False economies, Part 2: Doing less with less



scissors cutting money © GeorgeMPhotograohy

Why some cuts hurt more than others

In Doing less with less, CPD public service Research Director Christopher Stone contends that sometimes cutting can cost more than it saves. Shifting responsibility to the private sector is not a cost-effective strategy when the public sector is better placed to provide essential services. While efficiency is defined in terms of producing more with the same or lesser expenditure, and some politicians talk about doing ‘more with less’, arbitrary spending cuts can in reality simply mean doing less with less.

Recent budgetary imperatives to cut service provision underline the importance of careful and evidence-based decisions on where to cut and how. This second instalment of CPD’s three-part False economies report provides examples of where peremptory cuts would have led to increased costs as well as reduced performance:

In 2o11 Queensland spent $120 million maintaining public works skill capacity much higher than that of Victoria. Queensland may have saved nearly three times what it spent, $350 million, by using that capacity to keep public works costs low.

Doing less with less also highlights examples that cast doubt on the assumption that the private sector always does the best and most efficient job of delivering essential services, for example:

Detailed analysis by the Productivity Commission comparing public and private hospitals has shown that the efficiency of each is very similar, with both having areas of strength compared to the other.

The cases provide evidence that reducing government can be wasteful and inefficient. They are a warning that when cuts, privatisation, or outsourcing are considered, thorough and sophisticated analysis of the costs and benefits of such actions is necessary.

Download Doing less with less

This report illustrates the points made in ‘Decoding Efficiency’ with six case studies where the efficiency of Australian public services has been, or could be, negatively affected by cuts or a decision to leave the job to the private sector.