Government to create departmental savings tracker as Budget signals spending squeeze

Treasury will help track efficiencies delivered through technology and cost reductions 

The government will create a new system to track savings as departments come under increasing pressure to find efficiencies.

To reduce departments’ day-to-day running costs after soaring inflation weakened the value of their budgets, the government launched an Efficiency and Savings Review in the 2022 Autumn Statement, looking for ways to work more efficiently.

In this week’s Spring Budget, chancellor Jeremy Hunt revealed that the government will launch a Government Efficiency Framework (GEF) to “track efficiency savings and drive continuous improvement”. The framework will aim to improve how departments report efficiency savings and ensure government has appropriate oversight and reporting processes in place.

The Treasury indicated it will work with departments to track the delivery of efficiencies for the remainder of the Spending Review period, using the framework “to provide a common approach for accounting for efficiency savings”.

The department also revealed extra funding for testing and evaluation of innovative approaches to cross-government working. It will provide a further £30.4m from the Shared Outcomes Fund to 10 existing projects covering areas such as data and digital, education, and service provision for people experiencing multiple disadvantages.

According to the Spring Budget papers, departments have reprioritised and identified further efficiencies through the savings review, building on the 5% efficiency challenge set in the 2021 Spending Review.

The 2021 Spending Review asked departments to save 5% from departments’ day-to-day budgets by 2024-25 to be “reinvested into priority areas”, based on the findings of another cross-government efficiency and savings review.

These cuts mean “the government can protect the vital frontline services that matter most to the public despite the impacts of higher inflation”, this year’s Red Book says.

Over the past two years, better use of technology and automation has been cited as a key means through which efficiencies can be achieved. Last week, the Cabinet Office issued a projection that the implementation of shared services across government – in five ‘clusters of departments’, each of which share core back-office software platforms – will deliver savings of £1.8bn over the next 15 years. This announcement came shortly after the department unveiled a plan to save the government £1bn per year through a new scheme which aims to modernise and automate services, and deploy technologies such as social-media alerts and phone bots in the delivery of services.

Earlier this year, the central department also spent £50,000 on a contract aimed at delivering efficiencies in its own organisation. Management consultants were retained to “turbocharge” a transformation programme through which it intends to “make the Cabinet Office better, smaller and fairer”.

Last year, the Department for Transport also brought in consultants to advise on how use of automation and digital technology could deliver the efficiencies needed to meet ministers’ efficiency targets. The Department for Environment, Food and Rural Affairs, meanwhile, indicated that transformation schemes will play a key role in offsetting the impact of the “strict recruitment controls” it was facing at the time.

In the budget, the chancellor stuck to November’s announcement of an overall 1% annual rise in public spending settlements from 2025 – but the chancellor pledged an extra £11bn for defence over the next five years as well as a big increase in childcare support.

The budget boost for the Ministry of Defence – £5bn for defence and national security priorities in the next two years and £2bn for defence in the following three years – comes after defence secretary Ben Wallace called for “real money” rather than “fantasy efficiency savings” last month.

The government has also set out an “aspiration” to increase defence spending from 2% to 2.5% of GDP. Hunt told the House of Commons this would happen “as soon as fiscal and economic circumstances allow”.

The defence budget increase follows similar help for the Department for Education and Department of Health and Social Care in November. But for other departments, but onlookers have warned that this could mean an extra squeeze on their spending or the 1% target simply not being achieved.

Sam Trendall

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