The Department has reported VFM cash releasing savings totalling £544 million in 2008-09, of which £404 million are new savings and £140 million represents over delivery of efficiency targets by police forces in 2007-08 that we did not review in detail. Taking into account delays in reporting police savings, the Department is broadly on course to meet its target of £1.7 billion by 2010-11 if it can sustain the present level of savings generation. The reported savings were comprised of a number of separate strands, four of which we examined in detail. These four strands reported new savings of £338 million, comprising 83 per cent of the Department's new reported savings. We have rated £280 million of the sampled savings as Green or Amber; but have significant concerns over £58 million (17 per cent) of the sampled savings.
We have assessed the Home Office's overall governance arrangements for its Value for Money Savings programme as strong, and welcome its proposals to involve its internal audit service more closely in future. However, reporting of individual savings in 2008-09 was in insufficient detail to allow Home Office centrally to effectively challenge individual savings claims with the result that a significant proportion did not meet our criteria.
The main reasons for our Amber and Red assessments were that:
• Procurement savings of £54 million were reported by the Department. The Treasury has issued further guidance on measuring the sustainability of procurement savings. The Department expects that a substantial proportion of its reported savings in future will comply with the revised rules. However, we assessed three quarters of the procurement savings we examined as Red because the claimed savings represent one-off actions such as resisting extra contractual claims for which no budgetary provision had been made, or were not new annual savings as the procurement actions had been taken in prior years. The Department believes that although many of the savings claimed are individually one-off savings, they are typical of the savings being generated by the more commercial style adopted by its procurement staff. However, in our view, the Department is unable to establish a suitable baseline against which to measure improved overall performance, or to establish that the savings were cash releasing, for instance, that the contracts on which the individual savings were claimed had been delivered below budget.
• Police forces report savings as either cash releasing reductions in annual budget for units, or non-cash releasing savings where operational units reinvest efficiency savings in priority areas. We have no serious concerns about the overall standard of reporting of police savings. We assessed many of the non-cash releasing savings as Amber, as forces were not always able to demonstrate a clear link between the reported efficiency savings and increased spending on priority areas. In addition, the non-cash releasing savings we examined also contributed to the savings being claimed through budgetary reductions and may partly be double counted.
• We assessed some £20 million of other savings as Red because they were double counted due to the same savings having been claimed by different units or, for example, because savings on staff were also claimed through reductions in average case costs. A small proportion of police savings for example were one-off savings, or were not cash releasing in 2008-09 as resources had been reinvested in improving support services rather than releasing cash or improving front line services.