UK Government

HM Treasury: Speech by the Economic Secretary to the Treasury, Ian Pearson to the Intellect - OGC Supplier Conference

News   •   Feb 12, 2010 11:04 GMT

High Holborn, London WC1, Monday 18 January 2010

Check against delivery


Thank you for the invitation to speak here this morning.

I’d like to start by thanking Intellect for organising this event and for the work they do, and welcome a productive ongoing relationship with Government.

Economic context

Little over a year ago the world banking system and the global economy were staring into the abyss.

A banking crisis, unique in the modern era, exposed structural problems in all developed economies, problems that were largely not foreseen and certainly not dealt with in the years preceding.

It led to the first downturn in the global economy for over 60 years.

All developed economies have been affected. Not surprisingly the UK, with the world’s leading financial services sector, second largest exporter services and 6m exporters, has had a hard time.

We have regrettably seen job losses and business failures, but taking action has reduced the impact of this downturn on families and businesses, compared with recessions of the 1980s and 1990s, when unemployment and business failures were far higher.

We are now at a point where the financial system has been stabilised and coordinated international action has prevented a financial crisis from turning into global depression.

And we have seen the effects across the world.

For example, the German economy contracted by 5.0 per cent during 2009. And from its peak, Japanese GDP has fallen by 7.7 per cent. The average estimate of independent forecasters is that the UK will have declined by 4.5% in 2009.

UK unemployment is lower than the Euro zone average and the US.

We are now at the point where confidence is returning across the world economy. We expect growth here in the UK to return at the end of the year. The average estimate of industry forecasters is creeping up and now predicting 1.4% growth this year.

Government action

But we must not be complacent, there is still uncertainty around the globe and that is why we need to maintain support for our economy until the recovery is firmly locked in.

Cutting support now could derail the work done so far, wreck the recovery and damage the economy.

But, as is well known, there has been a profound impact on the public finances, resulting in a significant increase in Government borrowing and, as a result, increasing public sector net debt.

And it was entirely necessary.

If we hadn’t allowed borrowing and the deficit to rise, helped people and businesses; we would have experienced greater pain; and it would have cost us more in the long run.

Continuing support now is vital, but it must go hand in hand with actions to rebuild our fiscal strength, once recovery is firmly established.

* That is why we have set out a plan to halve public sector net borrowing as a share of GDP over four years.


Fiscal consolidation is necessary for sustainable growth in the economy.

But, while putting public finances on a sustainable long-term footing is vital, so too is having a clear strategy for securing and entrenching growth in the long run.

For growth, we need to invest in new jobs, new industries and new infrastructure that are vital to balance our economy in the future.

We are building on the strengths in the UK by:

* maintaining our leadership in the low-carbon sector;
* boosting investment in our national infrastructure and skills;
* supporting our world-class hi-tech industries.

We are taking action to ensure that the Banks continue to lend to businesses and to support small and medium sized firms to continue to invest for the future, including extending the Enterprise Finance Guarantee scheme for a further 12 months, providing £500m additional credit.

Public services

In order to maintain the frontline services that people rely on – schools, healthcare and police - we will have to make tough choices elsewhere.

As the Prime Minister and the Chancellor have both made clear, the impact on other services cannot be painless.

At Pre Budget Report, together with our report on Putting the Frontline First, we announced £20bn of cuts and efficiencies. On IT these included:

* £3.2 billion to be delivered by 2012-13 as part of the £8bn identified across the public sector through the Operational Efficiency Programme.
* £600 million from greater use of online systems; and
* £850 million from delaying things that can wait, like some large IT programmes

And while we have not set out Departmental budgets for the next five years – and global economic uncertainties mean now is not the right time for a Spending Review – the direction of change is very clear over the next few years.

We need to ensure that we get maximum value for every pound we spend. 
Some departments will have to cut back.

There will be cuts to some budgets, as programmes come to an end or resources are switched to new priorities.  And some programmes will need to be stopped altogether.

Cutting the deficit will require clear action, and Departments will need to find savings, but it should, as far as possible, be done in a way that is not detrimental to services.

There will still be the expectation that service is delivered and also improved.

Public Services

And this is why, alongside our drive to improve efficiency, we have in recent years also implemented significant reforms:

* introducing institutions such as Foundation Trusts and Academies to increase choice and raise standards;
* new performance management tools such as Public Service Agreements;
* more joined up inspections through Local Area Assessments;
* more front-line staff – 16,000 more police officers, 42,400 more teachers, and over 70,000 more nurses;
* and new services such as Sure Start Childrens’ Centres, Jobcentre Plus and neighbourhood police teams.

These have all helped correct the legacy of under-investment in public services.

But, in order to protect frontline services at a time when budgets are tighter, we must be relentless in finding new ways to save money in order to pay for services.

As you know, putting the frontline first, Smarter Government has set out how we will meet these challenges.

We will strengthen the role of citizens and civic society. This will include £30m to support the National Plan for Digital Participation and the use of modern communications technology to promote behaviour change, such as texting people to remind them of appointments

We will free frontline services to innovate and collaborate, with action such as cuts to inspection regimes and mergers of regulators, more use of published comparative data and removing a number of indicators measuring local authority performance by April 2010.

And we will streamline and restructure central government, by actions including reviewing the Senior Civil Service aimed at saving 20% of its costs, a relocation of 10% of Civil Service positions in London and the south-east, and cuts and mergers to over 120 arms-length bodies

Procurement and OEP

Looking further at the micro side, our strategy has been to take steps aimed at improving efficiency and procurement.

As part of this we launched ‘policy through procurement’. The first time Government has identified specific priority areas on which to focus spending.

We are sending a clear signal to the market about what we expect from buyers and suppliers when looking for the best value for money deals.

And procurement is about value for money in the widest sense. When Government procures goods and services it is to deliver policy priorities, so it is right that it buys things in a way which also supports these priorities.

To improve efficiency, the Operational Efficiency Programme aims to streamline Government processes and deliver more for less.

It identified that a key area for efficiency savings was the need for Government to run leaner back-office and IT functions.

We published the first set of results on 7 December 2009, which documented that we had made £1.4bn savings across Government through collaborative procurement so far.

And we will continue to publish annual benchmarking documents as a result of the programme’s recommendations.

Another one of the recommendations identified is that of collective procurement and the opportunity for public sector organisations to leverage their collective purchasing power.

The review found that the best performing organisations were already making substantial savings by collaborating in managing suppliers, through the use of technology and through professional buying organisations.

Working together

But a key message for those working with Government, is that as Government looks to make savings wherever it can, we will need those working in industry alongside Government to come up with solutions that will help maintain and improve the service we provide, alongside cutting costs.

Next generation broadband is becoming available, with the potential to create another wave of opportunities for individuals, businesses and the way Government services are delivered.

And this is why we are modernising the UK’s digital infrastructure and taking action so that we can provide the next generation of super-fast broadband to 90 per cent of the population by the end of 2017.

However, as well as increasing access through this avenue, we also want to ensure that we improve access by the service we provide.

And, of course, it is about making these services more efficient.

This will require the need for strong relationships between suppliers and Government.

It will require collaborative solutions that will ensure that we provide ICT systems that help meets taxpayers’ expectations and needs.

Recent years have seen great improvement in the relationship between the public sector and industry.

This has included the Senior Responsible Owner/Senior Responsible Industry Executive initiative designed to ensure better top-level contact between civil servants and industry executives on major programmes, after award of contract.

And these are the relationships that are key as we look to ensure that the UK is at the leading edge of the global digital economy through the Digital Economy Bill.
To date, there has been significant progress making services electronic and using advances in ICT and the internet.

There are many good examples, including the Government Gateway and DVLA issuing vehicle tax discs through an online system, that are helping to improve access and efficiency.

And efficiency gains are being made elsewhere, for example, through better management of hospital patient admissions and the OGC ICT hardware eAuctions, which has helped deliver £50 million in savings.

We have also set up the Centre of eAuctions to cover other categories of spend, and Nigel Smith will talk more about this later.

And, through the course of the day, you will also hear about some other new initiatives that we have been working on with industry.

Martin Bellamy will talk about data centres, where we hope that gains will be achieved by server virtualisation and the consolidation of existing data centres, and G-Cloud, a public/private hybrid ICT system with substantial potential to improve the flexibility and performance of ICT service provision to central government and the wider public sector.

Bill McCluggage will talk about the Public Sector Network, a bespoke public sector communications network that will deliver significant benefit to all areas of the public sector within the next five years.

And Phil Cholewick will talk about the Home Office Extend and Blend contract, a good example to the whole public sector of how candid supplier management and strong governance can bring about tangible benefit.

Going further

As ever, there is more that we can do – both at macro and micro level.

Government will have to make further tough choices to ensure sound public finances; while at the same time prioritising and protecting the key services people rely on.

We will need to bring in more changes to the way we deliver services, to achieve further efficiencies and embrace new technologies.

We must also think about all of this in a wider perspective. What I mean is that the benefits of improving these services extend further than financial considerations and providing the services people need.

There are further benefits related to sustainability, with better and more widespread use of ICT helping achieve a reduction in the carbon footprint and this can support the inclusion of UK SMEs.

Smarter procurement, in addition to delivering savings, can also support other public objectives, such as the Government's growth agenda, environmental targets, and its goal to increase energy efficiency across the public sector.


To conclude, I don’t think there is a single person in this country who believes there are not tough times ahead in the public sector. But there are also opportunities and we must look to produce solutions that work for our citizens.

Providing these solutions will require productive relationships between the Government and the ICT industry.

Doing more for less is nothing new to most of us. We are just going to have to do even more of it. And, to be realistic, we are also going to stop doing some things that we collectively decide aren’t priorities.

We need to work at this together. Public and Private Sectors. Actively engaged to do more for less, to develop new efficiencies, transforming public services, delivering best value. I look forward to seeing the results in the future.


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