The country may be fighting a recession, but public sector workers have been shielded from the worst of it. Despite the woeful state of public finances, the Government has kept on spending.

Those working in the public sector are relatively safe at the moment, because the Government is committed to a Keynesian policy of fiscal stimulus, which means using public money to help to ease the real economy out of the downturn. However, from 2011 onwards, the Government plans one of the tightest squeezes on public spending in the postwar era and many public sector managers are ill-prepared to cope with the looming crisis. Some senior officials are waking up to the reality of the situation but they may be underestimating the size of the problem.

A recent KPMG snapshot poll among senior public servants has revealed that, although there is widespread concern in Whitehall and beyond about the impact of the recession, the majority of public sector organisations are not prepared for the drastic spending cuts that the Government will be obliged to make before long.

Asked about measures being used to control costs in the next year, 85 per cent said that they are using efficiency programmes, the traditional Civil Service response to a spending squeeze. Far fewer are planning to make radical changes: only 25 per cent plan to change their business model and an even smaller proportion (15 per cent) say that they will change their organisational strategy as a result of the downturn. Only 5 per cent want to introduce a pay freeze.

It is already clear that the savings that will be required cannot be delivered through efficiency programmes; much more radical measures are called for. More job cuts in the public sector are inevitable. More than one quarter of all public expenditure goes on paying the wages of public sector employees. It is very difficult to see how the required savings can be made without a substantial reduction in that pay bill.

What is more important, the whole approach to the delivery of public services will have to be reengineered. In the private sector, approaches to delivery have changed out of recognition in recent years. Huge numbers of jobs have been lost in front offices and replaced with online services, call centres and distribution hubs. The public sector has been slow to follow suit, but similar changes will be required. They will not be achieved without upheaval nor without major implications for public sector jobs.

Sixty per cent of respondents in our survey agree that the recession will eventually reshape the public sector but their answers about what exactly might happen are pretty vague.

The risk we all run is that, in the absence of proper planning now, the public sector recession will result in kneejerk cuts in public services. There is an alternative. All public sector organisations need to take a cold, hard look at where they spend their money and make difficult choices about priorities; they need to implement radical new approaches in the delivery of services. The cost in human terms will be high but the only way to minimise that cost – and to minimise the pain for those who benefit from public services – is to start planning now.

— Alan Downey is head of public sector for KPMG, the business advisory firm

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