2 Delivering greater efficiency by
2008 and beyond
8. The Efficiency Programme is a significant opportunity
to make better use of public money for the benefit of taxpayers.
The Programme is different from previous attempts to improve efficiency
in that it covers the whole of the public sector not just the
main departments.[12]
Its success will, however, depend on sustained leadership realising
in particular opportunities for collaboration with other parts
of the public sector; promoting and acting upon a better understanding
of the drivers of cost and value; and integrating efficiency fully
into business planning and performance management.
9. The Gershon Review identified five key workstreams
(Figure 2), with most potential to deliver improved efficiency.
Prior to the Review, the major departments already had efficiency
projects underway and most of the targeted £21.5 billion
is expected to come from these projects. Of the sample projects
in the C&AG's Report, most existed prior to the start of the
Programme. While the Programme has increased the emphasis on securing
efficiency gains from existing initiatives, OGC considers that
future projects should focus more on embedding the search for
efficiency into department's routine activities. The OGC also
explained that departments' current headcount reductions would
come from the projects contributing to the efficiency gain targets
rather than from separate exercises.[13]
Figure
2: The five key workstreams for the Efficiency Programme
| Procurement
The public sector spends over £100 billion annually on procurement of goods and services. There is therefore potential for efficiencies through more aggregation of demand, and improved supplier management.
|
| Productive time
This workstream relates to activities that are integral to the delivery of improved front-line services, such as within schools, hospitals, policing and local government. Freeing staff from time spent on unproductive tasks could increase public sector outputs considerably.
|
| Policy funding and regulation
The Policy, Funding and Regulation workstream focuses on the parts of government that set the delivery and financial frameworks for the public and private sectors. The workstream includes, for example: developing policy and regulation and setting standards and targets. The objective is to reduce the cost of this activity while increasing its effectiveness.
|
| Corporate services
The Corporate Services workstream concentrates on the efficient delivery of Finance, IT, HR and property management services to all government organisations, on which almost £30 billion a year is spent.
|
| Transactional services
Transactional Services focuses on improving the efficiency of the delivery of services, which currently cost over £10bn annually. These represent the most common interaction that citizen and businesses have with local and national government. The workstream will build on existing programmes across government to modernise service delivery.
|
Source: C&AG's Report, Figure 7
10. Every six months, the Chief Executive of the
OGC reports to the Prime Minister and Chancellor of the Exchequer
on the progress departments are making towards their efficiency
targets. Each department's efficiency programme is rated according
to the likelihood of delivering targeted efficiency gains. In
December 2004, the overall likelihood of delivery was assessed
as highly problematic or problematic for just over 60% of the
Programme by value (Figure 3). By December 2005, the proportion
of the Programme rated as highly-problematic or problematic had
fallen to 36%, although 64% of the Programme was rated as mixed,
with some aspects still requiring substantial attention. The OGC
said it was working with departments on their programmes to tackle
identified risks and to achieve additional gains in some areas.
At the start of the Programme, procurement projects were expected
to contribute £6 to £7 billion of gains by 2008. The
OGC now considered, however, that departments may achieve further
procurement efficiencies through the use of new techniques, such
as electronic auctions.[14]
Figure 3: The overall likelihood of delivery against the £21.5 billion target
Highly problematic: requires urgent attention and
decisive action
Problematic: requires substantial attention, some
aspects need urgent attention
Mixed: some aspects require substantial attention
Good: requires only refinement
Source: C&AG's Report, Figure 29
11. When asked to identify the departments which
had been rated as highly problematic, the OGC stated the ratings
formed policy advice to the Prime Minister and Chancellor and
that it would be inappropriate to give this information to the
Committee. In a letter[15]
to the Committee following the hearing, the OGC reconfirmed this
position arguing that, if the ratings were made public, departments
would be less likely to engage in open discussion on the likelihood
of delivery. The Committee considers that the ratings of departments'
efficiency programmes are facts relating to programme implementation
which do not, by themselves, involve any policy advice to ministers.
Both in this and other respects there is a risk of insufficient
transparency about the Programme. For example, while announcing
in March 2006 that £6.4 billion had been achieved, the Treasury
provided details for only £1 billion of the claimed gains.[16]
12. The Programme would have benefited from earlier
decisions on how the Gershon Review was to be implemented, making
it more likely that a stable OGC team would have been in place
from the start. The limited period of transition from the Gershon
Review to the Efficiency Programme, along with high staff turnover
during 2004 and the time taken to recruit suitable replacements,
hindered the Efficiency Team in fulfilling its dual role of monitoring
and supporting departments' progress. In particular, a full team
of measurement specialists was not established until June 2005,
some three months after £2 billion of efficiency gains had
been announced in the Budget.[17]
13. When Sir Peter Gershon recruited his team, most
of whom came from outside Government, the expectation was that
they would stay for nine months to undertake the review and then
move on. At that stage, the Government had not decided how it
was going to move into implementation of the Gershon Review recommendations.
When the Efficiency Programme was announced in July 2004, the
OGC set up an Efficiency Team. To manage the transition, some
members of the Gershon Review team were held back or re-acquired
for short periods while the new Team was being assembled, however,
the Team suffered from high staff turnover and had difficulties
in recruiting staff with specialist skills. For instance, the
Team found it difficult to recruit a Head of Metrics from within
the Civil Service to challenge departments' measurement of efficiency
gains and had to make the appointment from the private sector.
At the beginning of the Programme, the delays in recruiting key
staff had made the establishment of working relationships with
departments difficult. The OGC considered that the Team was now
staffed to see out the implementation of the Programme for the
full three years of the Programme. The Treasury accepted lessons
needed to be learnt from the transition between the Gershon Review
and the Efficiency Programme in preparation for the 2007 Comprehensive
Spending Review.[18]
14. The OGC has subjected the Efficiency Programme
to two Gateway Reviews. In both cases the Programme was assessed
as "red" highlighting that immediate remedial actions
were required in a number of areas. OGC considered that at the
early stages of such a substantial programme it was not surprising
that there were a number of issues to address. The first Gateway
Review in June 2004, at the start of the Programme, highlighted
issues around the setting up of the OGC Efficiency Team and how
risk management issues were to be tackled. The key issue raised
in the second Gateway Review, in July 2005, had been the development
of indicators to identify sufficiently early slippage in the Programme.
The OGC accepted that better monitoring of potential slippage
was needed and established a cycle of quarterly reporting by departments.
When the Programme is subjected to future Gateway Reviews, the
OGC expects that the reviews will identify further issues which
will need to be tackled.[19]
The purpose of Gateway Reviews was to identify risks sufficiently
early for effective remedial action to be taken.
Efficiency needs to become embedded
into public sector culture
15. The long term goal of the Programme is to embed
efficiency into the culture of the public sector so that achieving
efficiency is a routine requirement. As the private sector and
some overseas public sector experience has shown there is potential
to go further than the targets set for the current Efficiency
Programme, if deeper and more systematic changes are pursued.
The public sector needs to cumulate the kind of fundamental process
changes introduced by the best private sector companies. Departments
should, for example, regularly benchmark their performance against
best practice in the private, voluntary and wider public sector
in key activities such as procurement, human resource management,
finance and IT services. But better data on efficiency and productivity
is needed. Too often in the public sector decisions have been
made on the basis of old or unreliable data. Lack of adequate
data often hampers attempts to benchmark efficiency or make reliable
assessments of productivity. The position in government contrasts
with that in many private sector organisations where up to date
and comprehensive reports on performance are routinely considered
at board level. The best of these have a clear focus around a
limited number of indicators that really drive cost and value
and also show clearly how input costs relate to outputs produced.[20]
16. How efficient the public sector will become largely
depends on its capacity for reform. Only if there are appropriately
skilled people, deployed in the right way, can significant improvements
in efficiency be achieved. As a matter of importance the Treasury
is addressing the increasing professionalisation of the finance
function within central government. By December 2006, the Treasury
expect all main departments to have a professionally qualified
finance director on their management boards. In addition, departments
now employ an individual staff member with responsibility for
commercial and procurement activities. In some departments these
individuals are senior appointments, either at management board
level or closely connected to the board. In some smaller departments,
however, they are at a lower level. In exactly the same way as
for the financial function, the Treasury expects departments to
improve the professionalisation of their commercial functions.[21]
12 C&AG's Report, para 1.7 Back
13
Qq 26, 90, 94, 103 Back
14
C&AG's Report, paras 2.46-2.48; Qq 13, 17 Back
15
Ev 17 Back
16
2006 Budget Report, para 6.13 Back
17
C&AG's Report, paras 19, 2.42 Back
18
Qq 37-38; 42, 46 Back
19
Q 11 Back
20
C&AG's Report, paras 22, 3.1, 3.12, 2.13; Qq 15, 20, 22 Back
21
ibid, para 3.8; Qq 114-115, 117, 119 Back
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