Written evidence from Sir Gus O'Donnell
APPEARANCE BFORE THE PUBLIC ADMINISTRATION
SELECT COMMITTEE
Further to my appearance before the Committee
on 28 October, you asked for a note on the details of the financial
and headcount savings associated with public bodies reform. I
know that the Minister for the Cabinet Office, Francis Maude,
has given evidence on this topic since my appearance and this
note reiterates what Mr Maude outlined to the committee.
First of all I would like to emphasise the point
we both made about accountability. The primary reason for the
reforms to public bodies is to ensure that accountability rests
in the right place—either with ministers, by bringing functions
back into departments, or with local communities, by devolving
functions to local government or moving them into the private
or voluntary sector. We do, however, expect that the exercise
will reduce duplication of effort and activity, either by stopping
functions that are no longer vital to the delivery of public services,
or by streamlining activities and reducing administrative costs.
As you know, the Chancellor announced significant
measures in the spending review to reduce waste in Whitehall,
and the administrative budgets of government departments and their
public bodies will be reduced by 34% over the spending review
period, saving £5.9 billion a year by 2014-15. The reforms
to public bodies will make a contribution to these savings. Departments
are still working through the implementation details of the proposed
reforms and will need to allocate budgets to their public bodies
accordingly. This process will need to be complete by the start
of the next financial year. Nevertheless all costs, including
redundancies, will be met from within each department's spending
review settlement.
Previously, all spending on public bodies was
accounted for from within departmental programme budgets. From
April 2011 this will change so that the running costs of public
bodies will be included within departments' administrative budgets,
placing a much stricter savings regime on public bodies for the
next spending review period than would otherwise have been the
case.
For each of the announced changes, individual
organisations will be working with their staff to make sensible
plans about how the workforce will need to change, and until that
work is developed further it is not possible to give accurate
information about the level of headcount reduction. Where changes
to public bodies are proposed that will have an impact on staff,
the government and the public bodies themselves will of course
work to ensure that appropriate implementation planning takes
place and that staff are treated fairly.
We are looking forward to moving into implementation
stage, and will be taking steps to ensure we can demonstrate our
progress. They key milestones are set out in the Cabinet Office's
draft business plan which was published on 8 November, copies
of which have been provided to you.
During the session you also asked about the
negotiations that we are having with the largest Government suppliers
and I thought it would be helpful to set out the latest position.
So far 15 MOUs have been signed and final negotiations are currently
underway with four other suppliers and we are confident that MOUs
will be signed with them in the near future. Once all MOUs have
been signed and delivered, the overall in-year savings from this
phase of the project are estimated to be in excess of £800
million.
December 2010
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