Facing up to the challenge of delivering more for less

1. Facing up to the challenge of delivering more for less Ross Fraser Chief Executive HouseMark

2. Government deficit reduction strategy poses real threats to: • New supply • Improvement programmes • Neighbourhood renewal • Supporting People services • Revenue – housing benefit reform • Public sector pensions

3. Government rationale • Need to eliminate structural deficit in 5 years • Debt rebalancing - 80% of from cuts in public services • ‘Salami slicing’ departmental spending set to continue • Exceptions are NHS and overseas aid • Front-line services will be protected • Not just about cuts – a new approach to public spending • Underpinning ideology is to shrink the size of the state activity and spending

4. Next CSR (2011/12 to 2014/15) sets VFM criteria for spending • Is the activity essential to meet Government priorities? • Does the Government need to fund it? • Does the activity provide substantial economic value? • Can the activity be targeted to those most in need? • How can the activity be provided at lower cost? • How can the activity be provided more effectively? • Can activity be provided by a non-state provider or by citizens? • Can non-state providers be paid on the basis of results? • Can local bodies, as opposed to central Government, provide the activity?

5. Views of Government critics • Government highly selective in its analysis of Canadian and Swedish ‘debt elimination’ experience • Up to 750,000 public sector jobs to go in next 5 years • Danger of major reduction in new social housing • Government plans will result in massive loss of social value and real hardship • Private sector growth will not compensate for cuts in public spending • Real risk of ‘double-dip’ recession– even President Obama is concerned • A more measured approach to cuts required

6. How should the sector respond? • Campaign for recognition of the social and economic value of our work • Coupled with recognition that Government is unlikely to listen to a sector that doesn’t respond to its agenda • Develop new models – less reliant on public subsidy and benefiting from more flexible asset management strategies - to finance new build • Campaign for greater rent flexibility – higher rents could boost supply • No option around cutting costs, but choices on how to do it • Be clear about strategy - more for less or same for less or less for less

7. Reducing costs: Pitfalls to avoid • Destroying value in your organisation by ‘salami slicing’ jobs and services • Falling for the ‘front line = good’/‘back office = bad’ fallacy • Loss of capacity required to remain agile and respond to future opportunities • Failure to engage with staff and residents about spending priorities • Losing the focus on performance improvement, VFM and customer insight • Failing to meet regulatory standards – the TSA may be going but the co-regulatory framework remains

8. Reducing costs: A measured response • Plan ahead for your cost cutting strategy – it will be more effective • Understand your cost base and where you can secure efficiencies • Look for innovative ways of cutting costs • Consult residents – not every service is important to customers as others • Consult staff – most will accept wage restraint and/or short hours as alternative to redundancy • Maintain focus on performance improvement and meeting regulatory standards

9. Reducing costs: Options • Procurement savings – there is so much more to go for here • Shared services – front-line following the Total Place model or back office • Stock rationalisation – sector leaders are now beginning to act • Exit from low priority services – as defined by customers • Improve housing management efficiency • HouseMark data 2008/9 shows that direct costs vary by up to 70% • Upper quartile performance - £196.33 per unit • Lower quartile performance - £277.42 per unit • Reduce wage bill by flexible working, better absence management etc

10. Your sector bodies are here to help • NHF and CIH are keen to develop new funding models • CIH and NHF will try to get the best deal from HB reform and rent policy • HouseMark benchmarking is the best ‘in depth’ data on comparative costs and VFM in service delivery – even more important than ever • Procurement for Housing can help you achieve real cost savings

11. A final plea: Recognise the true cost of redundancy • Every redundancy is a personal and family disaster for someone • The impact on the local economy may be severe – in many parts of the country, public services account for more than 40% of jobs • Redundancy costs an average of £15k per employee with a further recruitment cost of about £5,000 to £10,000 when the market revives • Voluntary redundancy may cause more damage to a business than compulsory lay offs • Redundancies may be inevitable but can be minimised and should be your last resort