There is no evidence to back up the government’s claim that it has exceeded targets for efficiency savings. The examples put forward are merely spending cuts that are likely to have a detrimental effect on the quality of public services
The government has claimed today to have made £5.5bn worth efficiency savings and that these have been ‘independently audited’.
First, definitions. ‘Efficiency’, in this context, is usually defined as ‘the relationship (ratio) between the cost of inputs and the amount and quality of outputs’. So if, and only if, we have reliable data about both inputs and outputs can we judge whether any changes are ‘efficiency savings’ or merely ‘cuts’ that affect service quantity and quality.
So how do the Government’s claims stack up?
1) £1bn ‘saved’ last year through a moratorium on consultancy spend. Without data about the impact of this on output, it cannot be claimed as an efficiency saving – it is simply a cut to inputs. Assuming that at least some, if not most, of what consultants were doing helped outputs then all, most or at the very least some of these cuts will not be efficiency savings.
2) £390m savings from freezing marketing spend. Again, this is simply a cut to inputs. If these cuts include, for example, cutting spending on getting patients to take up flu vaccinations and as a result less people do so, this is clearly not an efficiency saving. Indeed, it could lead to increased costs to the health service where a small spend on prevention (input) could lead to much better outputs and outcomes (less flu and less costs to the NHS).
3) £200m from reduction in property costs. Again, just a cut in inputs. Unless it can be shown that these cuts had no effect on the quantity and quality of service delivery (outputs) these cannot be claimed as efficiency savings.
4) Almost half a billion pounds from bulk-buying. Again, unless it is demonstrable that what was bought had no deleterious effect on output then this definitely cannot be claimed as an ‘efficiency’. At best it is what is usually called an ‘economy’ saving (from the famous three E’s of economy, efficiency and effectiveness). Such moves can even be damaging – when for example some NHS trusts bought cheaper hip joints this initially appeared to be an efficiency saving. Technically it was, if measured short-term. But when these hip joints started to fail because they were sub-standard the ‘efficiency’ evaporated as the NHS incurred huge extra costs for poorer service.
5) £1.5bn in savings from cutting the civil service. Let’s be clear, most civil servants deliver services – collecting taxes, distributing benefits, running prisons, issuing passports, driving licences and so on. Unless civil service numbers have been cut without affecting services these are just cuts to services.
Now, to be fair to government, sometimes it is necessary to cut spending (inputs) whatever the affect on outputs. And sometimes areas of government spending can be cut altogether because they are not priorities or they are not working. But what is wrong is to claim these as ‘efficiency savings’ because they are not.
NOT ONE of the ‘savings’ listed by government today is an efficiency saving on the information we have – they are all just cuts to inputs. Many of them have the potential to not only damage immediate outputs but to cause longer-term problems that will costs government dearly.
Independent Audit: government claims their figures have been ‘independently audited’ and when I first called the Cabinet Office they claimed this was ‘by the NAO’. When I queried this, the position started to shift and it appears they have been ‘independently audited’ by some internal audit process and whilst they ‘welcome’ audit by the NAO this has not yet happened.
NB – just in case anyone thinks this critique is ‘political’ – I said exactly the same things about the ‘efficiency’ claims of the last government.
This post first appeared on Whitehall Watch
Two comments:
1. Government accounting and management information systems are quite simply not capable of producing reliable, up-to-date, complete information from the ‘front-line’ across all these areas of spend. As a minimum, the Cabinet Office should publish their assessment of the level of reliability for each data set.
2. The ‘baselines’ against which savings are measured need greater scrutiny. Again, the Cabinet Office needs to be more transparent in its approach to measurement.
Colin’s point is clear that the government cannot demonstrate that these spending cuts do not affect outputs negatively. However, is there a way of tracking or modelling their effects? The government’s case is cruder but more effective – the benefits of deficit reduction and low borrowing rates are much more tangible than spending taxpayers money on consultants or marketing. ONS figures on public service productivity (perhaps only slightly less crude) have also shown consistently low yield on increasing spending during the Labour years – despite the efficiency savings.
And what of the counterfactual? A recent PAC report on HMRC’s Enforcement and Compliance programme suggested that even though HMRC increased tax revenue by over £4bn, they lost £1.1bn in potential revenue by shedding 3,300 staff . Whilst the figures were not disputed by the department, they felt that the restructuring was justified on the basis that the productivity improvements were greater without those jobs.
Without a clear vision about what outcomes are desirable, we regress to a murky world of quantum uncertainty where inputs start to look a lot like outcomes. As in Bullseye, if you could see what you would have won, maybe you’d be more willing to play.