The Government has forced the pace on public sector service transformation over the past decade but as public finances have worsened, research suggests that innovative approaches to services and funding may be necessary.

After the Gershon report of 2004 provided a framework for driving £20 billion of savings in central and local government, successive reports — such as Sir David Varney’s call for joined-up services that focus on the citizen — kept the pressure up. However, a survey of 129 finance directors commissioned by Civica and carried out this month by the Chartered Institute of Public Finance & Accountancy, suggests that more-radical thinking will be needed and public service providers and their partners will need to demonstrate local leadership.

With 83 per cent of survey respondents expecting a new efficiency drive and 54 per cent predicting reduction of local funding, finance directors fear the worst. Many public organisations have pushed efficiency savings as far as they can, so new approaches are needed to balance funding with growing service demands, especially in recession-hit communities. In particular, the notion of moving away from central government funding to options such as local taxation, public-private finance and local finance is proving to be surprisingly popular.

Of those surveyed, four in ten want the reinstatement of local taxation powers; 37 per cent backed new types of public-private funding such as a reworked PFI; and more than a third thought mutual funds for capital projects would help.

It is interesting to look at the thinking behind this. Finance professionals don’t always accept a well-worn central template for change: they are clearly mulling over new ways to sustain and improve service delivery in the new financial climate. Such structural changes could help to remove constraints on many public organisations’ ability to invest in services or balance their finances.

There appears to be real concern that central government is not going to deliver. Senior finance figures are looking at increasingly creative ways to safeguard local services and implement efficiency savings. Public sector bodies need to consider options such as overhauling procurement, redefining “risk and reward” based approaches to managing suppliers, shared services or outsourcing to help save the £7.2 billion per year set out by the Treasury in the Operational Efficiency Programme.

The survey highlights pragmatic steps already taken by senior finance professionals over various different strategies, such as shared services, through which their organisations can help to meet local needs while complying with tougher spending constraints.

Public finance directors are clearly under enormous pressure to deliver value for money without undermining the integrity of complex national and local services. While the two main parties continue to argue over definitions of public spending plans, practitioners accept that the next government may have to look beyond the efficiency game. All sides will need some fresh thinking from experts across the public, private and third sectors if they are to meet service expectations while reshaping the public finances.

• David Roots is managing director for local government, Civica UK

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive