Some success in cutting Whitehall costs

By Tony Collins

The coalition government, Cabinet Office, Treasury, departments and agencies have succeeded in cutting central government costs, according to a National Audit Office report published today.

The NAO found that “in particular, large reductions have been made in spending on consultants, temporary staff, property and information technology” in 2010-11.

Departments cut their spend on consultants by £645m in – a real-terms reduction of 37%, said the NAO which also identified “£537m reduced capital spending on IT-related items”.

Unlike some previous reports of the NAO that have questioned the credibility of officialdom’s claims of savings, the NAO’s latest report “Cost reduction in central government: summary of progress” found that the savings claimed by the Cabinet Office, Treasury and government were usually genuine.

Where departments have cut costs by cancelling IT projects or having contracts renegotiated – as opposed to simplifying and streamlining the way they work – the NAO was unsure whether the savings could be sustained.

Said the NAO

“Central government departments took effective action in 2010-11 to reduce costs and successfully managed within the reduced spending limits announced following the 2010 election.

“This resulted in a 2.3% real-terms reduction in spending within departments’ control, compared with 2009-10. Some £3.75bn or around half the reduction was in areas targeted by the Efficiency and Reform Group for cuts in back‑office and avoidable costs.”

Are IT cuts sustainable without a change in working practices?

The NAO said:

 “The fall of 35 per cent in IT capital spend is partly the result of decisions to permanently halt or reduce spending on specific projects, and partly the result of action to reduce the costs of IT products and services including through contract renegotiation.

“However, it is unlikely that IT capital spending will remain at this lower level in total, given the key role of IT and online services in increasing productivity.”

The NAO mentioned the actions of some departments by name.

–          The Home Office cut costs in part by “significant reductions in IT, estates and consultancy spending”.

– HM Revenue & Customs, the Department for Work and Pensions and the Ministry of Defence aimed to secure the bulk of cost reductions from within their organisations. HM Revenue & Customs has established comprehensive governance arrangements to reduce costs, with a central team and programme management infrastructure. The Department for Work and Pensions put in place a transformation programme board in May 2011 to oversee the redesign of its corporate centre and broader cultural change. “However, it cannot finalise plans beyond 2011-12 as they depend on the future business model after the introduction of Universal Credit,” said the NAO. The DWP’s finance team has provided ‘What the Future Holds’ updates and interactive briefings for staff.

– The NAO said it “identified strong leadership as a key factor in the success of the Foreign and Commonwealth Office’s cost reduction efforts”.

– The Centre for Environment, Fisheries and Aquaculture Services within the Department for Environment, Food and Rural Affairs “held sufficiently detailed information to be able to challenge its project managers to reduce costs without affecting services”. The NAO said the “resulting savings identified from some 200 projects made up 30 per cent of the Agency’s efforts to meet their efficiency savings target”.

In July 2011, the Cabinet Office’s Efficiency and Reform Group reported to the Public Accounts Committee that it had helped save some £3.75bn through various initiatives. “Our analysis of the audited accounts of the 17 main departments confirms that spending in the areas targeted was reduced on this scale”, said the NAO.

Comment

The NAO report shows that within some departments officials are cutting costs by simply reducing grants but some parts of central government are making an effort to do things differently.

We hope the coalition and Cabinet Office keep up the pressure for cost-cutting because, in IT alone, the potential savings are in the billions. The NAO report shows there has been a good start. We hope that the officials who are achieving lasting success will pass on their learning experiences to those who are struggling to make cuts sustainable.

NAO report Cost reduction in central government – a summary of progress

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