Doubts over £13.3bn government efficiency savings

MPs claim the £13.3bn efficiency gains claimed by the government do no stand up to scrutiny because of unreliable and inconsistent figures.

A report by the parliamentary spending watchdog the Public Accounts Committee (PAC) says there are question marks over £10bn - 74 per cent - of the £13.3bn savings claimed by the government.

The government's efficiency programme is aiming to achieve ongoing efficiency gains across the public sector of £21.5bn a year by the end of the 2007/2008 financial year and to reduce more than 70,000 Civil Service posts and reallocate a further 13,500 posts to front line services.

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The £21.5bn target is a mix of cashable and non-cashable gains. Cashable gains are cost reductions that don't affect the quality of the service and non-cashable gains are classed as enhanced services without any extra cost incurred.

While some of the £13.3bn efficiency gains are robust - such as the Home Office reducing the cost of asylum accommodation - the PAC report raises question marks over almost £10bn due to an inability by government departments to demonstrate their claimed gains are genuine and inaccurate measurement.

Edward Leigh MP, chairman of the PAC, said in the report the government's claims do not "stand up to close scrutiny".

He said: "Efficiency gains must be real and demonstrable. They must be deliverable year after year and not be one-offs. The cost of achieving them must be taken into account. And they are not genuine if, as we have found in a number of cases, they are achieved at the expense of the quality of the service provided. Too much of the data on which claims of efficiency gains are founded is simply unreliable."

One of the causes of discrepancies is departments not taking into account expenditure incurred in achieving savings. For example the Department for Work and Pensions claimed £300m of savings from an initiative to pay benefits electronically but did not account for the £164m it cost to introduce the Post Office Card Account so people without bank accounts could receive their electronic benefit payments.

The PAC also warned that some efficiency projects may be having an adverse impact on service quality. The Department of Health, for example, claims efficiencies through patients spending less time in hospital despite the rate of re-admissions rising.

There are also inconsistencies in the definition of frontline staff when reporting reallocation of staff, with some departments such as HM Revenue and Customs categorising managers, administrative support and IT staff as frontline.

Since the PAC compiled this report the government claimed a total of more than £20bn in annual efficiency savings in this week's Pre-Budget report and Comprehensive Spending Review.