THE EFFICIENCY PROGRAMME: A SECOND REVIEW OF PROGRESS
Publication of 48th Report of Session 2006-07
Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:
“The Treasury claimed at the end of last year that, by the mid-point of its Efficiency Programme, it had already achieved an annual £13.3 billion of efficiency savings. This claim does not stand up to close scrutiny. Our Committee found that there is a question mark over the reliability of nearly £10 billion worth (74 per cent) of the savings claimed.
“A focus by government on the efficiency of its departments is extremely important. But efficiency gains must be real and demonstrable. They must be deliverable year after year and not be one-offs. The cost of achieving them must be taken into account. And they are not genuine if, as we have found in a number of cases, they are achieved at the expense of the quality of the service provided.
“Too much of the data on which claims of efficiency gains are founded is simply unreliable. The principles by which gains are measured can differ from department to department. And departments’ claims of progress are still going unchallenged in too many cases. An increase of rigour in all of these areas, together with the linking of questions of efficiency to the overall performance of departments, will do much to make the drive for ever greater efficiency part of the culture of central government.”
Mr Leigh was speaking as the Committee published its 48th Report of this Session which, on the basis of evidence from OGC and the Treasury , examined four main issues: the measurement of efficiency gains and headcount reductions; the effects of efficiency projects on service quality; the management of the Programme; and embedding a culture of efficiency into the public sector.
The Government’s Efficiency Programme is designed to achieve ongoing efficiency gains across the public sector of £21.5 billion a year by 2007-08 to improve front line services, to reduce Civil Service posts by more than 70,000 and to reallocate a further 13,500 posts to front line services.
Departments are responsible for delivering and quantifying the efficiencies achieved while the Office of Government Commerce (OGC) checks the robustness of figures put forward and provides support to help departments deliver their gains. The £21.5 billion target is a mix of ongoing cashable and non-cashable gains. Cashable gains are defined as reductions in inputs which do not adversely affect the quality of outputs. Overall, around two thirds of the £21.5 billion target is expected to release resources in this way. The remainder of the £21.5 billion target will be in the form of non-cashable gains, where additional outputs such as enhanced quality of service are obtained for the same level of inputs.
On 26 February the Committee took evidence on the £13.3 billion of annual efficiency gains departments had reported up to 30 September 2006, 60% of which were cashable. While some of these reported gains are robust, such as the £200 million saved each year by the Home Office through reducing the cost of asylum accommodation, almost £10 billion of reported efficiency gains remain uncertain. Some of this uncertainty is due to an inability by departments to demonstrate that efficiency gains are genuine, in that they are sustainable and have not affected service quality. There is also uncertainty around reported gains due to inaccurate measurement, such as the reporting of gains without taking account of additional costs.
Three weeks before the Committee took evidence, the Treasury announced that another £2 billion of annual efficiency gains had been achieved since 30 September 2006 and it subsequently confirmed in the Budget that it was claiming £15.5 billion. Only this week (in the 2007 Pre-Budget Report and Comprehensive Spending Review, 9 October 2007) the Treasury claimed a total of over £20 billion in annual efficiency savings.
By the time of the Budget, departments had also claimed 50,800 headcount reductions and 9,700 reallocations to the front line. Reported headcount reductions were broadly robust because they used sound information systems and consistent definitions for headcount. However, reported reallocations were less reliable. In some areas they included projected staff numbers rather than actual numbers, and there is also no consistent definition across the Programme of what constitutes a ‘front line’ role.