Conclusions and recommendations
1. The Programme has been effective at raising
the profile of efficiency within the public sector. It
is broader in scope than previous efficiency initiatives and the
process of reporting progress to the Prime Minister and the Chancellor
has made efficiency a priority for senior management in departments.
Personal commitment and ownership by senior managers will also
need to be sustained throughout the Programme and beyond if the
targets are to be met and efficiency embedded in the public sector
culture.
2. The great majority of projects carry a
high or medium risk of reported gains not representing real efficiencies.
Only two of the 20 projects examined in
detail by the National Audit Office were assessed as having a
low risk of reporting gains that do not represent real efficiencies.
While progress has been made, reported efficiency gains should
continue to be considered as provisional and subject to further
verification. Reported claims should be supported by full
audit trails and declared only when the relevant data has been
collected and verified by the OGC.
3. At the start of the Efficiency Programme
around 180 of the 300 major projects lacked baselines.
The number without baselines has now reduced to just over 100,
and the OGC expects it to decrease further. Robust baselines need
to be established which accurately show the level of performance
at the start of each project. Until baselines for an efficiency
project have been agreed with the OGC, a department should not
be able to record efficiency savings against it.
4. Claimed efficiencies do not take into account
the costs incurred in achieving them, on the grounds that most
projects pre-date the Gershon Review, and therefore commitments
to incur the costs had already been made.
But for savings to be counted to the Programme, so should the
relevant costs. Most of the efficiency projects require up-front
investment in order to achieve the benefits in the longer term
and many will entail on-going running costs. To reflect the true
increase in efficiency all additional costs, whether one-off or
recurring, should be deducted before gains are reported.
5. It is difficult to have confidence in what
is being achieved when the Treasury and the OGC display a lack
of openness about progress. This lack
of transparency is shown by the OGC's refusal to provide the Committee
with basic factual information about the likelihood of departments
achieving their efficiency targets. Announcements of efficiency
gains have lacked analysis to support the claims being made. They
should be accompanied by full breakdowns between workstreams,
departments, and cashable/non-cashable which so far have only
become available through the Comptroller and Auditor General's
Report. The Treasury should also provide a reconciliation of claimed
headcount reductions with data from the Office for National Statistics
on changes in the overall size of the Civil Service.
6. Most of the projects already existed before
the Programme was launched. Although all
efficiency projects have become a higher priority for departments
as a result of being in the Programme, the OGC and departments
should make clear what proportion of efficiencies is derived from
projects which were launched as a direct result of the Gershon
Review.
7. Greater assurance is needed that the quality
of public services is not being adversely affected.
Service quality needs to be measured robustly to ensure the Programme
achieves true efficiencies rather than just cuts in public services.
Efficiencies relating to administering benefit payments, for example,
should be accompanied by data demonstrating that the speed, accuracy
and security of transactions have not been impaired. Savings should
not be classified as efficiency gains unless the relevant department
can show that service quality has not suffered as a result.
8. Less than half of reported efficiencies
will release cash. The OGC expects cashable
savings to account for two-thirds of the realised gains by March
2008. By September 2005, only 48% of reported gains represented
cashable savings. Given the greater certainty over these gains
relative to non-cashable gains, and their more direct impact in
giving departments flexibility over the use of their resources,
the OGC and departments need to prioritise projects delivering
cashable efficiencies.
9. The Programme has received two red Gateway
Reviews and remains at high risk. Fifty
of the 300 projects are intended to deliver 80% of the £21.5
billion efficiency gains. At December 2005 more than a third of
the Programme was assessed as having problems which put at risk
the delivery of efficiency gains. The OGC needs to work with departments
to reduce risks by, for example, developing early warning indicators
of developments which may prevent delivery so that remedial action
can be taken quickly.
10. Experience in the private sector and in
the public sector overseas suggests that there is potential to
go further than the targets set for the current Efficiency Programme.
This is demonstrated by the NAO's analysis of good practice across
the public, private and voluntary sectors and it is also the view
held by staff delivering efficiency projects within government.[2]
In seeking to embed efficiency, departments need to:
a) undertake fundamental reviews of their operations
and processes, using approaches such as the NAO's Efficiency Toolkit
to find opportunities for efficiency savings;
b) routinely benchmark their performance against
other public sector organisations and against best practice in
the private sector;
c) recruit the right people to key finance and
commercial posts. All main departments should have a professionally
qualified finance director and a commercial director on their
management board.
2 C&AG's Report, para 3.1 Back
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