Government efficiency claims, independent audits and procurement savings

The efficiency savings declared by the Cabinet Office last week - £3.75 billion in 10 months – were impressive at first sight. Most of the media took this as a sign of getting to grips with waste, although others  made comparison with the “Gershon savings” declared under the Labour government, which turned out to be not quite as impressive as they sounded once the National Audit Office had a close look at them.

Given this issue, it was interesting to see the Cabinet Office declare that these savings had been “independently audited”. By whom, we wondered? It didn’t appear to be NAO.  After some brilliant investigative journalism (i.e. phoning the Cabinet Office press people) we eventually got the answer. The savings have been audited by the internal audit team (of civil servants) who provide a shared service to the Department of Business and the Department for Communities and Local Government. (No-one else has reported that by the way - a Spend Matters scoop!)

So how “independent” are they? Well, they’re not employed by Cabinet Office themselves, and they are auditors presumably by trade. On the other hand, they are civil servants, in central government, who may have felt under some pressure to give the “right” answer.  But it’s a step in the right direction, and from what we’ve seen, and discussions with people in Cabinet Office, we believe that a higher degree of rigour is being applied now than was the case under the early days of reporting Gershon savings, when the savings methodology was – let’s just say - “open to abuse”.

But we do need NAO to take a hard look at what is being declared here – and that’s not for political reasons. It is important because (as we’ve seen before), if organisations can get away with declaring savings that aren’t real, they may avoid taking the tougher actions that can really deliver better value and greater efficiency. So it’s being cruel to be kind – the savings methodology needs to drive the right actions and behaviour.

We should recognise though that savings measurement can never be an absolutely precise science. Take the example of the major reductions in marketing and consulting spends (which are genuine cuts in expenditure). But what has been the cost of, for instance, no longer advertising a particular government policy? Have accidents increased since health and safety advertising was reduced (just a theoretical example)? The truth is, we will never know exactly what the impact has been. So is it a “cut” or an “efficiency saving”?

What we can look at is whether the saving once made is truly ‘captured’, and that is one area where the current activity differs from the process under Labour. Even where a real efficiency saving was made in those days, as budgets were generally increasing, that saving was “re-invested” in other expenditure. It wasn’t returned to the tax-payer in any sense. In the current environment, things have changed. So where a saving is being made, we can at least say, in the vast majority of cases, that it is genuinely contributing towards the slow narrowing of the UK’s annual budget deficit.

Voices (4)

  1. IanB:

    Back when I was a Civil Servant I used to be very wary of making savings on my budget because I’d just get beaten up by Finance at the end of the year for an “underspend”!

  2. Pete Loughlin:

    Very well articulated Peter. It’s an issue close to my heart. There are too many organisations – not just public sector – that claim savings that never materialize. Without accurate and diligent measurement of compliance to contracts and processes, it’s impossible to know what is being saved.

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