Soon after the 2010 election, the Coalition held an emergency spending review and the pressure on public spending has continued throughout this Parliament. Ministers frequently talk about achieving greater efficiency to deliver more for less. Now the government is seeking a new CEO with private sector experience to renew that effort.
So what do the numbers tell us about what has been achieved so far? One useful measure of efficiency may be how much government spending is delivered per £ of administration spend. This is expected to go up from £21.96 in 2010-11 to £32.31 in 2015-16, based on the National Audit Office’s analysis of spending in 2010-11 and the government’s plans for 2015-16.
However, this does not necessarily prove that government is doing more with less. Look at it this way: I could reduce my administration cost in buying a new car by choosing a model at random and failing to negotiate on price. This would increase my spending per £ of administration cost, compared to acting as a more diligent consumer, but it would be a stretch to say that my spending has become more efficient.
The government, to its credit, has published more detailed information on its claimed efficiency savings. Studying these might tell us more. As an example, the Efficiency and Reform group – based in the Cabinet Office at the centre of government since 2010 – reports that government has reduced its spending on advertising and marketing by nearly £380m since 2010. However, even the technical notes do not allow us to work out if this is an efficiency saving. Government programmes usually rely on people to know about them in order to be effective. Sometimes advertising and marketing will be the cheapest way to achieve that.
There are big efficiency savings claimed for centralising procurement and better management of government’s commercial relationships. On the face of it, these look like genuine efficiencies. But we don’t know if government saved money because it consumed less – which might be an efficiency, though consuming fewer surgical gloves in the NHS for example might increase infections and treatment costs, hence providing no efficiency at all; or if its suppliers reduced prices – another potential efficiency, so long as the product or service remained of acceptable quality. Cheaper IT which breaks down more often doesn’t necessarily improve efficiency.
Even more questionably government claims almost £2.5bn in efficiency savings from cancelling major projects. If cancelling those projects meant that the same outcomes were achieved without the cost of whatever the project was, then this is an efficiency. However, if the major project – for example, an IT change – was itself planned to increase efficiency – for example, by allowing a process to be completed in 10 minutes as opposed to 30 – then cancelling the project reduces efficiency compared to previous plans. Again we don’t have the information to judge what the impact of cancelling the major projects in question really was on efficiency.
Another way of describing what I’m getting at here is to say that we need to look at how much government is producing as well as how much it is spending on that production. When we take the two together, albeit at a high level, the evidence is much less positive. The Office of National Statistics calculates that public sector productivity – output divided by input – is stuck where it was in 2010.
This may seem puzzling. We know for example that the public sector workforce is smaller than it was, dropping from 6.3m at the start of 2010 to 5.4m on the latest figures. But those employment numbers are misleading. The public sector in 2010 included Lloyds Banking Group, Royal Mail and English further education and sixth form colleges. Once the effects of major reclassifications are removed, the decrease in total public sector employment is much smaller: 181,000, or 3% of the workforce. In other words, departmental spending has fallen faster than employment, another indication that government may be no more efficient than it was in 2010.
Now it may be that this doesn’t matter. Rather than look for a definite trend towards greater efficiency in the numbers, we could trust the judgement of government decision-makers that they have made cuts in the best way available, trying to maintain the capability and effectiveness of public services while reducing cost. And it may be that the cost of developing much more detailed data about efficiency would be disproportionately high.
However, two issues remain: the first is that government claims that it is making efficiency savings but does not provide enough information for us to judge whether this is the case – there is an accountability gap here; and the second is that, as politicians look ahead to more spending cuts over the next parliament, and using the limited information we have on efficiency savings claimed so far, it is hard to judge what scope there is to achieve at least a part of the future cuts through improved efficiency or whether all of the cuts will take the form of reductions in service.