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Monday, 20 April 2009

Cost savings: efficiency or cuts?

There is lots in the news today about proposals by all parties to reduce public sector spending.

Darling is promising he knows where to save £15billion. Some are pointing out that when the Tories said that sort of thing Labour say that Tories will be "cutting" and closing hospitals. There is lots of scepticsm that savings are possible.

Obnoxio reckons he can save 80% of government spending.

My suggestion is to look to the most efficient company in the world: Toyota. John Seddon, a UK managament guru has done just that: taken the Ideas of Taichi Ohno and used them to improve public services. Like Toyota, he works on two things at once: better quality and less waste. He acheives cost reductions and better services. 

John describes this in "Systems Thinking in the public sector" - please read it and spread the word. John blogs here


  1. I believed in the incremental approach until recently, but this has all gone too far. What we need to do is have a serious debate about what the core functions of the state are (cost around ten per cent of GDP) - zero-based budgeting, in other words - and how much welfare/redistribution we want on top of that.

    Then we argue about what combination of Milton Friedman's least-bad taxes and second-least-bad taxes to raise to fund it all.

  2. I agree, I question a lot of what the state does and would stop much of it and as you know I would tear up the welfare state and build a new one on a citizen's income.

    But Seddon is not about incremental change and small savings. Some of his work produces startling amounts of savings while improving the service users get. He always gets improved service - in a way his process is just to improve the service and cost savings are a natural reaction of the system to what he does. He does this in services we would still need: health, police, housing, tax collection, dustbins, etc..

  3. You're the expert, but to what extent does his method rely on the user not being forced to pay more than market value and/or provision of health being opened up to competition (whether or not taxpayer subsidised)?

  4. Seddon is about improving quality, as determined by the user. This delivers cost reductions naturally.

    It is probably very fair to say that if there were real competition between service providers, many would seek out Seddon's methods to give them a competitive edge.

    But that's not to say he couldn't save billions & billions in the current structure, given the chance.