Procurex national bill hall - deloitte


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  • GDP Growth 2010: 1.2%; 2011: 2.3%, 2012: 2.8%; 2013: 2.9%; 2014: 2.7%; 2015: 2.7% Bullet 2: excludes unfunded PS pensions, and FS interventions.
  • Procurex national bill hall - deloitte

    1. 1. Fixing the Public Finances 2011 Bill Hall Partner – Public Sector
    2. 2. The Economy : How this cycle could pan out Boom 20% Doom 10% New normal Peak Trough Peak Trough Recession Expansion Debt machine restarts Double dip or worse Economics & Markets, Deloitte Research, London
    3. 3. The Economy : Growth Headwinds & Tailwinds Economics & Markets, Deloitte Research, London Headwinds Tailwinds Fiscal tightening Debt Weak consumers Uncertainty Low interest rates/QE2 Financial repair Strong corporates Momentum
    4. 4. The Economy : Key indicators The Deloitte Academy percent Source: HM Treasury
    5. 5. The Economy : Comparison to Others Economics & Markets, Deloitte Research, London Fiscal deficit for 2010 (% GDP) UK
    6. 6. The Economist house price indicators: % under(-)/over(+) valued against long-run average of price-to-rents ratio The Economy : Debt headwind Economics & Markets, Deloitte Research, London UK
    7. 7. The Economy : UK CFO Survey: availability and price of corporate credit Cost of credit Availability of credit Economics & Markets, Deloitte Research, London
    8. 8. The Economy : Where is the growth in the global economy GDP growth in 2011, Top 10 and Bottom 10 major countries Economics & Markets, Deloitte Research, London Top 10 Bottom 10 <ul><li>China </li></ul>8.6 <ul><li>Greece </li></ul>-3.5 <ul><li>India </li></ul>8.6 <ul><li>Venezuela </li></ul>-2.1 <ul><li>Indonesia </li></ul>6.0 <ul><li>Portugal </li></ul>-1 <ul><li>Chile </li></ul>5.7 <ul><li>Ireland </li></ul>0.2 <ul><li>Egypt </li></ul>5.5 <ul><li>Spain </li></ul>0.4 <ul><li>Brazil </li></ul>4.5 <ul><li>Iceland </li></ul>0.8 <ul><li>Colombia </li></ul>4.4 <ul><li>Italy </li></ul>1 8. Hong Kong 4.3 <ul><li>Japan </li></ul>1.2 <ul><li>Malaysia </li></ul>4.2 <ul><li>Norway </li></ul>1.3 <ul><li>Taiwan </li></ul>4.2 <ul><li>Austria </li></ul>1.4
    9. 9. The Economy : Conclusions Economics & Markets, Deloitte Research, London <ul><li>Financial system stabilised but risks and uncertainties abound </li></ul><ul><li>Interest rates ultra low, QE means easier financial conditions </li></ul><ul><li>Balance sheet rebuilding </li></ul><ul><li>Constraints: consumer, government </li></ul><ul><li>Growth in emerging markets stronger than in the developed world </li></ul><ul><li>Rebalancing economies => recovery depends on exports, manufacturing, profits, capital expenditure </li></ul><ul><li>= Choppy, continuing recovery – New Normal </li></ul>
    10. 10. Public Finances: Expenditure and Income Footer Source: Guardian Income = c£577bn
    11. 11. Public Finance: Tax and spend since 1980
    12. 12. Public Finances: The fiscal deficit
    13. 13. Public Finances :Comprehensive Spending Review(CSR) <ul><li>About 490,000 public sector jobs likely to be lost (Figures has been revised down) </li></ul><ul><li>Average 19% four-year cut in departmental budgets </li></ul><ul><li>Structural deficit to be eliminated by 2015 </li></ul><ul><li>£7bn in additional welfare budget cuts </li></ul><ul><li>Police funding cut by 4% a year </li></ul><ul><li>Retirement age to rise from 65 to 66 by 2020 </li></ul><ul><li>NHS budget protected; £2bn extra for social care </li></ul><ul><li>Schools budget to rise every year until 2015 </li></ul><ul><li>Regulated rail fares to rise 3% above inflation </li></ul><ul><li>Permanent bank levy </li></ul>Headlines
    14. 14. Public Finances : CSR numbers <ul><li>£81 billion over 4 years: </li></ul>Source: HM Treasury Department Budget (£bn) Administrative and program changes (%) Capital changes (%) Education 58.4 -3.4 -60 Health 103.8 1.3 -17 Transport 12.8 -21 -11 Local government 28.5 -27 -74 Business 19.6 -25 -52 Home Office 10.1 -23 -49 Defence 32.9 -7.5 -7.5 Welfare 151.6 -11 -5.5
    15. 15. Public Finances : The top line impact <ul><li>Total spend will still increase from £669bn to £739bn </li></ul><ul><li>National debt will still hit £1 trillion next year </li></ul><ul><li>Public spending will still be above 40% of GDP - the same level as in 2006-07 </li></ul>£ Billion % of GDP Public spending as a percentage of GDP
    16. 16. Public Finances : Government as a customer Government spending in 3 groups: AME cash payouts, pay, and spend on third parties. £243 billion worth of goods and services purchased annually. Deloitte thinks this may reach £300bn by 2013-14. Over £1 in every £3 spent by government is in the private sector. We think this could be up to 44 per cent by 2013-14 Represents 6 per cent of GDP and employs 1.2m people.
    17. 17. Public Finances : Does Outsourcing create value? <ul><li>When: </li></ul><ul><li>there is scale from multiple contracts </li></ul><ul><li>new expertise is required </li></ul><ul><li>capital investment is needed </li></ul><ul><li>there are measureable and repeatable service lots </li></ul><ul><li>minimal client-side oversight/monitoring is required </li></ul>
    18. 18. Public Finances: Is social enterprise the answer? <ul><li>It can lower the cost and increase the quality if: </li></ul><ul><li>TUPE issues can be resolved </li></ul><ul><li>Volunteers and the leadership skills are available </li></ul><ul><li>Governance costs are lower: Can Politicians accept this? </li></ul><ul><li>Client costs are minimised: Can existing organisations let go? </li></ul><ul><li>Capital can be found to support the new venture: How? </li></ul><ul><li>Cost effective infrastructure can support the new venture: Are there viable shared services? </li></ul>
    19. 19. Challenges : For procurement <ul><li>Reduce existing contract costs at a time rest of economy is recovering </li></ul><ul><li>Procure extra services. Deloitte estimate c£50B by 2013/14 </li></ul><ul><li>How do you commission/contract with the third sector/social enterprise? </li></ul><ul><li>Procurement process challenges </li></ul><ul><ul><ul><li>Compliant </li></ul></ul></ul><ul><ul><ul><li>Innovation </li></ul></ul></ul><ul><ul><li>Using Risk and Reward Appropriately: </li></ul></ul><ul><ul><ul><li>Models need to make commercial sense for all parties </li></ul></ul></ul><ul><ul><li>No “Fire and forget”,. Ongoing contract management is required </li></ul></ul>
    20. 20. Member of Deloitte Touche Tohmatsu