The myth of cost savings by cutting spending

In response to the global financial crisis many governments are trying to reduce costs by cutting back on services. This is described as cutting costs although it is actually simply cutting spending. The spin is based on the implication that cutting costs is both necessary and desirable...whereas, cutting spending might mean that someone misses out. And they probably will.

While it is true that such a strategy reduces the cost to government (at least in the short term) it almost never reduces the total cost. There are two common outcomes from such a flawed strategy:

1. The total cost increases because
   
   • Processes become less efficient since they have to be developed using different arrangements and this may not happen (efficiency = 0%, effectiveness = 0%)
   • Actually require more resources - new arrangements have to be established
   • Processes become less effective creating backlogs, rework and deficiencies
2. The cost moves towards those who can least afford it - those who have the least resources

The only way to genuinely reduce costs is to improve the systems involved.

Note: A new improved system may emerge spontaneously as a side effect of cost cutting - the edge of chaos phenomenon - however this is a very risky and unpredictable strategy.