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The truths they don't want you to read....

Thursday, April 28, 2011

Public sector funding cuts

There is a most interesting report from the Scottish Agricultural College about the impact of public sector cuts on the Western Isles, which highlights that the impact of any cuts fall most disproportionally on the Western Isles.

Indeed, the Western Isles are the most vulnerable area in the whole of Scotland due to the high number of people employed in the public sector, and the low percentage of people of working age.

So let's think through how this can best be addressed to reduce the impact.

The Government is already cutting 2.5% off the Council budget, so there is a huge impact.

Inflation at 3-4% will make another big hole, and is in reality a cut, and Council Tax is to be frozen, which cuts another 0.4% off the Council budget.

So we can look forward to a serious impact on the local economy over the coming years.

Simply asking for more public sector funds won't wash; and doesn't solve the problem.

The over-dependence can only be solved by growing the private sector which means that the Council, the Government and the Enterprise Agency have all got to foster and nurture a spirit of entrepreneurship throughout the islands to reduce the dependency.

It is not a quick or easy solution, and it is being addressed only tangentially at the moment, as neither the political will in the Government nor in the higher echelons of the Council to actively address the issue.  It's not about handing out grants, nor about small scale fiscal encouragement, but about a fundamental reappraisal of what is being done by the public sector, and why it remains in their death-grip.

I certainly don't have the answers, but I do know that the status quo isn't working in diversifying the economy, and the effect of that will become all too apparent all too soon.


Anonymous said...

It seems an irony that the public sector should be responsible for creating a vibrant private sector out of the ashes. The two are diametrically opposite, so how can this be when savage cuts are having to be made? Its been obvious for some time that assistance for small businesses was phased out in favour of subsidising public organisations and social enterprises or charities which could secure funding so long as they were running their affairs on a not for profit basis. This excluded most of the small and established private businesses in the islands and so for them in this climate, its not worth taking any more risks unless you want to lose everything. Houston we have a problem!

Hairy McLairy said...

I think this is one of your wisest comments for ages, Angus. The £64k dollar question is - what should be done?

Most of the folk who work in the public sector - which can make the biggest difference - have never run anything in the private sector.

To me, The single biggest thing the Council and all the other public agencies could do is to dismantle the bizarre and arcane processes they use to let contracts. Only a few, big companies understand them - and only a few, big companies win them. They are skewed towards big, mainland business (FMP? I rest my case).

I'm a fairly bright soul and I quite like paperwork but the questions in the bidding process actually count against small firms - they assume you have a turnover of millions of pounds, and ask for evidence of five other contracts like this that you have successfully performed. How is anyone supposed to get into this kind of business?

As it currently stands, it's a sham, designed to persuade small business that if they try hard enough, they'll win a few crumbs off the table. Well, they won't.

Change the bidding process and you'll put some life back into the islands.

Anonymous said...

The difficulty the council are faced with is that they can't dismantle the contract tendering process since this is determined by a European Directive. To a large extent their hands are tied and to make a change in the tendering process needs political action in Europe not locally. The way you plan your work activity is quite a different matter.

Hairy McLairy said...

I agree, 7.31am, but it's also how the work is bundled together that makes the difference. Work is let in large lots which is difficult for small companies to go for.

As an example, take window-cleaning (no, I'm not in that business). The contract is usually let on an island-by-island basis, when the best way for smaller businesses are to do it on a district-by-district basis.

If the Council organised an annual purchasing meeting in each location, it could openly tell anyone who wanted to attend (in person, by videoconference or online) what it was planning to put out to contract over the coming year, and take feedback on good ways to bundle up the contracts, or to explain what's actually needed.

That's allowed - indeed encouraged - by the EU regulations. But they don't. Instead, you have to watch the Gazette or Public Contracts Scotland like a hawk, then send off for or download a 30-page template which allows you to express an interest. You have to email in your business' entire life history in the vain hope that you've put it in the format they actually want - and you've no way of telling how right you've got it.

Three months later you get a rejection letter which gives you no idea at all why you didn't get the work. You later discover that the work was won by a Big Accounting Firm, who charge £200 a day more than you do, but who got their central research team to send in a DVD showing how they would do the work, accompanied by a special set of graphics they've used to win business from every Council in Scotland.

Six months later the Council ring you and ask you to fix the problem that the Big Accounting Firm have caused because they did a slapdash job - at cut-price local rates, of course, because they've spent all their money....