The public sector can also be affected by the economic climate. Mike McDonagh, head of Public Sector at KPMG in Birmingham, looks at the potential impact upon local government.
Most people only really consider the impact the economy has upon the private sector but in reality it also has an impact upon public sector organisations too.When economic conditions worsen and the private sector performance slows, the government’s tax take drops, resulting in arguably reduced public money to invest in local services.
Inflationary pressures such as the increased cost of fuel and the rising cost of borrowing also raise the cost of delivering public services. Yet against a backdrop of these economic pressures, there is often an increase in demand for public services such as social housing and housing benefits.
Scenarios whereby employees who have been made redundant, households who are struggling to meet rising mortgage payments or families who are coping with long term illness due to increasing stresses of daily life are all likely situations that could place demands on local government. As a result, the resources made available to local government will be stretched further.
History has also shown that during times of financial pressure, the risk of fraud increases, including the threat of benefit fraud.
When you add this to the fact that local government employees themselves are seeking a pay increase in order to cope with the rising cost of living, it is easy to see just how vulnerable the public sector can be to economic change.
As with the private sector, local government managers need to ensure priorities are clear and appropriate for the changing environment.
So what can the public sector do now to manage some of the challenges ahead?
Importantly, organisations need to be clear on their strategic priorities and how they will be delivered. Modern business processes together with effective management will contribute to delivery in practice.
A focus on efficiency is key, as is clear medium term financial planning which considers market trends locally and nationally.
Maximising income is also something which could be considered in traditional areas such as car parking and leisure, as will accessing grants available nationally and on a European basis.
Public sector bodies must give considerable thought to these areas as a failure to address and then deliver services to an increasingly pressured electorate, could add to their woes.
Maximising the impact of the public purse on the neighbourhood we all live and work in, will be crucial.