Boosting public sector productivity could save tens of billions – NAO

"It is relatively easy to cut spending" if government takes the right steps, Gareth Davies will tell MPs today
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The government could realise tens of billions of pounds’ worth of savings if it makes improving its own productivity a high priority, the head of parliament’s independent public-spending watchdog will say later today.

National Audit Office head Gareth Davies will tell MPs: “It is relatively easy to cut spending, but it requires skilled leaders and managers to deliver genuine efficiencies that release resources for government priorities.”

Better data, innovation and more rigorous evaluation could all contribute to this goal of cutting spending, according to the  comptroller and auditor general.

Davies will use his annual speech in parliament this afternoon to set out a blueprint for improving public sector productivity, highlighting five areas where government could improve value for money: major infrastructure projects; asset management; procurement; digital transformation and reducing fraud and error.

“Government of whatever complexion faces a tough challenge in the years ahead,” Davies is expected to say.

“Demographic changes mean demand for many services will continue to rise.

“Parts of our national infrastructure are crumbling. Maintenance backlogs persist across the public estate, impeding service delivery and costing more over time.”

The NAO head will warn that outdated IT “slows the modernisation of many public services; interferes with efficient government and increases the risks of successful cyberattacks”.

Staffing and retention woes and climbing inflation have also contributed to government’s “productivity problem”, he will add.

However, Davies will stress that the NAO’s scrutiny of government departments, projects and programmes has produced “good evidence… that government can achieve more with what it already spends”.

While he will not put an exact figure on the potential savings, Davies will say they could amount to “a material contribution to the fiscal challenge, certainly tens of billions of pounds a year”.

Setting out his value-for-money blueprint, Davies will call on government to address the “governance problem” plaguing major projects – pointing to HS2 and the New Hospital Programme as “examples of mega projects too large for risks to be managed by the relevant departments and arm’s-length bodies, with overall budgets in the tens of billions and long project lifetimes”.

“Both lacked sufficiently robust and realistic assessments of affordability at the outset,” he will add.

“A new approach to the governance of genuine mega projects is needed, starting with the involvement of a cross-government oversight board from the outset. This would increase the chance of making better go/no-go decisions and more effectively holding the project to account for cost control and delivery.”

Davies will also call for greater investment in digital transformation, listing three urgent tasks for digital decision makers: replacing antiquated IT systems; improving the quality and shareability of data; and recruiting and retaining scarce, in-demand skills.

“The challenge is vast. Defra spends more than three quarters of its digital budget maintaining ageing systems. The MoD in part relies on kit dating back to the Cold War for defence inventory management," he will say.

However, the Passport Office's response to its post-lockdown backlog, improving its systems and operational management, show "it can be done", he will say, adding: "The customer experience is now much improved, and the Passport Office is saving money by avoiding delays.

“The potential efficiency gains in services dependent on high volumes of data processing are enormous, with fewer, better paid civil servants delivering more modern and responsive public services, which waste less of their customers’ time."

Davies will also call on public bodies to make better use of competition in public procurement, pointing to the NAO’s September report that highlighted government’s own estimates that it could save £4-8bn each year this way.

And he will call for a “more disciplined approach to asset management”, noting that the NAO’s work has “highlighted the false economy of allowing maintenance backlogs to build up”. For example, it has found that more than a third of school buildings are beyond their design life, leading to higher running costs and expensive emergency repairs.

Fraud and error is another area in need of attention, Davies will tell MPs - citing the £5.5bn a year lost to fraudsters and mistakes in the Universal Credit programme..

“Well-targeted defences to prevent, detect and recover as much as possible are urgently needed," he will say.

Improving value for money across these areas will require improvements to the use of data – with consistent definitions, standards and quality being used across government – according to Davies.

Innovation and evaluation will also be critical, though the NAO head will recognise that "creating an environment where this is encouraged, tested, evaluated and scaled up is more challenging".

The planning and spending framework is a third area that can better support this efficiency drive, he will say. “The planning and spending process also needs to address personal and organisation incentives for high performance on efficiency," Davies will add.

“Each of these enablers must be underpinned by a stronger focus on leadership skills," Davies will tell MPs.

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