I’m delighted to welcome the Chancellor here today. Under his deft stewardship this country’s economy is back on the mend and we are undoing the damage of the past.
Today’s savings announcement goes right back to a speech the Chancellor gave at Mansion House soon after the May 2010 general election. He committed then to the coalition delivering substantial in-year efficiency savings while protecting frontline services.
We’d do this by renegotiating contracts, reducing discretionary spend and controlling overheads. Hardly radical - the kind of financial common sense that a company’s shareholders expect as a matter of course; indeed successful companies had already started to do these things 2 years earlier, when the recession first hit.
Government should have done the same. Yet as we discovered, vast sums were flowing out of departments without even any serious attempt to control the flow, let alone reduce it.
So in 2010 we knew there were staggering savings to be made. We promised to deliver them and that’s precisely what we’ve done: £3.75 billion for our first year, £5.5 billion for our second and more than £10 billion for our third – all saved against a 2009 to 2010 baseline.
So it now gives me great pleasure to hand over to the Chancellor to talk about how our work is helping to cut the deficit and supporting the Government’s long term economic plan.
[George Osborne, Chancellor of the Exchequer spoke, followed by a short video about the government’s efficiency savings in 2013 to 2014.]
government savings 2013 to 2014
As the Chancellor has announced, our work saved an unprecedented £14.3 billion in the last financial year. It’s a blend of recurring and non-recurring savings; and it’s measured against a 2009 to 2010 baseline. It’s a conservative figure; we’re showing our workings transparently; and we’ve erred on the side of caution in how we measure and count the savings.
But by examining how we achieved these savings, you can see how we’re transforming government to be leaner, more efficient and more capable.
Procurement and commercial
Back in 2010, no one had a central grip on government procurement. Government should be the best customer, operating at scale, with the best credit, and paying quickly. Instead it was the worst.
It wasn’t just that the left hand didn’t know what the right hand was doing – it was that the left hand was paying out more than the right hand for the same goods and services. Government buys in volume and we ought to be able to use this buying power to drive costs right down. Last year we did just that – and saved £1.4 billion by centralising common goods and services.
Better management of contracts and commercial relations helped save another £1.8 billion this year. All of this is against a baseline for 2009 to 2010.
Our hard headed, business-like approach is already beginning to bear fruit. And with our new Crown Commercial Service we have a more commercially savvy organisation at the heart of government, with experts who really know the supply market and can make intelligent decisions by exercising their judgment about who’s the best supplier. And now our spend with small- and medium-sized enterprises (SMEs) is on the rise – on track to hit a quarter of our business by next year.
Over a third of the savings total for 2013 to 2014 – £4.7 billion – has come from increasing contributions to public sector pensions, and by reducing the size of the civil service, which is already down 16% since the general election.
And we have reduced the size of the government estate, using the tough new controls on property which we introduced in 2010. No department can take on a new lease or pass a break-point in a significant lease without consent from my team.
For the last financial year this generated savings of £460 million from lease terminations and over £160 million from asset sales, against the 2009 to 2010 baseline.
This tough approach was what was needed to bring order to the chaotic way in which government property was managed.
Recently we agreed that the Department of Education will move to the Old Admiralty Building. This has been made possible because the Foreign Office has been able to concentrate its staff in its main King Charles Street headquarters.
Most of my officials already share One Horseguard’s Road with the Treasury, HMRC, DCMS and the Northern Ireland Office. These moves have released to the private sector expensive central London leasehold property that the government no longer needs. It’s Whitehall musical chairs – but the taxpayer wins every time.
We were able to save £3.3 billion for 2013 to 2014 through better management of major projects and by reforming public sector construction.
Four years ago, only a third of major projects were delivering to time or on budget. So the Prime Minister established the Major Projects Authority with unprecedented powers to support and, if necessary, to recommend re-scoping or closing failing projects.
And we set up a new training programme at the University of Oxford’s Said Business School. By the end of this year, 340 project leaders will have graduated from the Major Projects Leadership Academy, helping build capability within the Civil Service and reducing our reliance on costly consultants.
Improving the delivery of projects saves money but also ensures Britain gets the 21st century services and infrastructure it needs more quickly and better.
Efficiency and Reform Group (ERG) and productivity
I’d like to take this opportunity to pay tribute to some of my brilliant officials in the Efficiency and Reform Group. And in particular to thank Katharine Davidson who for several years was our director of strategy and is responsible for so much of what we have achieved so far.
My officials are not always the most popular people in Whitehall. Sometimes their job is about saying no. But sometimes that’s just what you have to do.
I’d also like to thank many of their counterparts from departments, some of whom are here today, and in particular their colleagues at the Treasury. We know that when departments get it; when they elect to work with the centre of government from the outset, proactively and positively, then we don’t have to say no; because we can work together to look for ways to deliver the same service – or better services – for less money.
Our achievement has been to disprove, once and for all, the fallacy that you can’t improve public services without increasing spending.
Look at GOV.UK – it swept away a plethora of government websites, it’s simpler, clearer and faster for users and saved 70% from the annual costs in the process.
Look at the Department for Education. It is halving in size, but its radical programme is changing the face of secondary education.
We’ve proved that we can deliver savings and reforms year after year. But we still have some way to go. It’s time to set about a real transformation of how we design and deliver services in this country.
The future of public services
From our experience over the past 4 years, we’ve distilled 5 principles for public service reform. They’re practical, not ideological, and they’re drawn from the lessons of what’s worked.
The first principle is open, because being transparent builds trust, sharpens accountability and drives improvements. Taxpayers can see how their money is spent and people can judge how services perform. It can also stimulate economic growth – there’s a thriving tech community waiting to use this raw data as the basis for new ideas and solutions.
The second principle is the one we’ve been talking about today: tight control from the centre over common activities. We introduced spending controls within days of the 2010 election to create a proper corporate centre for government and exert the same standards which you would find in large businesses. Those controls account for more than half the savings we’re announcing today.
But tight control at the centre should be matched by loose control over front line operations, which is my third principle. That’s why we’re diversifying the range of public service providers - supporting mutuals, joint ventures and social enterprises in delivering public services. There’s no longer a binary choice between in-house public sector delivery and red-blooded commercial privatisation. Already there are nearly 100 staff-owned mutuals in the UK delivering around £1.5 billion worth of public services while cutting costs and dramatically improving productivity.
The fourth principle is innovation. Public servants need to have permission to try sensible new ideas so we can move away from the risk aversion that has held progress back. The innovators of Silicon Valley or Israel’s start up nation know that you learn more from the ideas you try which don’t work, than from those that do.
The fifth principle is digital by default, because as well as being much cheaper, services delivered online can be faster, simpler and more convenient for the public to use. By next year 25 of the government’s biggest services will be digital by default. You’ll be able to apply for an apprenticeship or fill out your taxes fully online. This will help unlock big savings for the Exchequer but also make things easier for citizens and businesses who rely on the services.
Our programme of Civil Service Reform is beginning to create a culture that is faster and less bureaucratic, focused on the delivery of outcomes, rather than process or structures. A much smaller civil service – the smallest since World War 2 – is delivering more, with productivity significantly improved. Truly and finally, we have nailed the old myth – that you cannot get more for less.
Open, tight, loose, digital, innovative – these are what I believe should be the characteristics of productive, effective and successful governments, now and in future.
Yet some people still ask me, “When will this all be finished? When can we relax?” – as if there will come a time when I’ll stand before a ‘mission accomplished’ banner and declare the job done, and everyone can go back to business as usual.
But it can never end. No great organisation ever completes the task of making itself more efficient. There will always be new ways of saving money: there are always be better ways of doing things. The business of reform from now on has to become business as usual. This will always be a work in progress.
Eliminating waste and cutting the deficit is a key part of this government’s economic plan for the long-term. This is about backing hardworking people by spending taxpayers’ money responsibly, keeping mortgage rates down so people have more financial security and building a better future for our country. It is my mission to carry on pushing, challenging and driving departments to deliver more for less. That’s just what I’m going to keep doing.
This year we saved £14.3 billion compared with the year before the last general election. I’m proud of this achievement. But it isn’t enough. By next year we want to save £20 billion for the year including by reducing losses from fraud, error and debt. And the Chancellor has asked me to set out an ambitious new efficiency programme to produce even greater savings from 2016 to 2017 and across the next Parliament. Everything we’ve seen during these years tells us that we can do this. We’re out of the foothills, and the climb gets harder from here. But we’re still a long way from the peak. We’ll do it because it’s what the country needs, and what its taxpayers deserve.
We’re now going to move on to the next session – the Chancellor has to leave but I want to thank him for being with us this morning.