Select Committee on Liaison Scrutiny Unit Review Memoranda

4  Efficiency agenda

4.1  Background

40.  Informed by Sir Peter Gershon's review of public sector efficiency, the Government has set itself the target of achieving aggregate efficiency gains of 2.5 per cent a year across the public sector over the SR04 period. Within this wider framework, each department has agreed its own efficiency programme. SR04 announced:

• agreed departmental targets for achieving annual efficiencies in excess of £20 billion a year in total by 2007-08;
• departmental plans for meeting these agreed targets, including proposals for a gross reduction of over 84,000 civil service posts and the relocation of 20,000 others away from London and the South East;
• administration budgets for departments that will reduce administration costs as a proportion of total spending to a record low; and
• an implementation, measurements and monitoring framework.[10]

41.  With the exception of the Treasury, departmental efficiency targets are not PSA targets so accountability rests on the publication of detailed accounts of efficiency plans and the subsequent reporting of progress.

42.  It was established as part of SR04 that each department would set out in an Efficiency Technical Note (ETN) the precise measures and methodologies that it would use to assess efficiency gains. The notes are intended to be working documents which will be improved and refined over time, and the NAO and Audit Commission were invited to scrutinise them prior to initial publication. Copies of ETNs for all departments are accessible from the Treasury's website.[11]

43.  Departments are further required to provide regular updates in departmental reports and on their websites, measuring progress against the overall efficiency targets, workforce reductions and relocations out of London and the South East. In relation to the 2005 DARs, the Treasury stipulated that:

Efficiency reporting should be in proportion to the size of the efficiency programme within the department. For most departments, 1-2 pages should suffice. Efficiency reporting should follow the principles established for PSA reporting, namely clear, informative and objective reporting, with supporting information (including any data/statistics) and set in the context of wider policy where appropriate.[12]

4.2  Efficiency reporting

44.  Clearly there was no call for the duplication of detailed ETNs in this year's DARs. Instead, the Treasury suggested reporting by outlining initiatives already taking place, announcements made, quantifiable gains achieved in 2004-05 and high level plans for the coming six to twelve month period, as well as providing updates on workforce reductions and relocation of posts.

45.  The extent to which the DARs accord with these suggestions varies across departments. At the most extreme, the Home Office report makes reference to specific efficiency gains but fails to provide an identifiable update against its overall ETN target.[13] Many other departments have included summaries, but these have all too often failed to provide enough information to allow the reader to make an assessment about the likelihood of success, even with extensive cross-reference with the ETNs. A number of examples are detailed in Box 12.[14]

BOX 12: LACK OF DETAIL IN DEPARTMENTS' EFFICIENCY PROGRESS SUMMARIES

46.  As a means of improving future reporting against efficiency agendas, the Scrutiny Unit suggests that the Treasury alters its DAR guidance so that each department is required to include a summary table which details total delivered efficiencies and reconciles these with the planned savings set out in its Efficiency Technical Note.

4.3 Credibility of efficiency targets

47.  Efficiency relates to getting the same and/or improved output from a reduced input - doing things more efficiently. Without including any measure of the impact on service provision, it is difficult to determine whether the plans developed by departments represent genuine efficiencies or are, in some instances, simply means of cost-cutting.

48.  It is beyond the scope of this paper to consider the quality of departmental efficiency plans as set out in ETNs, but some questions of credibility are raised by issues reported in the DARs. Box 13 discusses varying assessments of the robustness of local authorities' efficiency statements.[15]

BOX 13: LOCAL AUTHORITIES' EFFICIENCY STATEMENTS (ODPM)

49.  As with PSA targets, department's own, non-validated, assessments of progress against efficiency targets must be open to question. If insufficient information is provided in the report, then the reader is helpless to question the department's conclusion. It is important, therefore, that departments present more comprehensive information on performance in the future. Reports would particularly benefit from the inclusion of tables linking efficiency achievements to ETNs.

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10   HMT, 2004 Spending Review: New Public Spending Plans 2005-2008: Stability, security and opportunity for all: Investing for Britain's long-term future, July 2004, p13 Back

11   http://www.hm-treasury.gov.uk/documents/public_spending_and_services/publicservice_performance/pss_perf_table.cfm  Back

12   HMT, Public Expenditure System: Guidance for the Spring 2005 Departmental Reports, PES (2004) 19, 30 November 2004, para 19 Back

13   Home Office, Departmental Report 2005, June 2005 Back

14   NIO, Departmental Report 2005, June 2005, paras 3.20-3.29; DTI, Efficiency Technical Note, October 2004, pp8-10; DTI, Departmental Report 2005, June 2005, pp164-165; ODPM, Annual Report 2005, June 2005, pp44-45 Back

15   ODPM, Annual Report 2005, June 2005, pp44-45; Public Finance, "Cutting Edge?" 1 July 2005 Back

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Prepared 19 May 2006