Wednesday 11 May 2011

Data in Today's FT reveal that reduction in health and social care spending is a serious threat to the economy as a whole

A report in today (11/05/11) reveals that the UK economy is in more serious danger of stagnating than was earlier thought. This is because the most productive sectors are the one's which are contracting the most. Notably the financial services sector is deleveraging at a rapid rate due to the current risk averse climate and the need for retrenchment.
Of interest, however, is the role of the health and social care sector. The report on p3 shows that this sector grew at 28.9% in the 2000-2008 period. Although this slowed to growth of 8.6% in the last quarter of 2010 it was labelled by the FT as the most recession proof area of the economy. This will now however, have changed markedly in the light of public sector cuts with very rapid reductions in spend in social care and reduction in health care in real terms.
Signs that the service sector improved in the first qurter of 2011 are now thought to be due to last minute run off spending from Govt depts before the cuts.
Allied to this is the policy of reducing central control on how public services are managed, organised and measured. Many experienced managers have been lost from health and social care during recent rounds of cutbacks. Another article on p4 of the same FT raises doubts about whether a Govt can bring about rapid service transformation and cost reduction in an environment of reducing management infrasturcture. Service transformation and intelligent cost reduction (as opposed to indiscriminate salami slicing) require skills such as project management and lean management. They need good accurate data and good managers to drive forward innovation and change.
Anecdotal evidence suggests that waiting lists are increasing in the face of the removal of targets.
KPMG are quoted on p4 in a separate article as saying that companies which supply the public sector are on a 'knife edge'.
The Govt is in serious danger of failing in its programme of public sector reform and seriously damaging the economy in the process.

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