Autumn statement: the efficiency deficit

The headline public spending implication of last week’s Autumn Statement is well known: spending has to fall, by a lot, over the next Parliament if the Chancellor is to deliver the budget surplus he is targeting. What isn’t known is how the Chancellor will achieve that ambition: what will be cut, and by how much.

Alongside the Autumn Statement there was one document that might have told us much more about it—the Cabinet Office and HM Treasury published a plan for efficiency savings to be made over the next Parliament. The reason why we haven’t heard more about this document though is that it doesn’t say anything. Some 18 of its 28 pages are given over to repeating what the Government is already doing. The section about the future lacks details, amounts and deadlines. In truth this is what civil servants might call a “strategy” rather than a plan.

My first guess on seeing the document was that there had been arguments within Government on agreeing the details and this is why it was vague. Then I noticed that Francis Maude, the Minister responsible for the Efficiency and Reform Group in the Cabinet Office, was giving not just one, but two, speeches this week. So I assumed that he was going to "trail" some big ideas about future efficiency savings, ideas that didn’t have cross-government or cross-Coalition agreement but which might make their way into the Conservative manifesto. The aim of doing so would be to demonstrate that cutting public spending further was going to be an exercise in reimagining the state—rationalising it, modernising it, digitising it—rather than hacking it back, which is the caricature that both the Liberal Democrats and Labour are trying to create of what a Conservative Government will do.

But then the first speech came, at the RSA, and there were no announcements; and on Tuesday the second speech came, at the first summit of the Digital 5—the five governments that have self-identified as the most advanced in digitising services—and again there were no announcements. The minister who has most consistently and ambitiously driven an agenda of “delivering more for less” promised that the work would continue but didn’t make any specific commitments about how—or what contribution any new efficiency drive will make to meeting the Chancellor’s target.

This is surprising. Trailing some ideas and numbers is within the realm of the possible for a speech where the burden of proof is lower than in a government document. It might have been possible, for example, to calculate how much could be saved if, more or less every time the citizen interacts with the state, this is to happen digitally as opposed to in person, by post or over the phone. There are some big numbers to work on here. The Department for Work and Pensions has £5bn for administration in 2015-16. It might be plausible to talk about taking 20 per cent off that number by the end of the next Parliament by modernising processes. It might not be. But that £1bn saving might be easier to get than taking £1bn off child benefit payments; and there are other large administration budgets too.

In a similar vein, it should be possible to suggest that Government is going to achieve a fixed percentage of efficiency in re-negotiating its contracts with suppliers. The document published alongside the Autumn Statement notes that central government alone spends over £40bn per year on goods and services. The target has been to direct 20 per cent of that spend to small businesses. The rest though are big businesses. Squeezing their margins will create much less excitement than squeezing the police or the army and it might be good for a couple of billion pounds. Cabinet Office and HM Treasury though have held back from offering a number for potential savings.

Commercialising government services is another area where some progress has been made in this Parliament and there might be the potential to do more. So far most of the spin-outs have been very small scale, for example, the Behavioural Insights Unit. Larger spin-outs with skills and expertise developed through delivering complex and challenging government work might do very well at winning business in the private sector and internationally. I used to run Ministers’ Private Offices; often I’ve thought that I could create a recruitment agency that supplies high calibre chiefs of staff to company chief executives and other governments. The profits from my firm could be re-invested in public services. (There will be other—and better—ideas of this sort, I admit).

At this point I’m not advocating any of these ideas specifically but there is an efficiency and reform agenda that the Government is already pursuing and which has more life in it. By not creating specific targets for the programme to hit over the next Parliament, the Chancellor has left a surprisingly large gap between his commitment to public spending cuts and what many people believe is plausible to deliver.

This gap might have been forced on him, perhaps there are no ideas kicking around on how to save more from the efficiency and reform agenda. Or keeping the gap might be a deliberate choice; in other words, the Chancellor would rather not that he or others trail specific ideas that can then be dissected and criticised. Fair enough, but effective public administration—that sweats as much as possible from efficiency savings before cutting services—requires that planning for more savings is done, even if it isn’t revealed. I’ll keep looking out for signs that maybe it is.