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Consulting feels brunt of UK government spending cuts

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London: A squeeze on consultancy spending has helped the UK government to beat its own target for saving public money, it claimed today.

The Minister for the Cabinet Office, Francis Maude, said that a "ruthless approach to eradicating wasteful spending across Whitehall" enabled the Government to save over £5.5 billion for the taxpayer last year — higher than it predicted.

The savings were driven by the Cabinet Office's Efficiency and Reform Group (ERG) which applied spending controls to cut expenditure by departments on IT contracts, property, marketing, temporary staff and consultancy. These new savings are in addition to the £3.75 billion it says it saved during 2010/11.

The Cabinet Office has highlighted a £1 billion in savings achieved last year through a moratorium on consultancy spending and on extending existing consultancy contracts. Since 2010 consultancy spend has been cut by over 85%, it says.

Minister for the Cabinet Office, Francis Maude, said, "There's never an excuse for wasting taxpayers' money in the way it was in the past, but given the size of the deficit this Government inherited and the ongoing tough economic climate, we were determined to cut the fat from Whitehall. Because our controls on spending are working well and saving unprecedented amounts of money, I'm determined they will be a permanent feature of good governance.

"Last year, this Government beat its own prediction and saved a staggering £5.5 billion from departmental expenditure, on top of the £3.75 billion from our first year in office. The real question is: why were such savings never made before and why was so much taxpayers' money squandered on things like unnecessary consultancy, wasteful marketing and underused property leases?

"In 2010 we set up an Efficiency and Reform Group in the Cabinet Office to beef up government's operational centre and to ensure that Whitehall operated in a more business-like fashion. It's working well, but we are determined to go even further, because when it comes to spending other people's money we must always strive to find more efficient and better ways of providing public services."

The effect of central government's limits on consulting spending is already apparent in consulting market statistics: UK Management Consultancies Association research published in May showed a 5% recovery in all fee income in 2011, but public sector fee income was down 19%.

As well as the consultancy freeze, the £5.5 billion savings included:

  • £390 million of savings from freezing all marketing spend — except when operationally necessary. This builds on the £400 million the Government saved in 2010/11.
  • The in-year cost of the Government's property estate was reduced by nearly £200 million by exiting unnecessary properties, and questioning each and every lease break before they were extended. This is more than double the £90 million in savings achieved the year before.
  • Almost half a billion in savings were achieved last year by using the Government's bulk-buying power and pooling spend on goods and services used by different government departments. This comes on top of the £360 million saved in 2010/11.
  • Reductions in the size of the Civil Service through stronger controls on non-essential recruitment has contributed to a reduction in salary costs for 2011/12 of nearly £1.5 billion. This is an enormous increase on the £300 million in savings the Government made the previous year.

In 2011 the Cabinet Office introduced a new team of skilled negotiators (Crown Representatives) from the private and public sectors who act as representatives of the Government and interact with key suppliers, ensuring government acts as a 'single client'.

The department says these representatives sit within the Commercial Procurement and Relationships Directorate and negotiate better deals on behalf of taxpayers. Contract renegotiations in 2010/11 delivered £800 million of savings across suppliers and £437 million were delivered in 2011/12.

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