Conclusions and recommendations |
1. The Committee expects efficiency improvements
to make a major contribution to the cost reductions now required
across government. If departments had been successful in making
real savings of 3% a year, less painful cuts would be necessary
now. Services will suffer because the Treasury did not get the
framework right for the CSR07 savings programme. Accounting Officers
should be, as the title indicates, personally accountable for
delivering the full amount of savings committed to, and the Treasury
should create a framework where that accountability is clear and
unequivocal. The following
recommendations reflect how we expect the Treasury and departments
to respond to the lessons from the CSR07 Programme.
2. The value for money savings target for
CSR07 was not based on robust evidence about what departments
could realistically achieve, and it is not surprising therefore
that performance has fallen well short of ambitions.
Regardless of whether the government adopts a headline efficiency
target for the next Spending Review period, future value for money
initiatives need to take a more sophisticated approach. The Treasury
should set and agree expectations for each department based on
individual assessments of their circumstances, the improvements
they have achieved to date, and their ability to deliver improved
value for money.
3. Two years into a three year programme,
departments have reported only £15 billion of savings towards
the £35 billion target set by Ministers.
Departments should include contingencies sufficient to allow for
the risk that, inevitably, some individual efficiency projects
will be delayed or will fail to produce the intended benefits.
4. Further, of the reported savings reviewed
by the National Audit Office, just 38 per cent fairly represented
sustainable savings. Departments should
only report savings which have been subject to robust quality
5. Many of the savings reported by departments
were unconvincing because departments did not have financial and
performance data to back up their claims, and savings could not
be reconciled to their financial outturn or their original spending
settlement. The low quality of savings
claims suggests that there is still some way to go in improving
the quality of financial information and management in the civil
service. In order to live within lower budgets, departments need
to be able to predict better the impact of their actions on their
bottom line and to demonstrate any impacts on performance. They
need a clear understanding of factors affecting costs and the
net financial effect of savings measures on the public purse.
6. The Treasury's top-down design of the Programme,
and limiting the timeframe to three years, did not create the
right incentives for departments to improve value for money in
the round. There were few suggestions
for improvements from front-line civil servants. Departments should
create opportunities for staff to have a say in how service delivery
can be made more efficient and to improve value for money. The
Treasury should expect departments to prepare a long term plan
to reduce their costs, with realistic timetables. The Treasury
should regularly monitor progress against milestones.
7. The Treasury chose not to monitor departments'
progress in delivering savings in any detail, and demonstrated
only a limited understanding of reasons for lack of progress in
individual departments. For example, the
Treasury could not explain the key reasons for the Department
for Communities and Local Government's poor performance. This
is at odds with the established principle of collective responsibility
across government, whilst the individual department's reporting
that it would not make its target, without identifying mitigating
action, demonstrates a lack of ownership of its own target. When
delegating responsibility to departments, the Treasury should
establish information requirements with clear parameters of success,
tailored to individual departments, to enable it to monitor progress
and intervene where performance fails to meet expectations.
8. The Treasury acknowledges that it alone
does not have the internal capability or resources to direct value
for money programmes across government.
The Treasury will need to work in partnership with the new Efficiency
and Reform Group to support and challenge departments to seek
value for money improvements, provide appropriate expertise, disseminate
best practice and establish a centralised approach in areas where
it is most efficient to do so.
9. Departments reported savings which did
not stand up to external scrutiny, and there were no consequences
for senior officials in those departments that failed to deliver
savings. There should be clear consequences
for senior civil servants who fail to deliver planned improvements
in value for money for taxpayers.
10. The inability of departments to improve
value for money in a time of increasing budgets casts doubts on
government's ability to reduce costs now while minimising the
impact on front-line services. Departments
reported few examples of savings from major changes to their business
in CSR07. In reducing costs in the next period, departments need
to fully exploit opportunities to improve value for money by delivering
existing services in radically more efficient ways. They should
not simply look to cut expenditure by cutting front-line services.
Our parallel report on Achieving Sustainable Cost Reductions sets
out what we expect to see departments doing to make the required
reductions. There should be full and transparent reporting of
the impact of cost reduction on services, and where departments
do cut service lines altogether, this should be based on a full
understanding of the value that is no longer produced, in particular
so that a cut in one area does not lead to additional expenditure