By Richard Johnstone | 10 May 2012
Improving cash management and fraud prevention could save the government as much as £18.7bn annually, an analysis of state spending said today.
In State of the state, auditors Deloitte and think-tank Reform say there is potential for enough savings to help the Treasury meet its ‘finely balanced’ targets on public sector borrowing.
Examining more than 500 sets of government data, including Budgets and the Whole of Government Accounts, the report found the biggest single efficiency – £10.2bn – should come from better cross-government cash management.
For example, the Treasury could spread tax payment deadlines to ensure a more even flow of tax receipts over the year. The government should also make more effort to ensure debtors pay on time. At any time, central government manages £76bn worth of debts owed to public bodies, of which about £20bn is written off or treated as ‘unlikely to be collected’.
The report, which aims to show how government could be run like a business, also highlighted that £8.5bncould be saved annually by bringing fraud detection rates in line with those of the private sector.
When large companies face budget squeezes, they ‘typically act to confront every activity where cash is lost unnecessarily’, the report said, and government must do the same.
‘This means attacking fraud and error where it occurs. It means ensuring debtors pay on time and cash is not written off through poor contract management or tax losses,’ it stated
Mike Turley, public sector industry leader at Deloitte, said that Whitehall should ‘look at how it can be more rigorous’ in planning its spending.
‘Looking at the business of government we identify some new issues it needs to tackle straight away to help save money and rebalance the economy. Setting a goal for tackling fraud and error, ensuring debtors pay on time and improving contract and cash management to minimise losses must be new priorities,’ he said.
‘The volume of money that government handles means that poor financial management is costly, but it also means there are huge opportunities to improve and save.’
Deloitte chair David Cruickshank added that there was very little ‘margin for error’ in Chancellor George Osborne’s plan to get public sector debt falling as a percentage of gross domestic product by the end of the Parliament. The state has to ‘consider how it can make its own contribution to fiscal sustainability through productivity improvements’, he said.
‘Applying a business lens to the government’s data, our analysis shows that there is ample opportunity to improve financial controls, optimise cash management and repair the balance sheet to make a significant contribution to economic recovery.’
Andrew Haldenby, director of Reform, added that the government’s current plan to cut the deficit was ‘only half the battle’. He said ‘continued austerity’ would be needed in the next Parliament to get the national debt down to safe and affordable levels.
Improving cash management and fraud prevention could save the government as much as £18.7bn annually, an analysis of state spending said today.
In State of the state, auditors Deloitte and think-tank Reform say there is potential for enough savings to help the Treasury meet its ‘finely balanced’ targets on public sector borrowing.
Examining more than 500 sets of government data, including Budgets and the Whole of Government Accounts, the report found the biggest single efficiency – £10.2bn – should come from better cross-government cash management.
For example, the Treasury could spread tax payment deadlines to ensure a more even flow of tax receipts over the year. The government should also make more effort to ensure debtors pay on time. At any time, central government manages £76bn worth of debts owed to public bodies, of which about £20bn is written off or treated as ‘unlikely to be collected’.
The report, which aims to show how government could be run like a business, also highlighted that £8.5bncould be saved annually by bringing fraud detection rates in line with those of the private sector.
When large companies face budget squeezes, they ‘typically act to confront every activity where cash is lost unnecessarily’, the report said, and government must do the same.
‘This means attacking fraud and error where it occurs. It means ensuring debtors pay on time and cash is not written off through poor contract management or tax losses,’ it stated
Mike Turley, public sector industry leader at Deloitte, said that Whitehall should ‘look at how it can be more rigorous’ in planning its spending.
‘Looking at the business of government we identify some new issues it needs to tackle straight away to help save money and rebalance the economy. Setting a goal for tackling fraud and error, ensuring debtors pay on time and improving contract and cash management to minimise losses must be new priorities,’ he said.
‘The volume of money that government handles means that poor financial management is costly, but it also means there are huge opportunities to improve and save.’
Deloitte chair David Cruickshank added that there was very little ‘margin for error’ in Chancellor George Osborne’s plan to get public sector debt falling as a percentage of gross domestic product by the end of the Parliament. The state has to ‘consider how it can make its own contribution to fiscal sustainability through productivity improvements’, he said.
‘Applying a business lens to the government’s data, our analysis shows that there is ample opportunity to improve financial controls, optimise cash management and repair the balance sheet to make a significant contribution to economic recovery.’
Andrew Haldenby, director of Reform, added that the government’s current plan to cut the deficit was ‘only half the battle’. He said ‘continued austerity’ would be needed in the next Parliament to get the national debt down to safe and affordable levels.
