Significant annual savings worth tens of billions of pounds are available if government implements a committed, well-led approach to improving public sector productivity, Gareth Davies, the head of the National Audit Office (NAO), has said.
Delivering his annual flagship speech in Parliament, the Comptroller & Auditor General said smarter government can provide people with better public services despite the challenging fiscal backdrop.
He outlined five areas of financial opportunity as part of a blueprint for value for money, aimed at getting the most from every public pound, including: major infrastructure projects; asset management; procurement; digital transformation and reducing fraud and error.
The Head of the NAO also outlined three enablers of productivity geared towards helping government realise the savings identified, including better data, innovation and evaluation – building on work already underway in government. All this should be underpinned by a focus on leadership and delivery skills.
He added ‘it is relatively easy to cut spending, but it requires skilled leaders and managers to deliver genuine efficiencies that release resources for government priorities’.
Outlining the challenging fiscal picture, he said: “Government of whatever complexion faces a tough challenge in the years ahead.
“Demographic changes mean demand for many services will continue to rise.
“Parts of our national infrastructure are crumbling. Maintenance backlogs persist across the public estate, impeding service delivery and costing more over time.
“Out-of-date IT slows the modernisation of many public services; interferes with efficient government and increasing the risks of successful cyber-attacks.
“Higher inflation has increased costs, particularly for large infrastructure projects.
“The public sector is finding it harder to retain staff. Turnover in social care roles is running at around one third, and there are thousands of digital vacancies across government.
“These factors and others have combined to leave public services with a productivity problem.
“Added to the sharply increased cost of servicing government debt, this is a challenging fiscal picture.
“There is good evidence from the NAO’s work that government can achieve more with what it already spends. And that this amounts to a material contribution to the fiscal challenge, certainly tens of billions of pounds a year.
“Now, I am not going to arrive at a specific figure as this will depend on the extent to which government prioritises pursuing the savings I will identify.
Setting out the barriers to improved efficiency and productivity, and what may be done about them, he continued: “There are five main areas of financial opportunity where despite government’s efforts there remain unrealised savings: major infrastructure projects; asset management; procurement; digital transformation and reducing fraud and error.
“Firstly, major infrastructure projects, where the NAO’s work shows failures in cost estimation and control.
“For the biggest projects, Whitehall has a governance problem.
“HS2 and the New Hospital Programme are examples of mega projects too large for risks to be managed by the relevant departments and arms-length bodies, with overall budgets in the tens of billions and long project lifetimes. Both lacked sufficiently robust and realistic assessments of affordability at the outset.
“A new approach to the governance of genuine mega projects is needed, starting with the involvement of a cross-government oversight board from the outset. This would increase the chance of making better go/no-go decisions and more effectively holding the project to account for cost control and delivery.”
On managing public assets, he added: “Efficient maintenance and improvement of existing assets is as important as getting value for money in building new infrastructure. New assets will only deliver promised benefits if they are properly maintained.
“Schools, hospitals, prisons, roads and flood defences must be adequately maintained to meet their purpose. The NAO’s recent work has highlighted the false economy of allowing maintenance backlogs to build up.
“Our report on school buildings found more than a third are beyond their design life, leading to higher running costs and in some cases emergency repairs, which continue to affect pupils, teachers and parents even now.
“The same issues are significantly affecting patient care – and costs – at many NHS hospitals.
“A more disciplined approach to asset management, with maintenance plans for each part of the public estate, is an essential component of the government-wide efficiency drive I am recommending.”
On procurement, he said there is still considerable value to be achieved in driving better deals for taxpayers.
He concluded: “We will only see these potential savings if government makes improving its own productivity a high priority. “That requires a disciplined, focussed, and cross-government approach over several years to realise the potential, and make the exceptional, the norm.”
