Clear cut?

Bob Papworth examines the fallout for business travel - both positive and negative - as the chancellor's axe falls

When Buying Business Travel's Business Travel Awards judges assemble at their posh-but-secret location later this month to ponder who should get what come January's glitzy gala night - book now to avoid disappointment - Sir Peter Gershon's name is unlikely to crop up for consideration.

One could argue, however, that the former chief executive of the Office of Government Commerce (OGC) does indeed warrant some sort of accolade. Albeit inadvertently, he may have done Britain's travel management community one of the biggest favours in recent history.

Although he spent less than four years in the corridors of Whitehall, he established a blueprint for changing the way the government buys goods and services, driving procurement efficiencies in a much-needed attempt to get better value for the £13 billion that we taxpayers stump up every year to keep the public sector in business. And that, according to the glass-half-full types, means that a huge chunk of that moolah is about to find its way into the travel management community coffers.

As part of his desperate plan to reduce the nation's £156bn deficit, Chancellor George Osborne wants this year to cut £6.2bns' worth of "wasteful" spending, £1.15bn of which will come from "discretionary areas" like consultancy and travel.

A lot of travel management companies (TMCs), who make what passes for a living by cutting other people's travel costs, are rubbing their hands with glee.

Mark Bowers, commercial director at Bradford-based Redfern Travel, is about as gleeful as they come. "Government is not good at buying travel," he says. "Travel procurement and travel management have a long way to go. There is a real need for education, and a real need for efficiency."

And Redfern, as one of the government's accredited Buying Solutions TMCs, is more than ready and willing - for a fee, naturally - to provide that education and efficiency. Equally happy, if not more so, is David Thomas, sales director with FCm Travel Solutions, which has just joined Buying Solutions' roster of travel management partners for the first time.

Although FCm has handled corporate travel for the Department of Health since 2004, and works with other government agencies such as the Food Standards Agency, it only joined the OGC's "framework" in late August this year.

"We did submit when the last framework went to market about five years ago, but we were unsuccessful," says Thomas, who heads FCm's public sector division. "However, we've been sharpening our pencils since then, and are extremely pleased to have been awarded this agreement.

"We believe that because of our geographical spread [FCm has 30 offices across the UK, including four in Scotland and one in Belfast] we can deliver a personalised local service, for instance, to local NHS trusts, the police service, the fire service and so on.

"We're not in it to make a fast buck - there is immense kudos just in being appointed - but we have huge experience in taking cost out of travel, as we have demonstrated in the private sector, and we believe we can bring that to bear in the public sector as well."

That kudos is clearly important. "Our model in this arena is not to make huge amounts of money, because we can't - we're under no illusions about that. It's not about profit, it's about the endorsement, and we believe we can use that to build on our private sector business."

There's yet more joy at York based NYS Corporate, which only two months ago won a place in all six 'lots' awarded by Buying Solutions, covering air and ferry, rail, hotels, conferences, serviced accommodation and 'all services'.

Currently midway through a four year Environment Agency contract worth an estimated £2.5 million a year, NYS joins an elite group of suppliers featuring in every one of the lots.

Daryl Pinnington, NYS managing director, said: "Our spread of clients across the public and private sectors means that NYS Corporate is strongly placed to achieve cost savings on their Buying Solutions behalf and share best practice across our client base."

Introducing an entirely new verb to the travel management lexicon, NYS senior account manager Leanne Fowler added: "We have done such good work recently onboarding our new public sector clients, rolling out online booking tools and saving them money. I'm really looking forward to continuing the process."

'Onboarded' or otherwise, public sector clients are going to be making huge demands. The Department for Transport (which surely should know a thing or two about travel) has had its budget cut by £683m; Communities and Local Government is losing £780m; and Business Secretary Vince Cable's team is having its budget trimmed by £836m. Even Education which, along with Health, prime minister David Cameron has pledged to shield from the worst of the cuts, is losing £670m.

The devolved administrations of Scotland, Wales and Northern Ireland have been told to save £704m, while local authorities are having their combined budget cut by £1.165bn.

Of course, not all of that dosh will be shaved from travel budgets. However, and particularly given the chancellor's focus on "discretionary areas", travel is clearly going to take very big hit indeed.

Much has already been made of George Osborne's spending review. The June Budget set out the overall level of public spending for the four years from 2011/12 to 2014/15. The spending review is the process through which this spending is allocated to pay for all areas of government activity and, since we already have the headline figures, it is (or "was", by the time you read this) unlikely to contain many surprises.

And even if the review does throw up a few nasties, Redfern's Mark Bowers is confident there is plenty of scope for dramatic improvement - and dramatic savings.

"The first thing is mandation. We cannot continue," he says, clearly speaking on behalf of taxpayers everywhere, "to have a situation in the public sector where a contract is signed but it's not adhered to. It's got to be mandated at an organisational level.

"Secondly, this is not about the price of the ticket, this is about the total cost of travel. It's one thing to say 'don't travel First class', but if you buy smarter you can make huge savings."

In other words, cutting volumes or downgrading class of travel will cut costs, but there are more fundamental and longer-lasting ways of reducing spend with minimal pain - an obvious example would be that off-peak First class rail tickets bought online are infinitely cheaper than those bought at the station on the day of travel.

Bowers' biggest challenge, one suspects, will be the 'job for life' culture pervading much of the public sector. Hitherto inured to the market forces which are part and parcel of the commercial 'real world', government employees - and particularly, some say, those in local government - see no reason to toe the line.

"It has always amazed me that people can question what is, generally speaking, a professional procurement exercise," says bowers. "These people study and analyse for nine months to put a contract in place - and suddenly, everyone else seems to know better."

Stewart Harvey, client management director at HRG (Hogg Robinson Group), is convinced that mandation is not the answer. He believes that devolved responsibility is the answer to ingrained travel habits - set a budget, give the traveller or booker a choice (within defined parameters) and let them make their own decisions.

The result, he believes, is greater buy-in at ground level. once people are encouraged to do their own thing, within limits, a competitive spirit is roused; the challenge is not how to get round the rules, but how to get the best within the rules.

Harvey believes that many of HRG's public sector clients have already tackled the fundamentals - don't buy a rail ticket on the day at the station -and have moved to what he calls a "mandate environment".

The question, he insists, is "where do we go from here?"

The answer may be in limited choice. Instead of offering a free-for-all range of hotels in Newcastle, and rather than forcing everyone into the same single hotel, give budget-holders a range of maybe five hotels (all within policy) and let them decide how much they save.

Another part of the answer will almost certainly be in reduced volumes. The chancellor's proposed cuts are so swingeing that job losses are inevitable, and it is obvious that at least some of those who are 'let go' will have been travellers. everyone seems convinced that attendance at meetings and conferences will be slashed - the days when bureaucrats travelled en masse would appear to be over. Sir Humphrey's hangers-on are being debarred, leaving the old Whitehall hand to fend for himself.

Suppliers will suffer. reduced volumes, coupled with a more disciplined approach to public sector travel spending, can only mean harder bargaining. At the recent Hotel booking Agents Association annual conference, 30 per cent of delegates reckoned less than 15 per cent of their business came from the public sector; a further 16 per cent calculated their public sector business was between 15 and 20 per cent.

The reality, according to hospitality industry guru Melvin Gold, is that the public sector probably accounts for 30 per cent of all UK room-nights. Take that away, and there are few hoteliers who won't notice.

Nigel Turner refuses to be even remotely moved. Carlson Wagonlit's director of public sector and industry affairs has been there, done that, worn the T-shirt (twice) then sold it on eBay.

"Our approach will not change," he says of the October 20 spending review. "We have increasingly worked with our public sector clients on cost-saving and quick win strategies, and they are not waiting for the review."

Sir Peter Gershon made sure that the public sector approach, to travel as to everything else, did change. The industry may yet have cause to be grateful. Whether we give him and award or not remains to be seen.

PUBLIC SECTOR EMPLOYMENT Q1/10