Archive for April, 2011

Why the UK public sector will eventually implode…

Intrigued the vote of no confidence at today’s Royal College of Nursing conference and some insight I gained last week as to the cost of the NHS, I thought I would try and find out how much it costs the UK taxpayer to run the public sector, the NHS, and why the government must execute a reform programme urgently.

Before I share my findings I have to make three things clear:

  • I absolutely support the work of Nurses and the medical profession, indeed some of my family and friends work in the NHS today.
  • I have no political affiliation whatsoever.
  • I have found it incredibly difficult to lay my hands on accurate numbers, most of the data (sourced from the Office of National Statistics and the Audit Commission) is two years old. I can only assume that it takes that long to try and add up all the numbers.

So here goes… some facts about the NHS:

In 2010 the NHS employed 1.3 million people and the total wage bill was £27.6 billion. This is an increase of £6.6 billion (32%) from the 2008 wage bill of £20.1 billion.

Nurse numbers as a proportion of NHS employees are also worth a mention here, in that they have increased from 408,000 in 2008 to 419,000 in 2010, a net increase of 11,000 or 3%.

Salaries represent 30% of the total NHS cost which puts the total running costs for the NHS at around £92 billion (I also read a newspaper article which said the total cost was £112 billion but I couldn’t find the evidence to back this up) so let’s assume the £92 billion for the time being.

  • As a proportion of the total UK population of 62 million, £92 billion equates to £1483 per person
  • As a proportion of the total UK working population of 38 million, £92 billion equates to £2421 per person
  • As a proportion of the total UK private sector working population of 31.8 million £92 billion equates to £2893 per person

I also read a report that made the assertion that it costs 10x more, in relative terms, to run the NHS today than it did when first created.

So, the NHS is very expensive and it would appear that costs have continued to increase year on year during the past 10 years… in fact even during the deepest depths of the recession in 2009, NHS costs and employee numbers continued to rise at around 3%.

However, this is a drop in the ocean when we look at the whole of the public sector:

In 2010 the Public sector employed 6.2 million people and the total wage bill was £182 billion. This is an increase of £8 billion (5%) from the 2008 wage bill of £174 billion.

Again Salaries represent around 30% of the total running cost of the public sector which puts public sector spending around £600 billion, up £26 billion from the 2008 cost of £574 billion.

During the deepest point of the recession in 2009, whilst around 700,000 jobs were lost from the Private Sector, around 100,000 jobs were added to the public sector. What’s more during the same period the average public sector salary of £23,660 overtook the average private sector salary of £21,528.

  • As a proportion of the total UK population of 62 million, £600 billion equates to £9687 per person
  • As a proportion of the total UK working population of 38 million, £92 billion equates to £15,805 per person
  • As a proportion of the total UK private sector working population of 31.8 million £92 billion equates to £18,886 per person

What does all of this mean?

Basically it means the UK economy, driven by the private sector, simply can’t afford to fund the public sector. The UK government is borrowing (increasing the budget deficit by) something like £140 billion each year to balance the books.

Where’s this all going to end and how can we keep paying for services that we simply can’t afford?

I’d urge those arguing against public sector reform to go and check out the economics. There is no magical pot of cash and the government can only raise more money from the taxpayer… and this particular taxpayer isn’t convinced he’s getting anything like value for money from the public sector today.

Just saying…

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The Enterprise Cloud and why saving money isn’t everything

I spent an excellent couple of days this week with a group of CIO’s from some of the largest companies across Europe and one of the hot topics we debated was around adoption of the Cloud… what’s the business case for cloud? who’s driving the cloud agenda? are businesses ready for cloud? which applications are best suited to cloud? and what’s the general feeling around the public and private cloud debate?

It was refreshing to have such an open debate without the hype and cloud washing by cloud vendors, and despite the fact there were a few cloud vendors present, they were politely asked to stop selling and start listening to what businesses really need:

  • The smart business is much more interested in using the cloud to drive business benefits and increase revenue as opposed to saving costs. (the vendor argument that the cloud reduces your operating cost simply doesn’t matter if it doesn’t help business growth).
  • The much publicised CAPEX vs. OPEX argument was also dismissed as a benefit as most felt it easier to secure CAPEX funding as opposed to OPEX.
  • The speed and agility of procuring cloud servers and services and the elasticity of increasing compute and storage capacity around demand peaks were seen as attractive benefits.
  • Getting data (not necessarily applications) to the cloud is seen as a positive move as it opens up a new range of business opportunities around collaboration, e.g. customer/employee self-service and supply chain digitisation (what a fantastic word!).
  • System integration and interoperability has replaced security fears as the biggest concern around cloud adoption… getting disparate systems to work together remains as one of the most difficult businesses issues and it is felt the cloud could complicate this further.
  • Whilst there was a bias towards private cloud, businesses were open to adopting all types of public, private and hybrid cloud on the basis that a “one size fits all” model is unlikely to suit all enterprise business models.
  • It was generally accepted that using the cloud for consumer applications is much more popular than using the cloud for the Enterprise today. The few cloud usage examples shared were all consumer facing operations of the Enterprise as opposed to back office operations.

I was very impressed with the level of knowledge and debate at this session and I have to conclude by saying Enterprise business leaders definitely understand the cloud, they see through the cloud wash, and they are more than capable of deciding how and when to adopt cloud in their business.

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