Conservatives launch productivity drive

Fri 27 Nov, 2009 00:09

By Sumeet Desai

LONDON (Reuters) - The Conservative Party on Friday will pledge to save billions of pounds by encouraging more efficiency and entrepreneurship in the public sector if it wins next year's election, as expected.

Philip Hammond, to be a senior Treasury minister if the Conservatives take power in an election expected next May, will outline his proposals in a speech that will also attack the ruling Labour Party's record on public sector productivity, party officials said.

With a budget deficit expected to hit a record 175 billion pounds this year, both main political parties are under pressure to reveal how they intend to rein in borrowing once the economy comes out of recession.

Spending cuts and tax rises are almost certain, but both main parties are trying to cushion the eventual blow by talking about finding "efficiency savings" by cutting waste in government departments.

On Friday, Hammond will say that if productivity growth in the public sector had kept pace with the private sector over a decade of Labour rule between 1997 and 2007, the state could have saved some 60 billion pounds.

"If efficiency gain is going to yield year-on-year savings and become a central part of what public sector bodies do, it has to become embedded within them, not imposed upon them." according to extracts of his speech.

"It has to work with the grain of those bodies, not against it. We need a 'hearts and minds' agenda: coercion is hard work and can only be maintained for a limited period of time. But win hearts and minds and the dynamics change radically."

Party officials said Hammond will announce the creation of a Shadow Public Services Productivity Advisory Board to look at productivity issues in the public sector as the Conservatives are concerned this has fallen during a decade of Labour rule.

He will also outline proposals to take property away from government departments. All central government real estate will be put into central publicly owned asset companies.

"Departments will become tenants and pay rent and this will incentivise them to use property more efficiently," one party source said.

The Conservatives also plan to introduce intra-public sector competition, with bidding to run services, as well as encourage more "customer power" to give end-users more choice.

(Reporting by Sumeet Desai; editing by Dan Grebler)