NAO urges Bank of England to cut spending

The Bank of England (BoE) is spending a third more than other central government departments on essential services such as IT and building operations, according to a report from the National Audit Office (NAO)

In 2017-18 the BoE capped its staff numbers at 4,281 and in 2018-19 committed to limiting controllable costs to £476m a year. As part of this, the bank pledged to transform its central services division, which is responsible for HR, technology, property, procurement, security, and financial management.

The NAO says the cost of central services increased in real terms from £174m in 2014-15 to £188m in 2017-18, but fell relative to total bank spending, which increased from £535m to £647m over the same period as its responsibilities expanded.

However, the audit watchdog says the BoE’s central services are more expensive compared to other bodies operating in central government. For example, its HR services cost around 15% more; building operation costs are around 35% higher; and providing technology support to staff, excluding expenditure on supporting the national banking system, costs 34% more. The BoE has 800 allocated but unoccupied desks a day at its Threadneedle Street office.

The NAO also found that complex processes and traditional working practices may reduce the Bank’s effectiveness, and contribute to costs. For example, the BoE has over 700 job titles and processes have evolved to support that complexity, with associated costs.

The BoE has identified a range of issues, including manual processes, ageing systems and inflexible reporting, which have contributed to cost pressures. Some 44% of staff were frustrated by processes and procedures across the bank, compared to 30% who regarded them positively.

In addition, the NAO found improved compliance with procedures could also secure better value. The bank recently identified 200 purchases above £25,000 made without bank staff consulting the central procurement team, contrary to staff policy. Prompted by the NAO’s study, the BoE identified that better value might have been achieved on purchases worth a total of £2m and that this could have saved up to £200,000.

The NAO reported that the bank’s systems for managing costs are improving and in 2017-18, the new finance director introduced more challenge around budgets and each business area needed to identify cost savings. However, it says the bank needs to further strengthen its ability to monitor and manage performance and costs.

While the BoE is moving in the right direction, the report concluded: ‘However, it is fair to describe the Bank as a relatively conservative institution. For a leading central bank this is appropriate in many ways, but it can make the adoption of modern practices in administration and management, and letting go of those that appear to have outlived their usefulness, more challenging.’

Amyas Morse, NAO head, said: ‘The Bank of England has rightly recognised that its central services need reform and has started to take action. However, the bank should not underestimate the scale of change required. Improvements will only be possible if staff across the bank are encouraged to embrace a more cost-conscious culture.’

The NAO report, Managing the Bank of England’s Central Services is here

Report by Pat Sweet

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