British Government announces new efficiency drive - targets £5.5 billion of wasteful spending

Derek du Preez Profile picture for user ddpreez March 21, 2022 Audio mode
Summary:
Ahead of his Spring Budget this week, Chancellor Rishi Sunak is putting digital adoption and reducing the use of consultants at the heart of the efficiency drive.

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The British Government has announced a new efficiency drive that aims to cut £5.5 billion of ‘wasteful spending’ across Whitehall and the NHS. Central to the plans are a new ‘Efficiency and Value for Money Committee’, as well as a commitment to reduce the government’s reliance on consultants and push ahead with further ‘digitization’. 

The announcement has been released by the Treasury, ahead of Chancellor of the Exchequer Rishi Sunak’s Spring Budget on Wednesday. 

For those that have been following digital progress in Whitehall over the past decade or so will know that this isn’t a new theme. The creation of the Government Digital Service (GDS) saw efficiency gains as an opportunity to garner support and investment for future projects. 

It was claimed that GDS’s original agenda, which put central controls at the core of its policy, saved the taxpayer over £50 billion (which is significantly more than what is being proposed by the Treasury in its latest announcement). 

Chancellor Sunak’s latest commitment to improve efficiency is described as a “crackdown on cross-Whitehall waste” and is being launched at the request of Prime Minister Boris Johnson. 

Any savings delivered by the efficiency gains will be “pumped back into public services”, the Treasury said. 

Chancellor of the Exchequer, Rishi Sunak said:

During these challenging times it’s vital that every single penny of taxpayers hard-earned cash is being spent well.

The current level of waste across government is simply not acceptable – which is why we’re doubling down on wasteful spending and launching an efficiency drive to make £5.5 billion worth of savings.

That money will then be pumped directly into the world class public services that the British people deserve The crackdown will also see a review of Government Arm’s Length Bodies or “Quangos” who will be expected to save at least £800m from their budgets.

Efficiency oversight

At the center of the Treasury’s plans is the creation of a new ‘Efficiency and Value for Money Committee’, which will aim to ensure that the 5% efficiency target set at the 2021 Spending Review is met across Whitehall. It will also scrutinise strategies to prevent fraud and error. 

The Committee will be co-chaired by the Minister for Brexit Opportunities, Jacob Rees-Mogg MP, and the Chief Secretary to the Treasury, Simon Clarke MP. The first meeting will take place the week commencing 28th March. 

The Arm’s Length Body Review will, as outlined by Sunak, will see savings come from better use of property, reduced reliance on consultants, increased digitization and greater use of shared services. Benchmarking will also be used to help drive efficiencies. 

diginomica outlined recently how the British Government’s reliance on consultancy firms has increased substantially over the past five years, as a result of the perfect storm created by Brexit and COVID-19. 

Market data from analyst firm Tussell found that consultancy spend by the government had jumped from £0.7 billion in 2016 to £2.5 billion in 2021. 

In addition to this, the use of SME suppliers has shrunk since 2016, dropping from 21% to 19%. A key part of GDS’s ambitions in the early days was to boost the use of SMEs in government work, making public sector procurement more accessible, with the aim of better outcomes and saving money. 

Part of the plans also includes an NHS efficiency commitment, which is being doubled to 2.2% a year - which the Treasury said will free up £4.75 billion to fund NHS priority areas over the next three years. 

These NHS savings will be made through a “range of programmes including the digitization of diagnostic and front-line services”. 

In addition to the above, the Treasury will also be launching a new Innovation Challenge to ‘crowdsource’ ideas from civil servants on how government can reduce waste and improve public services, with winners selected this Summer. The best ideas will become government policy. 

A similar challenge was run in 2015, which received 22,000 responses, of which 16 measures were implemented. 

My take

There is inevitably a huge amount of efficiency savings that can be made across government and Whitehall - something that will be needed after the huge amount of money that has been spent as a result of Brexit and COVID-19. 

However, the way that government operates is complex. The empire building of individual departments, and the silos that result from this model, make it difficult to think of government as a ‘whole’ and to identify where meaningful change can be implemented. 

What has been key to successful change in the past, however, is the use of central controls - particularly central spend controls. It isn’t a popular tool, as can lead to an ‘us vs them’ dynamic, but as we saw with GDS in the past, it is a mechanism that enables rapid change. 

It’s not yet clear how much control the Treasury or the new oversight Committee will have to introduce such measures, however. We fear a simple target of ‘drive efficiency’ is inadequate and doesn’t fully encompass the real opportunity. I’m keen to see who else is behind this agenda and whether they’ve got a real understanding of white it takes to drive organizational change. 

What this agenda needs is a real strategy that outlines how platform thinking in government, as well as data sharing opportunities, can not only result in cost savings, but also deliver new operating models that deliver better outcomes for citizens.

We will be watching the Spring Budget eagerly to see if more details are released. 

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