Whitehall yet to figure out how to deliver ordered savings

Axing major IT projects contributed to a 35% reduction in IT capital spend across government Departments down to £3.6bn, according to the first independent analysis of cost cutting across Whitehall since the Coalition's austerity programme started nearly two years ago.

 

Central government departments reduced their total IT spending by around 10%, equating to almost £800m last year, according to a National Audit Office report published today. The majority of savings came from cancelling major IT projects, such as the national identity card scheme.

 

The spending watchdog said the decision to reduce spending on specific government IT projects and successful renegotiation of contracts for IT products and services also contributed to the reduction in information and communications technology capital spend.

 

But it warns that IT capital spending is unlikely to remain at this lower level in total, given the key role of IT and online services in increasing productivity - and that "major organisational changes" will be needed across Whitehall in the future if cuts targets to be hit, with Amyas Morse, its head, claiming, "Departments will achieve long-term value for money only if they identify and implement new ways of delivering their objectives, with a permanently lower cost base."

 

Although Departments had cut costs successfully in 2010-11, "much more" would need to be cut over the next four years, the NAO says.

 

The NAO said Ministries have taken "effective action" to limit direct spending by a total of 2.3% compared with 2009-10 levels. The spending watchdog's investigation found Whitehall spent £7.9bn less in 2010-11, as capital, administrative and programme budgets were all reduced and they had "successfully managed" within the new limits.

 

Government spending moratoria and efficiency initiatives, including cuts to back-office and avoidable costs, contributed around half of the figure, some £3.75bn.

 

“Most Departments will need to cut their spending by much more over the next four years. This will not be possible without their recognizing that short-term measures are not enough and that fundamental changes are needed," Morse added.

 

The Coalition's spending plans require most of the centre to reduce its spending in real terms over the years to 2014-15. For 2010-11, Departments needed to reduce spending by £5bn compared with the plans announced in the March 2010 budget. But that's just the start; over the period from 2011-12 to 2014-15, the budgets of Departments other than Health and International Development are falling by 19% in real terms, for example.

 

Although the NAO’s report concluded that most mandarins had an overall vision for cutting costs, it said managers in fact had yet to come up with a "detailed plan" for doing so.