The head of the National Audit Office has praised the Office for Value for Money’s approach to driving efficiencies across government, but added that the “ultimate test” would be whether departments can deliver.
NAO boss Gareth Davies has exchanged letters with OVfM chair David Goldstone on the time-limited Treasury unit’s progress since it was established last year, including its efficiency drive as part of the Spending Review 2025.
The first letter, sent by Goldstone on 10 June, the day before the SR25 plans were published, spells out the approach he took to the process of helping departments to become more efficient.
Goldstone said he was “determined to learn the lessons of the past” and that this included reflecting on one of the findings of the NAO’s 2024 report Lessons learned: a planning and spending framework that enables long-term value for money.
He quoted a section of the report which says spending decisions “must be based on realistic assessments of deliverability and affordability”, that a competitive approach during spending reviews “may incentivise officials to use unrealistic costs and benefits to gain approvals, including overambitious in-year plans for efficiencies”, and that the watchdog has seen “little evidence of rigorous internal follow-up and accountability for promised efficiencies”.
Goldstone said he, “in consultation with others across government”, concluded that the OVfM should focus its work with departments on agreeing technical efficiency targets to be delivered over the Spending Review period – as announced by Treasury perm sec James Bowler in April.
“Crucially, I wanted these targets to be underpinned by credible plans that could be published at SR25, encouraging more realism and deliverability, and enabling greater external scrutiny, public accountability and sharing of best practice,” he said.
The plans, published at the Spending Review on 11 June, contain commitments to average day-to-day technical savings of 4% across departments, totalling £14bn in expected savings. They also set out how each department will achieve its target, including through estate efficiencies and workforce reforms.
Goldstone said the approach which led to these plans differed from other recent efficiency drives in three key ways:
- Focusing on outcomes over cost-cutting
- Underpinning the plans with targets harnessed through cross-government expertise in the functions
- Creating bespoke plans for each department
Responding the day after the SR25 documents were published, Davies said: “As you noted in your letter, the NAO has highlighted the importance of realistic efficiency plans, supported by rigorous follow-up and clear accountability for commitments.
“Ensuring that efficiencies represent genuine improvements as opposed to spending cuts, developing clear plans to support targets, and ensuring rigorous follow-up of progress, are all important principles for achieving sustainable efficiencies.
“The ultimate test of departments’ plans will be their ability to deliver against these welcome efficiency commitments. We have seen too often in the past that planned efficiency savings fail to materialise.”
Davies added that the NAO will, through its annual financial audits and programme of value for money reports, support parliament in following up on departments’ productivity improvements and progress against plans.