It’s unclear how much departments are spending on such investments, but Treasury Board officials confirmed the $5.2 billion in yearly savings that departments must deliver by 2014-15 are “net of any costs to implement these savings.”
Having departments shoulder the cost of any up-front investments, such as technology or new equipment, means they have to come up with much more savings than those outlined in the budget. Departments are also dipping into their shrinking budgets to cover downsizing costs, such as salary buyouts, waived pension penalties and education and training allowances for laid-off employees.
For unions, it’s another missing piece in the cumulative impact of the spending cuts, which they claim is far bigger than the government has led Canadians to believe. Others say the big question is how much of the proposed savings are coming from “efficiencies.”
David Zussman, who holds the Jarislowsky Chair in Public Sector Management at University of Ottawa, said that if departments are making such investments “there may be far more change taking place than we have been led to believe.”
“If savings are predicated on more efficiencies, you can’t just turn on the efficiency tap. It is a huge effort. If you want to make government more efficient you have to change what it does and that is a big, big challenge that costs money,” he said.
Parliamentary Budget Officer Kevin Page is trying to get a handle on the nature of the reductions. Last week, he asked Finance for a breakdown of the $5.2 billion in savings apart from the estimated $2 billion salary savings of getting 19,200 people off the payroll. (The average public servant costs about $100,000 annually, including salary, benefits, pension and overhead). He asked how much is coming operating budgets, the ongoing budget freeze and from transfers such as grants and contributions.
Some have estimated up to $1 billion in savings will come from reductions in grants and contributions, raising questions about where the remainder will come from.
Unions want a similar accounting because they believe the government is underplaying the magnitude and scope of the cuts.
The budget cuts come on top of the job losses departments will face as they digest reductions of the strategic reviews that have been ongoing since 2006. Departments are just beginning to absorb the nearly $2 billion in reductions from the 2010 freeze slapped on operating budgets. All told, unions argue between 30,000 and 35,000 jobs will disappear.
Departments spent months preparing for the cuts. Each submitted scenarios for five per cent and 10 per cent reductions, which included job impacts and any needed investments or costs to generate savings if they were streamlining operations. It’s unclear how firm these estimates were or whether business cases were prepared with full due diligence.
The budget didn’t trumpet the kind of “transformation” that Treasury Board President Tony Clement was pitching in the weeks leading to the budget. He said departments were looking for long-term savings, efficiencies and a rethinking how they do business, from revamping business processes to changes in how they deliver services.
Rather, the government downplayed the reductions and stressed that 70 per cent of the $5.2 billion savings will come from operations, and not from front-line services to Canadians. The savings are supposed to come from three streams: a refocus on programs government provides, a reduction of red tape, and modernization and reduction of back office systems.
“Back office” typically refers to internal services that all departments use, such as finance, human resources, information technology, communications, and procurement, but it’s unclear if other operations are included. The newly-created Shared Services Canada is the flagship project that is taking over the running of the governments’s IT services from individual departments.
What will change is also impossible to decipher. More than 90 departments and agencies are undergoing some kind of streamlining, modernizing and reduction of the back office. The budget document is rife with words such as “modernize,” rationalize,” “streamline,” and “integrate.”
But spending reductions from “efficiency savings” are risky and the government has a bad track record with them, especially if they involve large technology projects.
Gary Corbett, president of the Professional Institute of the Public Service, said he was frustrated by vague references “streamlining’ or departments “focusing on core mandates” to save money. “What’s that mean? What were they doing before?” he said.
The governing Liberals launched a similar Expenditure Review in 2004 and the projected $2.5 billion savings from revamping procurement was so overstated that most was written off. The rest was taken out of departmental budgets even though the expected savings never materialized.
“Consolidating IT is always high-risk,” said Liberal MP John McCallum, who led the Liberals expenditure review. “It can be a black hole for money going in and nothing coming out.”
In September, Page wrote to Clement warning that efficiency savings are difficult and his office would be assessing how departments are making those savings and wanted to see business cases to support them. He warned Clement then that major “transformational” changes have big implications because if the savings don’t materialize the shortfall “could have an impact on the government’s fiscal balance.”
Page pointed to an audit of U.K.’s spending review in 2010 which found the government won’t hit its savings targets, and that only 38 per cent of those achieved so far are “sustainable.”
He argued efficiency projects only work if departments have a handle on their current business costs, have a clear view of the new business processes and how they will work, with a plan to recoup the savings.
Original Article
Source: ottawa citizen
Author: KATHRYN MAY
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