When I have been involved in turning round companies in difficulties I have always concentrated on managing the cash. When the banks are becoming reluctant to lend more – or want some of their money back – the business has to concentrate on getting more cash in and letting less cash out. It’s not just a question of spending less and trying to raise more revenue, though that is essential. It’s also a question of reviewing all the assets of the business and seeing which ones can be converted into cash, and which are no longer needed.
Stopping spending is a lot easier than the government seems to find it. You put in place a comprehensive freeze on recruiting people from outside, and only override this if you need some specialist skill which you cannot find already on your payroll. You run down stocks of everything before allowing any more purchases. You review every item in your budget and ask if you could run the business without it in the future, or with less of it. You do without so many external consultants, asking your own managers to do more of the tasks.
Finding assets that you do without, or assets which can be sold to others for cash is also usually an essential part of battling an overborrowed business back from the brink. Here the government is in strong position, as some of the past spending has built up a wide range of public sector assets. Some of these are of no immediate use to the public sector and can be sold for that reason. For example, there is plenty of spare land and should soon be some spare office buildings as the overhead numbers come down. Some are of greater value in the private sector than they enjoy when under public sector management. The commercial forests – as opposed to the heritage and recreational forests – would be better off in the private sector and could raise the state some cash, as Labour used to do with their annual sales programme.
Two areas I have identified where improvements could run alongside raising cash are the cases of service housing and motorways. I am pressing again for the service personnel to be given the option of buying their own homes where the MOD still owns them, with a right for the MOD to repurchase and sell on to a new staff member when the person leaves the services. This transaction would be at market price, so the individual would get the full benefit of ownership and have their deposit for their next home, assuming house price rises during their period of ownership. This scheme helps tackle the problem of homelessness some service personel face on leaving MOD employment, whilst producing a one off cash injection into the government.
The question of privately owned and financed roads is more contentious. The aim would be to lease franchises, so the state still owned the long term underlying asset.Tthere could also be a system based on motorists opting in to paying tolls only if they thought they would be better off than paying the Vehicle Excise duty the tolls would gradually replace. The government could then say that tolls only applied automatically to foreign vehicles, currently avoiding most of the taxes, and to commercial vehicles. Private motorists could opt between carrying on with their present level of tax, or switching part of their tax to tolls. Meanwhile the state would get a sum of cash for the franchises, and the motorist would have a manager of the highway more interested in keeping it open and earning revenue.