MPs voice 'grave concerns' over spending cuts

Spending committee warns of 'serious risk' that government will have to cut frontline services to beat deficit



The public accounts committee says frontline services are at risk.
Photograph: Martin Argles for the Guardian



MPs on a powerful spending committee today warn that there is a "serious risk" that the government will struggle to find efficiencies and end up slashing frontline services to beat the deficit.

There are now "grave concerns" about the government's ability to reduce public spending by £81bn by 2014-15, after a review of the last cost-cutting programme was found to have stalled and many of the savings did not actually transpire, the public accounts committee (PAC) warns today.

Even relatively modest savings of 3% over the spending review period from 2007 – made as budgets were rising overall – have not transpired.

Two years into the three-year budgets, only £15bn of the £35bn target had been met and only 38% of those savings were considered "legitimate".

The MPs warn that the coalition's plans to reduce spending by £81bn by 2014 – an average cut of 20% for each department – could be unrealistic as only £1 in every £7 of savings promised had been delivered.

Margaret Hodge MP, chair of the public accounts committee, said: "Departments were in general unable to make real value-for-money savings of 3% a year following the 2007 comprehensive spending review – and that was at a time of increasing budgets.

"Now that much more radical cost-cutting measures are required across government, my committee is gravely concerned about the ability of government to make efficiency improvements on the scale needed. There is a serious risk that, to reduce costs, departments will rely solely on cutting frontline services."

Hodge told the BBC Today programme that some departments were accused of "double counting". The then Department for Children, Schools and Families, for example, had no evidence to back up its claim to have saved money on IT procurement.

"What it demonstrated to us is the problem the present government will face if the machinery of government, this big tanker, doesn't have a focus on the efficiency savings," she said. "Clearly what is at risk is that the frontline services will be cut with profound effects for communities."

The committee's report, based on an inquiry by the National Audit Office and evidence from the permanent secretary at the Treasury, finds that some departments struggled to make hardly any saving at all. The Communities and Local Government (CLG) department had reported only £40m of savings at the half-way point, against a target of £987m.

The report says: "Departments reported savings which did not stand up to external scrutiny, and there were no consequences for senior officials in those departments that failed to deliver savings."

The report says that CLG had particular problems – the bulk of its budget is devolved to local authorities – but that senior civil servants should be held responsible when savings are not made, and the Treasury should be more hands-on in its monitoring. It says that there was will from the Labour government to make real savings but that the civil service struggled to deliver meaningful efficiencies and that Labour's reliance on targets distracted officials from considering more profound reforms.

"We are concerned at the implication from Treasury that it will simply reduce departments' budgets and then walk away from responsibility for the delivery of the level of savings required across government," it says. "Bearing in mind the disappointing performance of this programme, we believe the Treasury will need to take a very different approach to value-for-money improvement in the next spending period."

Savings were not considered "legitimate" because departments could not account for the saved money in their budgets each year.

Labour conducted two rounds of efficiencies, the first after a review by Sir Peter Gershon in 2004 and the second setting 3% reductions a year, achieved by improving the value for money of departments' programmes, by 2010-11.

Francis Maude, the Cabinet Office minister, said: "We said that our priority would be to take the cost out of the centre of government we could protect the frontline and, in just a few months, that is exactly what we have done. Already, actions led by the efficiency and reform group have resulted in hundreds of millions of pounds of demonstrable efficiency savings – and this is just the beginning. These are savings we invite the PAC to hold us to account for.

"As we move forward with our ambitious efficiency programme, we expect to build significantly on the £402m already saved following a review of the government's largest projects, the £18m already saved in rent alone by vacating empty buildings and the estimated £800m we expect to save this year from renegotiating contracts with some of the government's largest suppliers.

"These are just some of the examples of savings already made, but the hunt for more will continue. As I have said before, this government will leave no stone unturned in its search to cut waste and inefficiency in Whitehall."