Government spending on consultants hits £980m

10 December 2020

UK government programmes and projects have been “afflicted by delays, inefficiencies and budgetary overruns” due to an “underlying lack of skills” in the civil service, MPs have warned.

In a report, the Public Accounts Committee (PAC) said the government was “too quick to spend money on consultants to undertake work that could actually be better done by existing civil servants” rather than developing and retaining in-house skills. 

However, the PAC did highlight work by the Government Commercial Organisation to introduce flexibile pay that had seen the turnover rate in commercial roles drop from 25% to 7%. 

According to the committee, the current cost of using external consultants across government stands at £980m, and warned the amount is likely to increase in 2020–21 because of “the need to fill gaps in capacity and skills as a result of Covid-19 and EU exit”. 

These skills gaps have impeded progress and “can necessitate the use of high-cost consultants”, as has been seen in projects including HS2 and Crossrail. 

Last year, a report by the National Audit Office revealed the government had spent £97m on external consultants in preparation for leaving the EU.

“Despite us repeatedly highlighting the root cause of these issues, government has consistently failed to adequately address the lack of skills, meaning delays, inefficiencies and budgetary overruns have continued to proliferate,” the PAC said. 

In 2013, the Cabinet Office (CO) established 14 different functions to develop and manage specialist skills within the civil service.

Each function is required to set out their own “capability blueprint” which should include a clear operating model and set out its organisational capacity. But the PAC said just one – the commercial function - had established a blueprint so far. 

“The department [CO] believes that the commercial function’s blueprint has made great inroads in improving commercial capability across government. Without clear plans, it is difficult for departments to fully exploit functional expertise,” the report said.

The PAC acknowledged that pay restrictions in the civil service had “limited its ability to offer progressive pay packages”. As a result, areas such as commercial and digital had “struggled to recruit and retain specialists” due to strong external competition for these skill sets. 

However, the report added some functions, including the Commercial function, had introduced pay flexibility measures in order to try and increase recruitment of specialists.

However, pay flexibility measures also created pay disparities between departments “which risks some government departments and projects missing out on the skills they need”, the committee warned. 

Meg Hillier MP, chair of the PAC, said: “Government’s preferred response to failing projects is too often to pay out billions to consultants rather than investing in developing skills, expertise and knowledge in public services. This short-term approach does nothing to improve the civil service’s capacity and capability for the future. Instead it is a constant drain on public funds with little evidence of benefits.

“We’ve got a long economic slog ahead of us in the wake of Covid-19, and the government is pinning a lot of hope on massive infrastructure and environmental projects – it cannot continue this pattern of huge waste and loss, or we will never get out of the hole we are in.”

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