27 April 2009 | Martha McKenzie- Minifie
The public sector will have to meet new savings targets under the Operational Efficiency Programme (OEP) recommendations released alongside last week's Budget.
The OEP report identified four areas of potential savings: back office operations, IT, collaborative procurement and property estate.
But it also highlighted four areas where departments could improve their performance - consistent, comparable data; providing incentives and sanctions; structures and tools as well as accountability and performance management.
The £15 billion savings total came despite the authors' concerns that many current departmental spend figures are only estimates.
While describing the "good progress made in recent years on efficiency" they referred repeatedly to a lack of consistent data across departments.
This, they concluded, made it difficult for departments to compare "whether the services they deliver constitute good value for money".
Invensys chairman Martin Jay, who led the OEP, said information on government procurement was so poor it held the function back.
"This lack of assured, comparable data for the public sector constitutes a key blocker to making progress against a number of agendas," he wrote.
In one example, Dr Martin Read - another of the five senior external advisers behind the report - said public sector back office spend (excluding IT) could be "as low as £16 billion or as high as £20 billion a year".
Overall, the team believed £15 billion of public sector cost savings could be made. Of the total, £6 billion will be delivered as part of the current spending review and the remaining £9 billion would be delivered annually by 2013-14.
But senior public sector procurement professionals told SM they were cautious about the savings targets if they were based on estimated spend.
One described the report as "shoddy" and said the lack of data on actual spend meant the savings targets were "plucked out of thin air".
The Chancellor referred to the report in his Budget speech and said the identified savings "allows us to protect frontline public services, while keeping current spending growth, in real terms, at an average of 0.7 per cent a year from 2011-12 onwards."
The report also said the introduction of incentives and sanctions would create the right conditions for government organisations and individuals "to maximise their contribution to the delivery of high quality public services".
It also echoed the views of MP Lindsay Hoyle, who called for a designated minister to be responsible for championing value for money in each department (News, SM, 5 March). For a full copy of the report see www.hm-treasury.gov.uk/vfm_operational_efficiency.htm
Operational efficiency programme
Identifies an extra £9 billion a year public sector efficiency savings to be delivered by 2014.
Calls for incentives and sanctions to encourage good performance from public sector organisations and individual employees.
Describes the lack of consistent and comparable data as a "key blocker" to progress and repeatedly calls for better intelligence gathering.
Argues that a designated minister should champion value for money in each department.