NAO: Sustainability key to government cost cutting

The Cabinet Office's Efficiency and Reform Group (ERG) has achieved its goal of encouraging government cost cutting, but needs to adopt a more sustainable approach to meet its target of £20bn savings in 2014/15, according to a report by the National Audit Office (NAO).

ERG was set up three years ago and is charged with delivering efficiencies, reforms and cuts to spending in low priority policy areas as part of plans for central government to find £40bn in savings as part of the 2010 to 2015 Spending Review.

NAO says ERG was responsible for influencing £5.5bn of savings in 2011/12, through actions such as changes to the Civil Service compensation scheme; restrictions on employing consultants and temporary staff; the monitoring of the recruitment of permanent staff; central control over procurement of common goods and services; and a review of major ICT and other projects.

However, NAO flags up concerns about how sustainable some of these savings will be in the longer term, saying ERG needs to develop an approach which encourages longer-term changes and improvements in efficiency. The report points out, for example, that the level of savings from commercial negotiation with major suppliers and from the advertising moratorium during this period was lower than the previous year.

Similarly, NAO says that some 2011/12 savings are unlikely to be sustained. It found that only 46% of the ICT savings assessed as meeting its criteria are likely to recur indefinitely, 33% are likely to occur for more than one year; and the final 21% were savings only in the current year.

ERG's plans to save £10bn in 2014/15 through initiatives focused on preventing and detecting fraud, error and debt, are also challenged by the NAO. The report says there is 'considerable work to be done before this aim is realistic', largely because data about fraud and error across government is currently of inconsistent quality and needs to be more timely and comparable between departments.

Other weaknesses in ERG identified by NAO include the lack of a clear plan for meeting its savings targets and a limited understanding of risks to services at a time of major restructuring. ERG also needs to develop more effective relationships with departments and address the issue of staff turnover which, at 25% a year, NAO said was too high.

NAO head Amyas Morse said: 'As a relatively new organization, ERG has assessed the obstacles it faces and has begun to tackle them energetically. However, it needs to get going on moving beyond the role of imposing central spending controls to placing more emphasis on changes aimed at promoting sustainable savings.'

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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