Government savings to date 'are not what they seem', finds NAO

20 July 2010

20 July 2010 | Angeline  Albert

Most of the £2.8 billion in savings that five government departments claim to have made are uncertain, significantly overstated or do not exist.

That is the verdict of a National Audit Office (NAO) report out today, which goes on to say Whitehall cannot meet its £35 billion annual savings target by 2011 based on current findings.

The NAO scrutinised the progress of the Department for Transport, Home Office, HM Revenue & Customs, Ministry of Defence and what was the Department for Children, Schools and Families (now the Department for Education), which together must deliver 40 per cent of the total annual savings goal between 2008 and 2011.

The NAO reviewed £2.8 billion in reported savings from these departments and gave 44 per cent of the savings an amber rating, which means they “may represent savings but with some uncertainty”. Some 18 per cent got a red rating, meaning they “do not represent, or significantly overstate savings”. Only 38 per cent of reported savings got a green rating for “fairly represented sustainable savings”.

HM Revenue & Customs reported £300 million cutbacks. The NAO examined reported savings of £288 million a year to staffing, estates, IT and procurement, but said most were uncertain (amber for 45 per cent, or £129 million) or significantly overstated or non-existent (red for 13 per cent, or £38 million).

The Ministry of Defence reported new savings of £944 million but NAO’s study of £712 million savings rated 45 per cent (£318 million) as amber and 14 per cent (£96 million) as red.

At the same time, the education department reported savings of £1.017 billion between 2007 and 2009. The NAO examined £591 million of that but rated 89 per cent (£523 million) as amber.

The spending watchdog said the previous government used unsuitable baselines for the calculation of savings and reporting processes lacked transparency.

NAO auditor general and comptroller Amyas Morse said: “Public confidence in reported savings is undermined where they do not stand up to external scrutiny. The proportion which do not fully meet the Comprehensive Spending Review criteria is evidence both that the programme was not well enough understood across government and that quality control within departments was not good enough.

“The scale of savings needed in the current financial situation means that departments will have to think more radically about how to reduce costs and how to sustain them in the longer term."

The report concluded: “At this halfway point only one major department had reported savings of more than 50 per cent of its 2010-11 target. This suggests that while some departments are broadly on course to meet their targets, departments may have difficulty in delivering the overall £35 billion target in 2010-11.”

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