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The numbers behind the efficiency savings

The headlines might sound very positive, but are rather misleading.

While the government’s continued focus on increasing efficiency savings is welcome, new figures showing the performance of the last Coalition government during its final year suggest a continuing need to avoid hyping up the presentation. Instead, transparency should be used to provide incentives to improve performance.

The government’s latest figures for efficiency savings were published on 17th August. The headline figure looked encouraging: £18.6bn saved in 2014/15, up 25% on a like-for-like basis from 2013/14. This might sound very positive, but is rather misleading. Both this year’s and last year’s numbers are measured against a 2009/10 baseline, so the savings are the difference between what was spent in the relevant year and what was spent on the same things in 2009/10. The savings achieved in 2010/11, 2011/12, 2012/13 and 2013/14 – through civil service redundancies, property leases terminated, cuts to consultancy budgets, etc. – are counted in this year’s figures as well as last year’s. So a higher savings number this year is hardly the basis for celebration – around £14.3bn of the claimed £18.6bn figure was already “achieved” before 2014/15 began. Digging below the headline figures, there are a few areas where it’s clear what is actually happening. Last year, the Government spent £378m less on advertising and marketing than in 2009/10. This year it is spending £329m less. Or put another way, it spent £49m more on advertising and marketing in 2014-15 than it had spent in 2013-14 - not much of a surprise, given that most governments succumb to the temptation to increase advertising spend in the run-up to a general election. The civil service workforce is another area where it seems clear what is happening. Last year the government spent £2,392m less than its baseline. This year, it is spending £2,823m less, making an additional savings of £431m. Given the detailed information that the government now publishes, it is possible to track where these reductions have taken place (and to make sure the government is not doing anything dubious, like including staff that have been transferred to external contractors). It’s clear from this additional information that the rate of reductions have slowed substantially over the year, with many concentrated in the early part of 2014. It is more difficult to tell what is happening in other areas. For example, the largest additional savings are on construction costs, with savings more than doubling in 2014-15 compared to 2013-14, rising from £840m to £1,889m. This is a very rapid increase, and would suggest that the government had managed to secure major reductions in the unit cost of building things in 2014-15 that had eluded it for the preceding four years. But there is little detail in the report to explain how such big changes were coming about. Many of us have witnessed very large numbers being claimed for efficiency savings over the years.  But many of these savings have proved to be, shall we say, an illusion. The classic example is Gershon’s efficiency savings, where the National Audit Office (NAO) could only substantiate around a quarter of the claimed savings. Over the past few years, Francis Maude and the Cabinet Office have gone to great lengths to assure us that their efficiency savings numbers reflect reality. They’ve developed clear methodologies, used the NAO to ensure consistent application, and have been very open with external commentators, like the Institute for Government, who take an interest in what they are doing. Maude himself acted as a guarantor of the figures, getting officials to remove anything that could undermine their credibility. It would be a shame if the new government threw this progress away now. Transparency provides a powerful tool to drive performance in large, difficult-to-control organisations, so long as those working across such organisations believe that ministers, along with parliament and the public, will scrutinise the numbers. But if they conclude that they are simply being asked to create big numbers to fuel public announcements, any incentives for real improvements will be lost.

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