Back when we started in May 2010, when the coalition was formed, we had inherited a situation where government was spending £4 for every £3 it took in taxes.
We were borrowing 1 pound in 4 just to keep the lights on and the pensions paid, the teachers paid, and the nurses and doctors in the hospitals.
We could have carried on as we were. It would have been easier to have carried on clinging to the old ways of doing things– but that would have led to ruin. When the money runs out, it’s time to start thinking.
So I was given the task by the Prime Minister of leading the government’s work to save money in central government and finding new and different ways of doing things.
In those early days it was quite tough.
Our Management Information was lamentable. Departments developed different systems for collecting data, so you couldn’t spot the efficiencies because you couldn’t compare how money was spent in different parts of government.
We didn’t even know who our biggest suppliers were. I had to write to the chief executives of the ones we guessed were our biggest suppliers to ask them to let us know how much business they did with the government. Government itself didn’t have that information.
And our digital presence was light years behind the curve.
So there were plenty of people who thought we couldn’t do this. They assumed we’d grab the low hanging fruit and then give up and move on. They didn’t take us seriously because they didn’t think I’d be around long enough to make a difference. And when you consider that none of my 8 predecessors lasted more than 18 months in this job, you can see why they might have made that mistake.
But let’s look at the difference there is 3 and a half years on.
For the first time we have a consistent system for collecting Management Information across government – it’s not perfect, by a long way, but it beats the hell out of what was we inherited. We have saved billions for the taxpayer by getting tough with suppliers and working as one government in a grown up way with our major suppliers. GOV.UK is winning awards and we are starting to become genuinely digital by default.
And I’m still around.
Efficiency and Reform Group
The creation of the Efficiency and Reform Group (ERG) has been central to our approach. It brought together officials from the Cabinet Office, from the Treasury, increasingly from around different parts of government, and importantly, supplemented by people from the private sector.
But ERG is not just about structure - it’s a state of mind. A bias for action over inertia; it’s about a readiness to invest in people so they have the expertise to succeed; and it’s about a willingness to treat taxpayers’ money as if it were our own.
Things are now moving in the right direction, but we need to do much more to balance the books. We know we are not nearly as good as we need to be and can be.
And we know that significant scope remains to deliver radical cost reductions and improve public services at the same time.
And frankly that will never be complete. No great organisation ever completes the task of making itself more efficient. This will always be a work in progress – with a lot more progress to make.
Government spends around £39 billion on buying goods and services, and we need to make the most of this extraordinary buying power.
This is in addition to the £54 billion spent on our workforce on pay and pension contributions.
At the same time we’re expanding our focus to include the welfare system. We know there are considerable efficiencies can be found by tackling fraud, error and uncollected debt in a coherent and coordinated way.
So in our first year we saved £3.75 billion effectively in the first 10 months to March 2011, in our second £5.5 billion, and last June I announced savings of more than £10 billion in our third year.
Year-after-year we are delivering innovative steps to help reduce the deficit but at the same time do things to encourage UK growth.
We’ve also started to collate the savings from our coordinated effort to tackle fraud, error and debt. So in August we were able to announce a further £6.5 billion of savings – that’s on top of the £10 billion efficiency savings.
Before May 2010 there was no cross-government effort to tackle, fraud, error and uncollected debt. It’s quite extraordinary when you think about it that government should be seen as it was seen as a soft touch: debt was shrugged off, fraud ignored and waste tolerated.
In the private sector no shareholder would tolerate a board with such a weak grip on a company’s finances – and taxpayers shouldn’t have to do so either.
2013 to 2014 half year savings
Today, we are announcing first half year savings of £5.4 billion.
That’s a 73% increase on where we were at this time last year for H1 savings. It also means that in just 6 months we’ve nearly matched what we saved over 12 months in 2011 to 2012.
We are now well on course to exceed the annual target we set ourselves at the beginning of the spending round period, when we take into account the programme to reduce fraud, error and uncollected debt.
Now graphs don’t set the pulse racing I know. But these bar charts represent countless hours spent scrutinising contracts, winning hard-fought deals for the taxpayer; harnessing innovation to find new and better ways of delivering services. Individually these achievements aren’t glamorous I know that. They don’t always grab headlines. But taken together I think they represent serious progress.
This is in no small part down to the energy and commitment of civil servants in the Efficiency and Reform Group, working hand-in-hand with departments. I’ve always said that when the civil service works well, it is truly world-beating: and this achievement is I think a case in point.
Let’s just take 2 of our areas of work – digital government and shared services – to see how our approach is delivering real savings and better public services.
We are introducing a complete culture change in how we do IT in government. Gone is the fixation with unwieldy all-consuming Big IT projects that were dominant in the past, and in comes an approach which is open, flexible, agile.
Underpinning all this is a commitment to user-needs – technology is there to serve the user not to serve the government. That was completely our approach in developing the award-winning GOV.UK. As well as making it easier for the public, we also saved 70% of the legacy costs.
Back in 1999, it was proposed that half of government services should be delivered electronically by 2005 and all of them by 2008. When we came into office in 2010, we found that only some government services were available online – and frankly the quality of these varied enormously.
We know there are much more savings to be had out there – staggering savings potentially – which we can deliver while actually improving quality. Quite often the same traits that make online services better – designing them to be simpler, clearer, faster – also cause them to be cheaper.
So we want to create a digital government for the future. By 2018 we expect all government services handling over 100,000 transactions a year to be offered online.
We’ve started with a wave of 25 exemplars. The first was making student finance applications available online – already has a 92% take-up rate. The lasting legal power of attorney will be one of the next, and others will follow as we seek to become digital-by-default in everything we do.
But perhaps the biggest demonstration of how far we’ve come is our efforts to share back office functions. For too long, the potential savings that come from reduced duplication, shared expertise and larger economies of scale have been hidden behind Whitehall’s federal structure.
Back in 2004 Sir Peter Gershon proposed breaking down these silos by creating genuinely shared services. And it makes sense – not least because it frees civil servants to focus on delivering exceptional public services which, after all, is their core role. Yet successive governments have struggled and failed to find the right formula.
Last week I announced a deal with a private sector partner that will see the taxpayer own a 25% stake in a new joint venture. And in doing so, we have made more progress in the last 8 months than in the previous 8 years, which just shows what can be done when the civil service embraces new ways of working.
It’s not your conventional outsourcing model. It’s a new company. The way this contract is constructed, the bigger the volume, the lower the unit price goes. So it’s in everyone’s interests, for additional business from other government departments and from the private sector both in the UK and overseas to be won by that company. If business grows, public services can be delivered at lower cost – and the taxpayer will share in the upside.
Pursuing this model generated some great proposals from the market in the process. So we’ve moved from a position of relative commercial naivety to the situation now where we are disrupting the market with an innovative new model - and the market is responding.
And that’s frankly how it should be. Government as a hard-nosed, intelligent customer, with a proper, grown-up relationship with suppliers. A world away from those early days of contract renegotiation - and that’s what I mean by transformation.
In the early days, it was easy for us to spot savings because we found waste frankly in such abundance. But these kinds of efficiencies are a quick win and will only take us so far.
Our challenge now is to deliver more of the transformations necessary to ensure savings of this magnitude are sustainable in the future.
So, in conclusion, 3 years on, we’ve proved that we can deliver savings year-after-year. And we remain as determined today as we were the day we began.
We’ve got further to go, and it will take time. But by simply by treating the taxpayers’ money as if it were our own, we are changing the way government does business.
So much more to do. And now it is my pleasure to introduce Sajid Javid, Financial Secretary to the Treasury, who is here as a symbol of the very close working between the Cabinet Office and the Treasury at the centre of government to drive this ever further.