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2 February 2012 | Adam Leach
The National Audit Office (NAO) has verified and praised the £7.5 billion spending reduction achieved by central government, but said “fundamental changes are needed” if savings targets for the next four years are to be met.
Cost reduction in central government: summary of progress, published today, praised departments for meeting their reduced spending goals, in particular the £3.75 billion saved by the Efficiency and Reform Group (ERG). However, it said that in order to meet the 2015/16 proposed savings targets, more strategic work is required.
Amyas Morse, head of the National Audit Office, said: “Government departments have been successful in cutting costs and managing within their reduced spending allocations for 2010-11. However, most departments will need to cut their spending by much more over the next four years. This will not be possible without them recognising that short-term measures are not enough and that fundamental changes are needed.”
The NAO raised concerns about the ability of the government and its various departments to continue to deliver the required scale of cost savings while also delivering high-value services. The report said: “Short-term measures, although successful to date, will not be sufficient. Departments will need to have a clear vision of how they and their delivery partners will operate with a permanently lower cost base.”
It also called for more contingency in cost reduction programmes, citing its experience that an average of 20 per cent of gross annual savings targets are not realised. The report said: “The plans we have examined do not have sufficient contingency to cover either risk that savings are not realised or the impact of external uncertainties.”
A government spokesperson said that the findings of the NAO showed it had followed through on its promise to “leave no stone unturned in the hunt for savings”. “The NAO has backed our figures 100 per cent,” the spokesperson added.