Progress with VFM savings and lessons for cost reduction programmes - Public Accounts Committee Contents

2  The Treasury's design of the programme

6.  The design of the current value for money programme built on the lessons learned from the previous efficiency programme which ran to 2007-08 and which was subject to detailed central management by teams from the Office of Government Commerce and the Treasury. Under the new programme, while the Treasury continued to monitor a small number of key projects in detail, responsibility for identifying potential savings and managing projects was delegated to spending departments. In theory, the targeted savings were removed from agreed spending plans, and departments therefore have to make savings in order to deliver agreed services whilst living within their budget.[15]

7.  For the current Programme, the Treasury decided not to have a large central unit to monitor progress across government, as it did not wish to second-guess individual departments' decisions and wanted them to take full responsibility. The Treasury's intention was to set clear parameters and hand departments the responsibility for delivery.[16] Treasury spending teams were available to discuss efficiency with each department, and the Treasury could feed its views on financial management into the Capability Reviews.[17] However, the complexity of the definition of savings meant the parameters were not clear, and departments could not meet the Treasury's demanding requirements for reliable reporting.[18]

8.  The Treasury's monitoring of progress by individual departments appears to have been insufficient for the Accounting Officer to be aware of the reasons for departments' poor performance. The slowest progress to date is from the Department for Communities and Local Government, which had only reported £40 million of savings at the half-way point, against a target of £987 million. The main reason for this appears to be a factor outside the control of the department (see paragraph 3). The Treasury was unable to explain to us whether or how the department would be held to account for its performance or whether the savings it could not deliver would be written off.[19]

9.  The Treasury's role is to control and plan public spending and to ensure that there is accurate measurement of the outputs which spending gives rise to. The Accounting Officer considered an external source of expertise would have more credibility than the Treasury itself in giving advice to departments on areas such as procurement. An Efficiency and Reform Group has been established within the Cabinet Office to be a source of expertise in such areas, and to play a role in holding departments to account. The Efficiency and Reform Group will control some things tightly from the centre, such as such as bulk procurement and IT projects, although the Treasury considered that other areas like school spending should be devolved.[20]

10.  The Programme did lead to some improvements in the oversight of savings within departments, with efficiency teams reporting on progress to departmental boards. The departments which have made relatively better progress in making savings have been more innovative in redesigning processes and services. Nevertheless, few of the reported savings represent major departures from previous practice, and there was little evidence that suggestions from the front line played a significant role.[21]

11.  Furthermore, individual departments have not taken full responsibility for making savings, as the above example of the Department for Communities and Local Government indicates. Circumstances change, but in reporting that it would not in fact make the planned savings, without being able to identify mitigating action, the Department did not demonstrate ownership of its own target. It is not clear whether this target was unrealistic or the Department has performed badly, nor what sanctions are available to the Treasury if departments under-perform.[22]

15   C&AG's Report, paras 3.2-3.4 Back

16   Qq 10-12, 26  Back

17   Qq 12, 29 Back

18   Q22; C&AG's report, para 8 Back

19   Qq 30-33 Back

20   Qq 23, 35-36 Back

21   Qq 3, 19; C&AG's Report, paras 2.16, 3.13-14 Back

22   Qq 28-33; Ev 12 Back

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Prepared 4 November 2010