9 Aug 2012

Government claims £5.5bn departmental savings

The government announces it has slashed £5.5bn from departmental spending in the last year, including an 85 per cent reduction in the number of consultants it employs.

Cabinet minister Francis Maude (pic: Getty)

Francis Maude, Minister for the Cabinet Office, said the cash savings had been independently audited with “no smoke and mirrors”.

On taking office 27 months ago, the coalition set up the Efficiency and Reform Group (ERG) based in the Cabinet Office, to make “efficiency savings” across government.

Mr Maude said: “It seemed to us absolutely crucial, that as we drove the deficit reduction programme, the priority rather than cutting frontline programmes, should be to cut the cost of government.”

He added: “In the first year, a short year, until March 2011 we saved £3.75bn. This last year to March 2012 we beat our own prediction and saved an astonishing £5.5bn from departmental expenditure … but we are determined to go even further.”

Mr Maude said the savings drive was “broadly ideology free”, adding: “This is just about running government in a business-like way.”

Smoother operations

The government, he argued, was “determined to cut the fat from Whitehall”, for example by operating better with major suppliers, but insisted it was “not cutting into the bone”.

He said: “In terms of how do we know what effect there is on frontline services, you can’t absolutely 100 per cent know, but where we’re making savings, in for example on suppliers, in general we are simply taking out money that is being spent unnecessarily and making sure it’s spent better.”

‘Comfort blanket’

Mr Maude claimed the last government used consultants as a “comfort blanket”, adding: “If there was anything difficult to be done, they would reach for consultants immediately, which is both very expensive, but also it actually undermines the position of mainstream civil servants.”

The £5.5 billion savings, he said, included £1bn of savings achieved last year through the moratorium on consultancy spend and on extending existing consultancy contracts, adding that since 2010 consulting spend had been cut by more than 85 per cent.

Dave Penman general secretary of the First Division Association, which represents senior civil servants in the UK, told Channel 4 News: “The FDA long argued that consultant spending was at too high a level and welcomes the drive to ensure the government fully utilises the skills and experience of existing civil servants. This has produced significant cost savings.

Senior civil servants are paid considerably less than those who undertake comparable jobs in the wider economy. This disparity is compounded by the current policy of pay restraint. If the government does not take action to address this pay disparity, there is a very real danger that skills and expertise will be lost from the civil service.”

In addition £390m of savings had been made from freezing all marketing spend, except when operationally necessary, building on the £400m saved in 2010/11.

Mr Maude said that because the controls on spending were “working well”, the Government had determined they would be a permanent feature across government.

The in-year cost of the government’s property estate, he added, was reduced by nearly £200 million by exiting unnecessary properties and by questioning lease breaks before extending them – more than double the £90m savings achieved in 2010/11.

115 different sites

One example of expenditure included Bristol where central government was occupying 115 separate addresses, he said.

Around half a billion savings were made by utilising the government’s bulk buying power and pooling spend on goods and services used by different government departments, on top of £360m saved in 2010/11.

Mr Maude said a report by retail tycoon Sir Philip Green was “very useful” in underlining the government was “not getting the savings that your size as a customer would justify”, with some parts of government paying seven times as much for black toner cartridges as other parts.

Reductions in the size of the civil service also continued with stronger controls on non-essential recruitment, contributing to a reduction in salary costs for 2011/12 of nearly £1.5bn – an increase on £300m savings made the previous year.