Graham Birse: Partnership and innovation can help soften the cuts blow

Published on Wednesday 1 September 2010 03:34

Scotland's public sector faces the biggest reduction in public spending in generations. Managing 51 per cent of our GDP, private sector firms who trade with them are bracing themselves.

A real terms saving of 3.7 billion is needed over five years in order to balance the books, according to research group the Centre for Public Policy for the Regions. Deferring cuts merely delays the pain.

Next May's Holyrood election means an incoming administration is going to be applying strong medicine immediately. Jo Armstrong, author of the CPPR report, said: "Many of these recommendations would be common to all parties and so considerable progress could be made … (allowing] for service providers to plan in advance."

If the Scottish Government keeps its promise to ring-fence the NHS budget, all other areas face cuts of 32 per cent. Without ring-fencing, but with efficiency savings of 3 per cent a year and a wage freeze for the next four years, then more than half the cuts needed would be found, with any job losses confined to the efficiency savings calculation.

It is also clear that public sector reform must include pay and pensions savings if it is effectively to tackle the deficit – for every 1 per cent above inflation that public sector pay is settled, an extra 100 million is taken from Scotland's spending.

Nevertheless, there is opportunity. At the Edinburgh Chamber of Commerce AGM today, the president, Robert Carr – reporting a 225,000 surplus on 4.9m turnover – will remind members that six of the top ten world leading brands by market capitalisation were created during recessions. He will point out that in a year in which ECC has grown its business development portfolio and launched Scottish Chambers International, partnership, new products and innovative marketing have led the way.

On similar lines, businesses and the public sector can and must band together now to support each other in making effective services available within budget.

• Graham Birse is deputy chief executive of Edinburgh Chamber of Commerce