Expert queries £4.7bn efficiency savings

8 Dec 05
A senior Whitehall academic this week cast doubt on Gordon Brown's claim that the government is on target to achieve its ambitious £40bn efficiency savings package by 2008.

09 December 2005

A senior Whitehall academic this week cast doubt on Gordon Brown's claim that the government is on target to achieve its ambitious £40bn efficiency savings package by 2008.

Colin Talbot, professor of public policy at the Manchester Business School and an adviser to previous governments, told Public Finance that he as yet 'simply does not believe' the chancellor's December 5 claim that 'the first £4.7bn of savings identified by the [2004] Gershon Review have been achieved'.

After identifying progress against Gershon's targets, Brown's Pre-Budget Report also states that Whitehall has exceeded the £3bn in procurement savings outlined in the 2002 Spending Review.

However, the Treasury refuses to publish a full breakdown of the Gershon savings achieved across individual departments – the PBR document identifies a few examples – leaving experts sceptical.

Talbot told PF: 'I don't think these figures are credible. If they were, the government would want to publish a full list of what has been saved, where and how. It would want to shout this stuff from the rooftops – because £4.7bn is a substantial amount.'

The government's insistence on allowing departments to achieve savings that are either 'cashable' or 'non-cashable' lies at the heart of the problem, Talbot added.

Cashable savings relate to those that can be easily realised in cash terms – such as lower payroll costs – whereas non-cashable savings involve attempts to quantify supposed improvements in the quality of services, such as better hospital treatment. A Treasury spokesman told PF that about half of the £4.7bn savings achieved so far were cashable.

Treasury officials later revealed to PF that procurement improvements account for £1.9bn of the latest savings, while productive time (£894m), policy funding and regulation (£520m), corporate services (£288m) and transaction (£113m) improvements have also contributed substantial sums. Around £1.9bn would be contributed by local government by the end of this year.

Despite widespread scepticism about the figures, Brown left Whitehall in no doubt that he demands continued progress against the £40bn target. He announced that health and education sector pay rises from 2005/06 would be capped at 2% and 2.5% respectively.

But the deals were criticised as threatening the sectors' ability to recruit and retain high-quality staff.

PFdec2005

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