For Government, is value for money business as usual?

5 December 2016

In passing, during his Autumn Statement, the Chancellor said that the Government remains committed to its “Efficiency Review”. George Osborne announced the Review in the March 2016 Budget. It aims to make an annual saving of £3.5 billion in 2019-20. In the Statement, Philip Hammond announced that £1 billion of those savings would be reinvested into “priority areas”.

This is all very much up the Reform street. Certainly public services should, above all, think about their effectiveness i.e. delivering outcomes. But there is a lot of good in looking at efficiency i.e. turning inputs into outputs. Citizens will benefit if (say) Government departments paid less in rent in order to deliver their functions (as long as those functions are not trying to do something that is simply the wrong thing to do). (More discussion of effectiveness and efficiency on page 24 of our recent review of prisons productivity.)

Reform’s staff held one of our regular Friday afternoon team discussions (“knowledge-sharing drinks”) on the Efficiency Review on Friday. My opening presentation looked at previous reviews of government and public sector by Sir Philip Green (2010) and Sir Peter Gershon (2004), and work by the NAO.  It found:

  • Reviewers have warned that government departments do not push for efficiency. Philip Green found that, “There is no motivation to save money or to treat cash ‘as your own’”.
  • It can be unclear whether the centre of government, or departments, actually are accountable for delivering efficiency. In 2016, the NAO reported that efforts to bring together the back-office functions of government departments had made disappointing progress. This is partly because the Cabinet Office “did not have a clear mandate to act on behalf of” its fellow departments.
  • Sir Peter Gershon recommended that government spending, and efficiency, should be much more transparent. That has proved difficult to achieve. The NAO study on that review found that it was hard to measure whether savings had been achieved because, for example, there were few clear baselines on spending and headcount to work from. Sir Philip Green wrote, “Data is very poor and often inaccurate.”

The Reform discussion generated the following further ideas:

  • There are case studies of success. The Department for Education reportedly reduced its headcount by 50 per cent in the last Parliament as a result of a thoroughgoing change of management and practice.  The then Permanent Secretary, Chris Wormald, wrote: “We are going to have to take some tough steps to achieve the vision for the DfE, not least moving to a smaller Department on fewer sites, and changing the way we all work day to day. I have no doubt that this will be difficult and challenging, but I believe that what we stand to gain – a Department that can say it is genuinely world class – will make the challenge worthwhile.”
  • Departments need internal challenge…  Staff agreed with Sir Philip Green’s recommendation of “attack units” (not his words) which lock down the financial numbers and challenge managers to justify their spending.
  • So much comes down to policies on people, generating the behaviours which make the achievement of efficiency a core value. Bernard Jenkin has emphasised the importance of behaviours throughout his work on the Civil Service at the public administration select committee. Imposing a pay freeze or a crude reduction in headcount could be cop-outs from a genuine effort to change the values of the workforce.

In the Autumn Statement, the Government rightly said that ongoing improvement in efficiency should be part of “business-as-usual” activity across the public sector. “Business as usual” is exactly the right goal. David Gauke and Ben Gummer, the Ministers leading the Review, have a chance not only to save a lot of money but also to change mindsets across the public sector.

Andrew Haldenby, Director, Reform

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