So what lessons are there for civil servants to learn about saving money? Perhaps it’s one of the most important questions in Government at the moment, and I was asked to make a presentation on it to a few hundred civil servants yesterday.
The introduction from Martin Wyn Griffith, head of procurement for the department, went something like (from memory): “Well we’re in the position where we need to look at all possible avenues of saving money, so who better to have to come and talk to us.”
Yet of course my speciality’s consumer finance, not public purchasing, so in the 20 minutes I had to think about it beforehand I was desperately racking my brain about what to say. Ultimately though, I decided to focus on classic consumer tactics and see what collectively could be drawn from them while having some fun too, as I ended up bouncing across the stage as usual (see MoneySaving Live for an example).
Here are some shorthand notes of examples (it was an hour and a half in total):
- Let the finances rule. Times are changing. In the past, perhaps the focus was on doing the best that can be done, but now finances need to be the primary driver. It’s like planning Christmas for many families – the ones who get in trouble are those who work out their dream plans then afterwards yelp, “How will we pay for it?” It’s far better to work out your budget before and ask, “What’s the best possible Christmas we can have on that cash?”
- Don’t fall for retail hypnosis. Which DVD player is better, the £50 or the £100 one? Too many automatically assume the £100 one is best without making any enquiries. This short cut rationale is not correct. We need to examine each product and not be hypnotised into thinking costs more is better (I also went through the downshift challenge about challenging supermarket habits).
- Don’t pick the obvious tool. People who need a loan typically pick the obvious option of getting the cheapest possible loan, yet actually a credit card is often cheaper (see half price plastic loans). Too often we get boxed into concepts because they seem obvious, which we must avoid.
- Accept uncertainty. For this I used my good debt, bad debt test from the teen cash class, putting the civil servants through it then explaining how the use of the last question shows sometimes it is impossible to make a definitively correct decision without hindsight. And so, what’s important is research to minimise and be aware of the risks, yet right and wrong solutions often don’t exist.
- Commoditisation. Choosing between various competing goods is difficult. Take the DVD player for example (don’t know why I was picking on them, but it works). Often we’re sold on a multitude of features, some we’ll use others we won’t. In fact, a better way is to first define your use e.g. do you need DivX, multiregion, link to surround sound, then once you’ve decided try and find the cheapest one that fits the bill – a strategy I call commoditisation.
- Centralised purchasing. Bulk buying should save money, but it doesn’t always. I remember working at the BBC (over 10 years ago, thankfully they sorted this one) where we had to use DAT tapes which cost more from centralised buying than you could get from WH Smiths. Work out when to use it and when not.
After that it was on to Q&As ranging from pensions, savings, student loans and more.
I was also delighted that we discussed many policy issues (after all, the department for biz includes the consumer unit) such as should there be a cap on interest rates? How best to regulate the problems of misselling, and my running joke throughout, mentioning financial education as the key thing we need (which it is) but then saying: “But I’m not here to talk about that.”
Overall an interesting event, good questions, I enjoyed it.
PS. And before anyone asks, one of the first savings was not to pay me, I did it on a volunteer basis as I think it’s important for all of us to try and engage in the debate as much as we can.