2nd UPDATE: UK Govt To Meet Suppliers Thursday To Seek Cost Cuts

7th Jul 2010 00:01

(Updates with details from speech Cameron is due to make before civil servants later Thursday) By Laurence Norman DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. Cabinet Office Minister Francis Maude will discuss cost savings with the government's biggest suppliers on Thursday as the government seeks to pare back a huge budget deficit. The move comes as the government continues to press civil servants over pay and performance with Prime Minister David Cameron telling Britain's diplomats they need to do more to generate business for U.K. companies. In a speech to the think-tank, Reform, in London on Wednesday, Maude said he will meet Thursday with the chief executives of the government's 20 largest suppliers to start "renegotiating with them across everything that they do for government to get the cost down." Maude said the government is seeking to replicate the renegotiation of contracts many private sector companies carried out during the recession. "And part of that will be, yes, we will want to have something off your margins and part of it...we will expect you to tell us how we can pay you less, some of which will be for doing less," he said. The new government, which took office in May, has promised some GBP6.2 billion in spending cuts for the current financial year. Some of that will come from the "significant savings" the Cabinet Office expects to make from renegotiating contracts. The Cabinet Office would not give details of who will attend Thursday's meeting and said there was no figure for expected savings. Further meetings are expected with other suppliers over the summer. So far, there has been mixed fallout on public sector suppliers from the government's planned spending cuts. Shares in social housing group Connaught PLC (CNT.LN)have plummeted in recent days after the group warned spending cuts would hit revenue. However, construction firm Carillion PLC (CLLN.LN) said earlier Wednesday that only a fraction of its GBP19.7 billion order book and probable orders was from public sector demand. In recent days, Maude has promised to use the government's collective buying power to drive down procurement and other costs. On Wednesday, Maude announced the government would cap redundancy payouts to civil servants ahead of what are expected to be significant job cuts in the public sector in coming years. Meanwhile, in a speech to the Foreign Office Leadership conference, the prime minister urged the nation's diplomats to "do more with less," warning that: "If you want to keep Britain's great ambassadorial residences--then I want you to show me that every day you are using them relentlessly to open new trade links and to generate new business for Britain," Cameron said. The new government has vowed to drive down by a third what it spends on central government departments as part of its deficit reduction drive. It has also announced a two-year pay freeze for most public sector workers and provoked union wrath by ordering a review into changes to public sector pensions. In a speech he is due to deliver in London to 450 civil servants on Thursday, Cameron will announce the publication of the first departmental "structural reform plans," which will set out the key priorities for each department and milestones for achieving them. Cameron will praise Britain's "talented and committed" civil servants but will pitch the new strategic plans as a key mechanism for devolving power from an central bureaucracy, according to excerpts made available by his office. "I'm not going to criticize everything the previous government did...where they went wrong were the techniques they used. Top-down. Controlling. Above all, bureaucratic," he is due to say. "We want to turn government on its head, taking power away from Whitehall and putting it into the hands of people and communities,' he will say, giving as an example plans to give parents greater choice over which school they send their children to. While Cameron insists his plans aim to improve public-sector performance and accountability, the opposition Labour party say they are aimed at reducing the role of the state and cutting frontline services. And they charge that the government's plans to dismantle top-down targets for public-service delivery will cause a slide in overall quality and a gap between the level of service provided in wealthier communities and lower-income areas. -By Laurence Norman, Dow Jones Newswires; 44-207-842-9270; [email protected] (END) Dow Jones Newswires July 07, 2010 19:01 ET (23:01 GMT)