No Surprise in New Calls for Cuts in Government Departments – KPMG

April 25, 2012 /

Alan Downey, partner and head of KPMG’s public sector practice, comments on calls from Danny Alexander, Chief Secretary to the Treasury, for Government departments to set aside an additional 5 percent of their budget to help meet austerity measures.

He says: “One of the puzzling aspects of the financial crisis is why it took so long for the shockwaves reverberating around private industry to rock the foundations of the public sector. It was always clear that a time lag would exist between the two, but hiatus has never been mistaken for an escape from the need for austerity, especially given the continued economic uncertainty.

“There may have been some who thought more money would be found if the going got really tough but, with two years passing since deficit reduction became a mantra for the coalition, it should really come as no surprise that calls for cuts are being extended. There are also indications that public sector bosses accept the enormity of the task ahead, with 4 out of 5 agreeing that they need to make productivity improvements to meet current and future challenges and two-thirds admitting that they need to amend their business operations.

“The worry remains, however, that is just a small minority who see cash flow and improving working capital management as a critical priority. Successful deficit reduction depends on the quality of day-to-day financial management and unless tough decisions are taken now we may not be able to protect the most important public services in the long term.”

 

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