3 Expenditure and efficiency
29. The whole question of the effectiveness of the
Government's efficiency programme arising from the Gershon review
is one that we have also examined before. We have expressed concerns
about the extent to which the £4.3 billion efficiency savings
which the Department is working towards will be able to be reused
elsewhere or, alternatively, will allow for a lower level of spending,
and about the extent to which it will be possible to verify savings.[18]
30. In a report earlier this year, the NAO shed more
light on the process throughout Government. It explained that
the Gershon savings are both "cashable and non-cashable gains".
Cashable gains consist of reductions in inputs which do not adversely
affect the quality of outputs. Non-cashable gains arise where
the quality of outputs increases while inputs remain the same.[19]
In its reply to the Committee's previous report on public expenditure,
the DfES said:
"Our efficiency initiatives are not about taking
money away from the frontline, rather they are about helping the
frontline to realise maximum outcomes from the resource it is
allocated. As our efficiency programme stems, in the main, from
initiatives designed to improve the quality of provision, we are
confident that the realisation of our efficiency target will in
turn improve outcomes for children and learners."[20]
31. In evidence, both the Permanent Secretary and
the Secretary of State told us that all of the £4.3 billion
Gershon savings, which does not include savings arising from the
restructuring of the Department and the reduction in the number
of staff, were non-cashable savings.[21]
We noted that the DAR also describes savings as recyclable and
non-recyclable, and queried whether this meant the same as cashable
and non-cashable. In response, the Department sent us a helpful
note:
"The Department has drawn an important distinction
between cashable, where the resource freed up is money,
and recyclable, where the resource freed up is productive
time, to exemplify how the programme is making a difference to
the frontline.
"The definitions of the terms as they are used
in the Department are as follows:
- Cashable efficiencies
release financial resources whilst maintaining outputs and output
quality, thereby enabling the resources that are released to be
diverted to other services;
- Non-cashable efficiency
gains occur when productivity or output quality increases, either
for the same resource inputs or a proportionately smaller increase
in resource inputs in a way that does not release financial resources
that can be deployed elsewhere;
- Recyclable efficiencies
release resource (although not necessarily financial) whilst maintaining
output quality, thereby enabling the resources that are released
to be diverted to other services. Clearly if the resource released
is not financial it can only be diverted within the system it
has been released e.g. teachers time freed up within a school;
and
- Non-recyclable efficiency
gains occur when output quality or quantity increases either without
reductions in resources or with a proportionately smaller increase
in resource inputs in a way that does not release resources that
can be deployed elsewhere.
"This means, for instance, that better procurement
practices represent a cashable gain as the same products are being
bought at reduced costs thereby liberating cash that can be redeployed
elsewhere. However, teacher time saved in schools through workforce
reform represents a non-cashable efficiency gain as teacher time
rather than actual money is freed up and thereby available to
be redeployed. This therefore represents a recyclable gain. Reducing
drop-out rates in higher education represents a non-cashable and
non-recyclable gain as successfully reducing drop out rates increases
course completion rates for no extra cost but clearly will not
free up any money or time resources for redistribution elsewhere."[22]
32. Taking this explanation with those offered in
oral evidence it appears therefore that the DfES expects to make
no cash savings through these efficiency gains, but does expect
that about 75% of these non-cashable gains will be recyclable,
for example allowing the more effective use of teachers' time.
We welcome
these recyclable gains, but we do have doubts about whether quantifying
them in cash terms is in any way helpful. Money is not being redeployed
elsewhere, and it is a moot point the extent to which the gain
which accrues from a teaching assistant or other non-teaching
staff member taking on tasks previously undertaken by teachers,
and thereby freeing teachers' time for preparation or teaching,
can be given a monetary value. This does not seem to be money
as it is normally understood, and once again draws the DfES, and
Government more widely, into arguments about what the numbers
mean, rather than putting the focus on the matter in hand, namely
the quality of educational provision.
33. This leads us back to another question that we
have addressed previously, the measurement of productivity in
education.[23] The Chairman
of the Committee wrote to the Office for National Statistics to
ask the nation's official statisticians about the best existing
measures of education productivity. The response indicated that
a definitive way of calculating that productivity is some way
off:
"Productivity analysis is very complex and it
is difficult for any estimate of productivity to fully capture
all the outputs from education spending, but there are some obvious
alternatives based on attainment output which are being considered".[24]
34. The ONS told us that there would be a consultation
exercise beginning in September this year looking at both issues
in education productivity and methodological issues more generally.[25]
It cautioned, however, that "Measurement of the productivity
of the public services is not simple and once the consultation
period is complete there will be many issues to decide."[26]
It appears, therefore, that there is no prospect of any resolution
of these problems in the near future. In the meantime, the arguments
over how effective extra investment is in terms of educational
outcomes, and over the extent to which measuring efficiency savings
in money terms is meaningful, will continue.
35. Given the
increased level of investment that this Government has made in
education, it is unfortunate that it has not yet proved possible
to measure the effectiveness of that spending in providing better
education and more highly qualified students. This is not to say
that the investment was ineffective; but in productivity terms,
we simply do not have the data to tell us one way or the other.
There is a risk, in the longer
term, that the inability to demonstrate a measurable link between
inputs and outputs will mean that taxpayers have no way of judging
whether or not public resources are being well used. Such an outcome
would be bad for taxpayers and, potentially, could undermine the
electorate's willingness to fund public services.
18 Education and Skills Committee, Second Report, Session
2005-06, Public Expenditure on Education and Skills, HC
479, paras 26-35. Back
19
National Audit Office, Progress in improving government efficiency,
HC 802-I, 2005-06, February 2006, p 4. Back
20
Public Expenditure on Education and Skills: Government Response
to the Committee's Second Report of 2005-06, HC 1132, 25 May 2006. Back
21
Q 65; Q 137 Back
22
Ev 51 Back
23
Education and Skills Committee, Second Report, Session 2005-06,
Public Expenditure on Education and Skills, HC 479, para
5. Back
24
Ev 72 Back
25
ONS announced the consultation on 18 September. Back
26
Ev 72 Back
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