The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:
“These reports all consider how government could do more for less. The need for more efficient administration in public services has never been more pressing. Strong action is essential to minimise the impact of real terms cuts in public spending on the quality of public services.
“A central message emerging from our four reports today is that the Cabinet Office and the Treasury together need to be much stronger if they are to exert effective corporate control over spending in departments and achieve long term sustainable savings for taxpayers.
“For too long these two central departments have been half-hearted in their dealings with spending departments and have failed to achieve best value for the taxpayer. Tougher leadership from the centre of government is required. The central departments should take on the challenge with renewed vigour and imagination, and take responsibility for instituting change across government and holding spending departments to account. So for instance capital projects should be stopped if the centre judges them to be poorly conceived and managed, and permanent secretaries should be held more firmly to account.
“The Government in its Civil Service Reform Plan has recognized the need for much stronger corporate leadership. We support and welcome the broad aims of the Plan, which is aimed at making the civil service sharper, faster to act and more results focused, and at addressing longstanding shortages of skills.
“We have seen signs of progress: for example, savings are coming from central control over buying goods and services that departments had previously been purchasing separately. However, today’s reports highlight continuing problems such as the lack of leadership from the centre on the better integration of public services and on ‘early action’ interventions designed to deal with causes rather than symptoms.
“Government could save money and improve people’s lives by investing more on early action to stop things going wrong and encouraging more cooperation across the departments. Government currently spends £400 billion each year on health, education, welfare and criminal justice but far too little of this goes on early intervention and prevention. For instance regular checks could stop people with diabetes from developing complications leading to amputations, blindness or avoidable death. Working across professions would help to minimise reoffending in the criminal justice system and support young people develop the skills and qualifications they need to succeed at work.
“The Cabinet Office and Treasury also need to have much better information to support the case for breaking down the ‘silo’ culture of individual departments, so that those departments work in the long term interests of public services and the public purse as a whole.
“The centre of government should be more forceful, rather than simply relying on encouragement and persuasion to get departments to alter their behaviour. It is bewildering, for example, that departments supposedly have to use central procurement contracts yet there are no sanctions for departments which do not comply.”
Margaret Hodge was speaking as the Committee published four reports focusing on the role of central departments in providing strategic leadership and coordination of government business.
2nd Report: Early Action: landscape review
Early action’ in public policy delivery involves the use of resources to tackle causes rather than symptoms. The Government spends nearly £400 billion each year on, for example, health, education, employment, justice and welfare, but huge numbers of people still suffer preventable health problems that are expensive to treat, too many young people leave school with too few qualifications and unable to get a job, too many young offenders commit further crimes when they leave prison, often because of drugs or alcohol addiction, and too many families get locked into benefit dependency.
A concerted increase in effective early action could help to deal with the root causes of such problems, benefiting individuals and society and saving the taxpayer billions of pounds each year, but governments have consistently failed to deliver. Early action accounts for only a fraction of annual spending and this spending is not properly co-ordinated. There is no common definition of early action, no central ownership, and little capacity at the centre to drive effective delivery and share good practice.
The Treasury is far too focussed on the short term, meaning that it risks missing the opportunity to help stabilise the public finances over the longer term, improve outcomes for citizens and get better value for money. We recognise the difficulty of diverting resources from acute services to early action in a world of pressing need, but robust evidence on the cost-effectiveness of early action and strong incentives for departments to implement early action projects are both vital. Good evidence, however, is thin on the ground and existing incentives do not seem to be working. It is notable that most early intervention grants are not ring-fenced, and the Treasury has been reluctant to address this. Addressing social problems effectively also requires that departments work together, but we found that, despite some encouraging evidence of joint working amongst departments and at the local level, silo behaviour still predominates.
There are some promising signs of change, such as the introduction of ‘What Works’ centres and the establishment by the Department for Education of the Early Intervention Foundation. But it is now time for— led by the Treasury—to respond imaginatively to the challenge and opportunity of early action and to adopt an integrated, long term, preventative approach to public spending for the benefit of society as a whole.
6th Report: Improving government procurement and the impact of government’s ICT savings initiatives
Central government spent a total of around £45 billion on buying goods and services in 2011-12, including an estimated £6.9 billion on ICT. Since 2010, the government has introduced a range of procurement reforms designed to save money. These include centralising the procurement of goods and services bought by all departments, such as energy and travel, on which central government spent an estimated £7.5 billion in 2011-12. Specifically on ICT, the government has introduced a process by which all ICT spending over £5million must be approved by the Cabinet Office, and a programme to develop ICT infrastructure which can be shared across government organisations.
We welcome these reforms, and recognise the recent progress made by the Cabinet Office, the Government Procurement Service and departments. The changes are beginning to have an impact: the proportion of spending that goes through central contracts has increased steadily; the ICT initiatives have resulted in some savings; and there are signs that departments are starting to think more intelligently about why and how they use ICT.
There are still weaknesses which will need to be addressed if the government wants to improve value for money in the long term. The accountability arrangements for centralised procurement remain a barrier; the centre manages the contracts yet departments remain liable for their own spending decisions so they are reluctant to cede authority to the centre. Management information on spending and savings is incomplete, so departments do not always trust the figures on savings claimed. These gaps in accountability and data make it harder than it should be to make the case for procurement across central government and in the wider public sector to be centralised. The Cabinet Office and the Government Procurement Service will need to work with departments to address these problems, and build shared plans, including much more stretching targets for centralised expenditure and ICT savings.
The commitment to localism seems to be at odds with buying through central contracts, and government’s desire to give more government business to small firms does not appear to have changed the way large procurements are managed and designed. The Cabinet Office needs to set out how it will resolve these issues, and clarify how it intends to deliver sustainable reform in its priority areas of procurement, digital services, shared services and management information over the next few years. The current economic position presents a unique opportunity to change the way government does business. It is therefore vital to build on early successes and move towards sustainable change with urgency.
The Government is not using its buying power to ensure that its suppliers, particularly in the ICT industry, pay their fair share of tax on the profits they secure from business activity in the UK. The development of more coherently managed procurement protocols provides an excellent opportunity for Government to exert appropriate pressure on its suppliers whose income on public contracts comes from taxes paid.
13th Report: Civil Service reform
The 2012 Civil Service Reform Plan (the Plan), published in June 2012, outlines plans to transform the civil service so that it is sharper and quicker, more delivery-focused, and has sufficient commercial, digital, project and change management skills. The Cabinet Office is responsible for overseeing implementation of the Plan.
We support the broad aims of this, the latest attempt to reform how central government operates, and hope that it will help prevent the failures in project and programme delivery we see time and again. We also welcome the Cabinet Office’s recently published plan to ensure the Civil Service enjoys appropriate capabilities, which provides helpful clarification of the government’s overall vision for the future civil service. We are concerned, however, that government has not set itself objective measures for assessing the impact of its reforms, which will make it difficult to judge the success of the Plan.
If the public is to have confidence in the system for holding permanent secretaries accountable, the Government must be clear about the detail of what each permanent secretary is expected to achieve and how their performance will be assessed. However, there is insufficient transparency about arrangements for holding permanent secretaries to account for their performance.
Commercial and contracting skills in the civil service remain weak and underdeveloped, despite the many attempts to address this skills deficiency in recent years. The mismanagement of the West Coast Main Line franchise competition and the Ministry of Justice interpreters’ contract illustrate the consequences of the skills shortage. Efforts to fill skills gaps are hindered by real or perceived barriers to recruiting people with the necessary expertise and paying them enough.
The process for overseeing major projects lacks real teeth and is seemingly unable to stop ill-conceived or poorly-managed projects. Yet the Government will only be successful in cutting public spending with minimum impact on frontline services if it finds new and innovative ways to deliver its programmes. This innovation can only be implemented if the Civil Service has the necessary skills and competencies. We welcome the government’s lead non-executive director, Lord Browne’s recent report on major projects, which contains useful recommendations to strengthen major project oversight and ensure projects are managed by people with the right skills.
The centre of Government is failing to demonstrate the strategic leadership needed to successfully change the way that Government operates. Both the Cabinet Office and the Treasury together need to be stronger if they are to exert effective corporate control and drive value for money change through central government.
14th Report: Integration across government and Whole-Place Community Budgets
For many years Governments have sought to breakdown silo working in departments and ensure better integration across departments to ensure more effective services and better value for money. If the Government works in traditional silos, money is wasted, citizens experience a poorer service and unintended consequences can occur which may negatively impact efficiency and value for money. Integration of health and social care services is one well-known example, but there are other examples elsewhere in government. For instance, proposals to integrate income tax and national insurance are intended to simplify how businesses and individuals pay tax and cut administrative costs.
Poor coordination across central government has been evident for many years. We are concerned that the Government is not acting with sufficient urgency to make the step change in integrated working at the front line. This change is vital if more public services are to be protected with reduced resources.
The Cabinet Office and the Treasury are best placed to support and promote integration across the Government, as they are the central departments responsible for coordinating policy and allocating monies. However, they are failing to provide the necessary strategic leadership and are not doing enough to tackle the barriers to integration. These include the lack of good information to identify where the Government could do better by joining services, funding arrangements which make it difficult for bodies to invest in joint working, and the risk that Accounting Officers are reluctant to pool budgets in case they lose control and authority if services were more often joined up.
In contrast to more limited progress in central government, the Whole-Place Community Budgets programme has involved local public bodies and central government working together to develop evidence-based plans for new integrated services. Through this programme, four local areas have analysed in detail the expected costs and benefits of integration and their findings show clear potential for improving outcomes and reducing costs in each area. Proposals include, for example, better coordination and integration of services for families with complex needs, But we are still talking about proposals rather than action.
The Department for Communities and Local Government, which manages the Whole-Place Community Budgets programme, has provided effective support to date. However, if other central government departments are not committed to Whole-Place Community Budgets it may, like similar initiatives in the past, fail to deliver any significant and lasting change. The programme must be evaluated properly to see whether the early promise translates to real change on the ground and improves value for money.