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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 we 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 now claiming £15.5 billion.
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.
On the basis of a Report by the Comptroller and Auditor General,[1] we took evidence from OGC and the Treasury on 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.
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