Spending Review: IfG says government must be realistic about what it will stop doing

Insitute for Government report says there is "insufficient recognition" that "less money will often mean doing less" – and urges clear statements of intent from new single departmental plans

By matt.foster

13 Nov 2015

Government departments are "juggling too many objectives" and must be clearer about the services they can no longer provide following the next round of spending cuts, according to a major new report by the Institute for Government.

Cabinet ministers are currently thrashing out spending settlements with the Treasury after being asked to model further cuts to their departmental resource budgets of both 25% and 40% by 2019-20. Three departments, as well as the Treasury itself, agreed reductions this week, with the final settlements due to be unveiled by chancellor George Osborne (pictured) on November 25.

Ahead of the Spending Review, the Institute for Government has published a wide-ranging assessment of how government will "manage with less", and says ministers need to be clear that some services "will have to be delivered differently", some "may have to be stopped entirely", while other commitments "will have to be dropped or reinterpreted".

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The think tank says departments are now facing less room for manoeuvre than at both the 2010 and 2013 spending rounds, with health, pensions, schools, defence and overseas aid spending all protected, and ministers who have stayed in place following the election unlikely to want to cut pet projects.

Against that backdrop, the IfG says, deciding where the axe will fall will require a sharper process of prioritisation by departments.

"Departments are juggling too many objectives," the report says. "And there is insufficient recognition that, while efficiencies may be achievable in some areas, less money will often mean doing less."

The Institute recommends that the new "Single Departmental Plans" (SDPs) – unveiled by civil service chief executive John Manzoni earlier this year in a bid to provide a "single, clear roadmap" for managing tight resources – are properly integrated with department's workforce planning to ensure that cuts do not undermine capability.

"A crucial test for the Spending Review will be whether the SDPs are a credible reflection of difficult decisions about prioritisation and, therefore credible mechanisms for supporting spending reductions," the IfG says.

"If the SDPs are to be effective tools for ministers and officials, they must be focused on a short list of priorities, and cover important manifesto commitments relevant to a department and essential activities that did not receive attention in the manifesto."

The think tank also calls for a "more strategic" approach to staff reductions, with the SDPs used to help departments to "manage the process of downsizing". 

"To drive effective prioritisiation and implementation, we recommend that secretaries of state should publish their single departmental plans by the end of the financial year, each with a short list of priorities and achievable targets, supported by implementation and workforce plans," the report says.

"Limited capability"

Elsewhere, the IfG urges caution on the scrapping of arm's-length bodies (ALBs), saying that the considerable fall in the number of ALBs over the last parliament was not met with a "corresponding reduction in the number of functions performed by government".

The report says: "Achieving real spending reductions from ALBs will require decisions about which functions can be stopped or transferred, or in which areas services provided by ALBs can be reduced [...] Setting up and closing bodies creates significant challenges and there is currently limited capability at the centre of govenrment for providing assistance or advice, leading to frequent reinventions of the wheel."

And the think tank also calls for the government's £489bn portfolio of major projects to be scaled back to avoid over-reach. 

"Implementing these existing projects successfully will be a stretch for the government," the report says. "Adding to the portfolio will increase the risk of project failure. Making room for the government's new priorities must mean reducing the number of existing projects and reallocating the resources."

Such a move would, the think tank says, "require coordinated action from the centre of government", with Downing Street and the Treasury urged to support the "reprioritisation of projects to avoid costly reversals".

It was announced this week that the Major Projects Authority watchdog overseeing that portfolio – which includes schemes such as Universal Credit and High Speed Rail – will next year be merged with the Treasury's own infrastructure body, Infrastructure UK.

Launching the IfG's report, programme director Daniel Thornton said: “The chancellor wants to ‘do more with less’, but less money means doing less. There is a real risk that Whitehall will not implement spending reductions properly, and we are concerned that increased pressures on services will lead to more frequent failures.

He added: “If ministers want to do this right, they need to stop rather than delay expensive projects. Civil servants must also get better at managing digital services and outsourced contracts.”


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