The first Efficiency Wars occurred in 2004, in the run-up to the last General Election the following year. Labour’s Gershon £21.5bn was pitted against the Tories' James £30bn as the parties vied to show who would run the public sector better.
The context could not have been more different from today. The economy was booming. Public spending was increasing. Both the main parties were signed up to more or less the same spending totals. Deficits were small, but significant, but no-one seemed too fussed about that.
The Tories made the initial running, raising the efficiency issue to say ‘we would spend as much as Labour, but we would spend it better’. Their review, carried out by businessman David James, purported to find £30bn of savings, although some of these were explicitly cuts rather than efficiency savings. Labour quickly launched the Gershon Review, with their own pet businessman Sir Peter Gershon, in charge. The rest, as they say, is history….. but instructive history.
The Labour government claims that they met their Gershon targets. The National Audit Office begged to differ – they found that only about a quarter of the reported efficiencies were safe, about half were doubtful but represented some degree of savings and the final quarter were definitely unsafe.
This follows a pattern – previous reforms and efficiency drives in government such as the Rayner efficiency scrutinies of the early 1980s and the ‘market testing’ and ‘Next Steps’ early 1990s all ended saving only about half of what they promised. Gershon in that respect seems to have followed the usual pattern.
In fact, some aspects of Gershon were far worse. Whilst the Department of Health was claiming huge efficiency savings in the mid-Noughties, the Office of National Statistics demonstrated that health service productivity was actually falling. Whilst HM Revenue and Customs were claiming efficiency savings of over half a billion, they simultaneously managed to overpay tax credits by a staggering £7bn or so (and underpay another £2bn).
This was because Gershon (and the NAO) tended to measure narrow aspects of efficiency in particular areas without looking at the overall productivity of systems – it is pretty clear that in a number of areas such as health, education, and tax/benefits, overall productivity was probably falling.
One small and somewhat farcical sideshow to the Efficiency Wars is that the Conservatives have now recruited Sir Peter Gershon to advise them on efficiency savings – the same Peter Gershon who’s programme for the Labour government they have spent huge energy on rubbishing over the past six years. Now, apparently, it would be ‘difficult to find’ a ‘more qualified’ person – funny, they didn’t say that before.
Much of this didn’t matter so much when public spending was rising – it simply meant that public services didn’t improve in quantity and quality quite as much as they might have done otherwise. But when resources are being squeezed, the results of fantasy efficiency games will prove painful – services will undoubtedly get worse. It might suit the politicians – and they are all at it – to claim they are just making ‘efficiency savings’ whilst ‘protecting the frontline’. We will all soon enough realise just how much flannel that is.
So the first time round it was farcical, this time it will be tragic.
Colin Talbot also writes the ‘Whitehall Watch’ blog
