Whitehall cuts £7.9bn but will struggle to find more
By Richard Johnstone | 2 February 2012
Government departments exceeded their savings targets last year but will have difficulty making all the reductions needed by 2015, the National Audit Office has said.
Chancellor George Osborne has demanded cuts of 19%
over the four-year Comprehensive Spending Review period. For 2010/11, Whitehall
was expected to find £5bn but managed to save £7.9bn, equivalent to 2.3% in
real terms, the auditors found.
The largest fall in
departmental spending, after cuts in administration and capital spending, was
the ‘substantial’ £2.2bn reduction in Department for
Communities and Local Government grants to local authorities.
Most of these cuts were short-term measures, the NAO report
found. The scale of the total cost reductions
required meant that departments would have to find longer-term solutions. These
would involve making ‘fundamental’
organisational changes to minimise the impact on services.
However, departments were not well placed to make these changes, the auditors
warned. Their planning was ‘not based on a strategic view’, the report
Auditor general Amyas Morse said: ‘Most departments
will need to cut their spending by much more [than they have been] over the
next four years. This will not be possible without their recognising that
short-term measures are not enough and that fundamental changes are needed. Departments
will achieve long-term value for money only if they identify and implement new
ways of delivering their objectives, with a permanently lower cost base.’
The NAO added that it was unclear what effect the cuts
had had on public services, as departments did not
have a consistent way of identifying whether savings had affected the front
Public Accounts Committee chair Margaret Hodge said
departments needed to develop a clear vision of how they will work with less
‘Many departments don’t have a good enough understanding of
the relationship between spending and outcomes, and there is not a consistent
way to measure this across government. We can look at individual examples of
the impact of cuts on frontline services but there is no big picture
assessment,’ she said.
Responding to the NAO report, a Cabinet Office
spokeswoman said it showed the government was ‘on track’ to achieve the necessary
reductions in spending.
She added: ‘The government has taken tough decisions,
including further pay restraint and reforms to public service pensions, which
will deliver significant savings over years to come.
‘We promised to leave no stone unturned in the hunt for
savings at the heart of government and we have delivered on that promise with
over £3.7bn of efficiencies in just one year. The NAO has backed our figures
100%, confirming that we lived up to our promises and delivered real, tangible
savings for taxpayers.’