More value for money needed from government

Central government departments have failed to reach almost a fifth of their cost-saving targets, according to a report from government watchdog, the National Audit Office (NAO). Savings worth more than £147m claimed by the biggest Whitehall departments, including the Ministry of Defence (MoD) and HM Revenue and Customs, have been described as overstated or not real savings by the NAO report on the government's value-for-money programme and a further 44% may represent savings, but with "some uncertainty". The watchdog says its findings at the halfway stage of the Treasury's three-year value-for-money savings programme, which began in 2008-09 and runs through to next April, have significant implications for the present government's cost-cutting plans. It says the scale of savings needed in the current financial situation means departments "will have to think more radically about how to reduce costs and how to sustain them in the longer term". The report finds a number of problems with the way central government states cost savings. These include the use of unsuitable baselines from which to calculate savings, a lack of transparency over the way in which departmental arms-length bodies report their financial affairs, and difficulties in demonstrating links between savings and performance. The NAO has so far reviewed reported savings amounting to some £2.8bn from five major departments, which between them will deliver about 40% of the government-wide savings programme, set up by the previous government. It has concluded that of the results so far, 38% fairly represented sustainable savings (green); 44% may represent savings but with some uncertainty (amber); and 18% do not represent, or significantly overstate, savings (red). Of the three major departments it has assessed alongside the report, the NAO found that savings of £38m at HM Revenue & Customs were red, as were £13m of stated savings at the Department for Education and £96m of stated savings at the MoD. The watchdog concludes that departments need more robust data systems to substantiate improvements in value for money; at the moment, departments are often unable to reconcile reported savings to the spending agreement set out in the 2007 comprehensive spending review or to their annual audited accounts. It adds that departments do not always have systems in place to identify what their arms-length bodies are doing to save money - "making it difficult to determine whether savings had been realised".