1. The Efficiency and Reform Group (the Group) has made a good start in its first year. However, the Group's interventions so far have relied heavily on political leadership and sustainable efficiencies will require permanent changes to institutional structures. The logic of establishing the Group as a corporate headquarters for central government is sound, as it allows the Group to exploit potential synergies from bringing different corporate government functions under a single body. However, some important areas - notably finance - are under the control of other parts of government, potentially undermining the effectiveness of the Group's interventions. The Group and the Treasury should be clear and open about their defined areas of responsibility and need to develop strong partnership working to maximise the impact on Government efficiency.
2. There is uncertainty about the respective responsibilities of the Group and individual departments for achieving value for money. For example, the Group's ability to intervene in the management of major projects and negotiate with large suppliers means that departments' responsibility for their own projects and procurement decisions is less clear-cut than in the past. The 'tight-loose' relationship is likely to evolve and there is a risk that departments might attempt to use the Group as a shield to avoid responsibility and accountability for their spending decisions. As we set out in our April 2011 report on Accountability for Public Money, Accounting Officers must remain personally responsible to Parliament for how they spend taxpayers' money. If departments consider that central spending controls militate against securing best value for money, they should raise this formally with the Group. The Cabinet Office should confirm that the head of the Group is accountable to Parliament for the transparency of its decisions and the impact of its activities on value for money across government.
3. Our past experience of reviewing efficiency savings shows that departments' reported savings are frequently unreliable and impacts on front line services are often unclear. The Government has ambitious aims for the scale of efficiency savings to be made, and intends that about half of the planned £81 billion reduction in public expenditure over the next three years will come from efficiencies rather than cuts to services. Following our hearing, the Group provided us with a note reporting that its activities produced savings of £3.75 billion across government in 2010-11, which included a breakdown of savings generated by each initiative. The Group should seek to maintain a high degree of transparency in future reporting on savings, and in particular provide clear and accurate statements which set out: the level of savings delivered across government; whether savings arise from efficiencies or reductions in service; whether savings are permanent and sustainable; and the extent of any independent assurance on the reliability and accuracy of the reported savings.
4. The Group has had a strong short term focus on reducing government spending, but has not been clear about what it intends to achieve in the longer term. In the absence of quantified targets, it is uncertain what we can expect to see from the Group in two to three years' time or how we will judge whether it has met its objectives. Lord Browne suggested that success criteria should include evidence of how the Group had affected the behaviour of those in Government, whether commercial decision making had improved and whether the Group had developed a unified approach consistent with its strategies across all government departments. The Group now needs to set out more clearly its aims over the spending period, specifying quantifiable measures of success. It should also put in place adequate management information systems to measure progress accurately and objectively.
5. The Group has direct responsibility for only a fraction of public sector spending, with many of the efficiency savings required by 2014-15 to be achieved in areas where the Group currently has no direct role. Local public sector bodies, such as NHS trusts, need to contribute £20 billion of efficiency savings over this period. However, the Group does not have a remit to exercise 'tight' control over these bodies, as we found in our May 2011 report on commodity procurement by NHS trusts. The Group must give further consideration to how the benefits of its approach could be replicated across the wider public sector, while respecting the powers of local decision making bodies. For commodity procurement in particular, the Group should develop and promote arrangements for the wider public sector to take up the best deals, including triggers to mandate actions if progress is slow.
6. The senior civil service needs to prioritize a different set of skills to deliver cost reduction on the scale required. Senior civil servants have traditionally been policy experts, but they also need strong implementation and project management skills in order to reduce spending while delivering sustainable improvements in value for money. The Group has responsibility for wider civil service reform and should set out detailed plans to develop the civil service's management capabilities, leadership and project management skills - especially among senior responsible owners and project directors. It should set a clear expectation that departments' arrangements for recruitment, performance assessment, promotion and training must encourage civil servants to develop their implementation skills.