This\’ll be interesting:
More than £6 billion could be shaved from public spending by eliminating wasteful state spending on mobile phones, stationary, photocopying and empty office space, one of the country’s leading businessmen has told ministers.
Assuming that this precis is correct we\’ve got two things going on here.
The first is Friedman\’s four ways of spending money:
There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.
We\’re at stage three here and as we know, that doesn\’t lead to particularly efficient use of the money being spent.
And of course companies are subject to exactly the same problem: over there we often call it the principal/agent problem.
But a company is subject to a pressure that a bureaucracy is not. The desire to make a profit. Which means that there\’s a constant pressure to be shaving pennies here and pennies there in order to boost that bottom line. Those myriad little efficiencies which, when added up, lead to the continual improvements in productivity that we see.
And we\’ve also got a method of dealing with those companies which don\’t do this: bankruptcy.
Be interesting to see what the whole report says later in the day.