1. Facing up to the challenge of delivering more for less Ross Fraser Chief Executive HouseMark

2. Government deficit reduction strategy poses real threats to:  New supply  Improvement programmes  Neighbourhood renewal  Supporting People services  Revenue – housing benefit reform  Public sector pensions

3. Government rationale  Need to eliminate structural deficit in 5 years  Debt rebalancing - 80% of from cuts in public services  ‘Salami slicing’ departmental spending set to continue  Exceptions are NHS and overseas aid  Front-line services will be protected  Not just about cuts – a new approach to public spending  Underpinning ideology is to shrink the size of the state activity and spending

4. Next CSR (2011/12 to 2014/15) sets VFM criteria for spending  Is the activity essential to meet Government priorities?  Does the Government need to fund it?  Does the activity provide substantial economic value?  Can the activity be targeted to those most in need?  How can the activity be provided at lower cost?  How can the activity be provided more effectively?  Can activity be provided by a non-state provider or by citizens?  Can non-state providers be paid on the basis of results?  Can local bodies, as opposed to central Government, provide the activity?

5. Views of Government critics  Government highly selective in its analysis of Canadian and Swedish ‘debt elimination’ experience  Up to 750,000 public sector jobs to go in next 5 years  Danger of major reduction in new social housing  Government plans will result in massive loss of social value and real hardship  Private sector growth will not compensate for cuts in public spending  Real risk of ‘double-dip’ recession– even President Obama is concerned  A more measured approach to cuts required

6. How should the sector respond?  Campaign for recognition of the social and economic value of our work  Coupled with recognition that Government is unlikely to listen to a sector that doesn’t respond to its agenda  Develop new models – less reliant on public subsidy and benefiting from more flexible asset management strategies - to finance new build  Campaign for greater rent flexibility – higher rents could boost supply  No option around cutting costs, but choices on how to do it  Be clear about strategy - more for less or same for less or less for less

7. Reducing costs: Pitfalls to avoid  Destroying value in your organisation by ‘salami slicing’ jobs and services  Falling for the ‘front line = good’/‘back office = bad’ fallacy  Loss of capacity required to remain agile and respond to future opportunities  Failure to engage with staff and residents about spending priorities  Losing the focus on performance improvement, VFM and customer insight  Failing to meet regulatory standards – the TSA may be going but the co- regulatory framework remains

8. Reducing costs: A measured response  Plan ahead for your cost cutting strategy – it will be more effective  Understand your cost base and where you can secure efficiencies  Look for innovative ways of cutting costs  Consult residents – not every service is important to customers as others  Consult staff – most will accept wage restraint and/or short hours as alternative to redundancy  Maintain focus on performance improvement and meeting regulatory standards

9. Reducing costs: Options  Procurement savings – there is so much more to go for here  Shared services – front-line following the Total Place model or back office  Stock rationalisation – sector leaders are now beginning to act  Exit from low priority services – as defined by customers  Improve housing management efficiency  HouseMark data 2008/9 shows that direct costs vary by up to 70%  Upper quartile performance - £196.33 per unit  Lower quartile performance - £277.42 per unit  Reduce wage bill by flexible working, better absence management etc

10. Your sector bodies are here to help  NHF and CIH are keen to develop new funding models  CIH and NHF will try to get the best deal from HB reform and rent policy  HouseMark benchmarking is the best ‘in depth’ data on comparative costs and VFM in service delivery – even more important than ever  Procurement for Housing can help you achieve real cost savings

11. A final plea: Recognise the true cost of redundancy  Every redundancy is a personal and family disaster for someone  The impact on the local economy may be severe – in many parts of the country, public services account for more than 40% of jobs  Redundancy costs an average of £15k per employee with a further recruitment cost of about £5,000 to £10,000 when the market revives  Voluntary redundancy may cause more damage to a business than compulsory lay offs  Redundancies may be inevitable but can be minimised and should be your last resort