A number of public sector organisations will face the equivalent of insolvency in 2013 as tough austerity measures hit front line services, warns KPMG’s head of public sector.

Alan Downey argues that many public sector organisations will be subject to intervention over the next 12 months, with new management teams brought in to resolve crisis situations for worse case scenarios.

However, he also said that a ‘catalogue of disasters’ in the public sector could be avoided if new approaches and initiatives were given the chance to succeed.

Downey said: ‘Many public sector leaders are approaching 2013 with a hint of trepidation, nervous in the knowledge that the reserves that kept their organisation going in 2012 are running out. With bail outs less likely and more cuts on the way, I expect to see an increase in the number of organisations facing the public sector equivalent of insolvency.

‘The best case scenario will be a rise in the number of distressed organisations pooling resources or merging. The worst will witness a step change in failing organisations facing special measures, with tough new management teams parachuted in to resolve crisis situations.

‘The good news is that the Government remains committed to reform and, in some cases, radical change. As a result, the next year will see more decentralising of power and a greater array of public services opened up to competition. Whether this will lead to improved results and a better delivery of key services remains to be seen, but the chances of success will improve if new ideas are given a chance and new approaches to budgeting are put to the test.’

Downey added that responsibility for ‘social financing’ should be accepted by service providers, such as the adoption of ‘Payment by Results’.