to fail (go bust) so stops spending violently
Big gov suppliers take the hit but shed employees
Small go suppliers go bust
Both lead to higher unemployment, higher welfare bills, lower tax revenues
Private sector still suffering from recession cannot absorb Gov fallout
Spending in retail slows and retail suffers
Recession kicks in.
This all from the first £6 billion. The next £156 is going to cause utter carnage.
Brown was right. Taking £6 billion out of the economy is going to be catastrophic.
So what can we all do about this? It all seems a bit negative. Well it is. The bigger worry is that this is going to cause some real social issues. The first is that crime will rise as times get more difficult at a time when government is less equipped to deal with it. The second is that we will see a widening now of the gap between rich and poor both in terms of levels and quantity. There will be even fewer massively rich people and even more poor. More of the middle will head south than north. If you are well off today your life will get better, if not expect it to get worse. The question will be how quickly this will happen. If it happens too quickly and the gap gets too wide then we can expect more problems than just an increase in crime.
If we add in EU issues then we could start to see more inwardly protectionist lines start to emerge and trade slow.
Well it is going to have to get worse before it gets better. We have to hit rock bottom and we are a long way from what is going to be a very deep bottom. There is no stopping this process now. But if you understand it you can prepare for it.
So still no positives? Its hard to see them from this view point I have to admit.
What is required to get through this is a fundemental shift in culture and expectation. The days of constant growth and prosperity could never last so what is needed is actually to reset ones mind and expectations. A level of culture change the likes of which we have not seen since the last world war. When people fought for freedom, hardship was a price that everyone agreed was a worthwhile price. People pulled together, community spirit grew and people got by on nothing. Poor and rich alike made sacrafices.
The challenge for the UK is to now find what the rallying cry will be to start that change.
Surviving this next downturn will not be about money, it will not be about business, it will not even be about jobs. It will be about successful culture change. And if the UK can be the first to recognise this and get it under way we will be the first to get back to something like a more stable and sustainable way of life.
What is emerging is that the ability to make £6 billion savings almost overnight will and can only happen one way. We talk about saving 6 billion and it is important to understand what this actually means in practice.
Government budgets will have been set sometime back against a set of needs to deliver a set of outcomes. So the costs of IT, staff, buildings etc. Those budgets would have been agreed. Now 6 billion will need to be removed from the budgets overnight. As you can imagine, the government departments are not sitting on 6 billion in unallocated cash. So to make a saving, they have to stop spending. Obvious right?
So how do you stop spending overnight? Well, its like being asked to realise the equity out of your house overnight. Its almost impossible and if you do manage it the equity realisation will be so expensive that you dont actually get the money you need due to the urgency of the process.
In gov terms they simply cannot get rid of staff to make those kinds of sums for a number of reasons:
1) That staff reductions at the lower pay grade levels would have to be vast to make any impact on the 6 billion. Then you are left with no staff to delivery any services or support the frotn line protected staff.
2) The time needed to get rid of staff and the costs of the process can eat up so much of the savings that any in year (which is what they want in the 6 billion) will be eaten up.
3) Ridding yourself of middle and senior management leaves government with few people with the skills to manage things ongoing or more importantly make the major savings decisions.
So if its not staff where will the savings come from?
Well its going to be the private sector. Yep, government savings will be made at the expense of the private sector. Projects will have to be stopped, consultants fired, pencil orders cancelled.
Now you may not think this is such a bad thing. But this is only because the media has done such a good job af demonising contractors, consultants and major suppliers. But not all government suppliers are poor, not all contractors are bad and expensive. See the link here? For every bad contractor or consultant there is a civil servant overseeing them and hiring them.
So you bin all of these. So who implements the changes needed to deliver the major savings? Not the civil servants, they are the ones who hire the experts in the first place and its not because the civil servants are lazy, its because they do not have the change skills in the quantities or levels required.
So where next? Well the liklihood is that contracts willstart to be binned. Notice periods and termination agreements will not be honoured. They have no choice. Nobody signs contracts that allow one party to walk away half way through delivery free. And that is exactly what gov will have to do.
The effects of all of this will be dire. Businesses will go bust, individuals will lose jobs. The flow down is going to be significant. The argument I have now heard is that the suppliers will roll over and just take it as they see things in the long term and want to do business later when things improve. Thats great if you are one of the major suppliers with deep pockets. But the SMEs will simply not survive. The major suppliers will simply bin their employees to protect costs.
Its an interesting flow.
Government puts too many people into the public sector
Banks take too much risk and put economy into a spin
Government bails out banks to prevent economy meltdown
Failing economy lowers tax revenues gov debt gets out of control
Banks stop lending (take lower risk)
Gov starts to fail (go bust) so stops spending violently
Big gov suppliers take the hit but shed employees
Small go suppliers go bust
Both lead to higher unemployment, higher welfare bills, lower tax revenues
Private sector still suffering from recession cannot absorb Gov fallout
Spending in retail slows and retail suffers
Recession kicks in.
This all from the first £6 billion. The next £156 is going to cause utter carnage.
Brown was right. Taking £6 billion out of the economy is going to be catastrophic.
So what can we all do about this? It all seems a bit negative. Well it is. The bigger worry is that this is going to cause some real social issues. The first is that crime will rise as times get more difficult at a time when government is less equipped to deal with it. The second is that we will see a widening now of the gap between rich and poor both in terms of levels and quantity. There will be even fewer massively rich people and even more poor. More of the middle will head south than north. If you are well off today your life will get better, if not expect it to get worse. The question will be how quickly this will happen. If it happens too quickly and the gap gets too wide then we can expect more problems than just an increase in crime.
If we add in EU issues then we could start to see more inwardly protectionist lines start to emerge and trade slow.
Well it is going to have to get worse before it gets better. We have to hit rock bottom and we are a long way from what is going to be a very deep bottom. There is no stopping this process now. But if you understand it you can prepare for it.
So still no positives? Its hard to see them from this view point I have to admit.
What is required to get through this is a fundemental shift in culture and expectation. The days of constant growth and prosperity could never last so what is needed is actually to reset ones mind and expectations. A level of culture change the likes of which we have not seen since the last world war. When people fought for freedom, hardship was a price that everyone agreed was a worthwhile price. People pulled together, community spirit grew and people got by on nothing. Poor and rich alike made sacrafices.
The challenge for the UK is to now find what the rallying cry will be to start that change.
Surviving this next downturn will not be about money, it will not be about business, it will not even be about jobs. It will be about successful culture change. And if the UK can be the first to recognise this and get it under way we will be the first to get back to something like a more stable and sustainable way of life.
posted by So long and thanks for all the fish at
12:59 pm
1 Comments:
Very interesting article. May I make a point, though.
The attitude that characterises this country is "can't be bothered".
The culture change you want to happen would have to be from not bothered to caring and involved.
Somehow, I cannot quite see it happen. UK equals massive benefits abuse, massive physical, mental and spiritual laziness, massive drinking, lack of values and shallowness without comparison.
I'm afraid the only thing for you to do - if you want to see different mentality - is to move out. I recommend Scandinavia. That's where people can still see, think and feel. Probably comes from the constant contact with nature, rather than with TV.
Yours,
Not Biased
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