Summary
Analysis of central government department accounts identifies that whilst effective action was taken in 2010-11 to reduce spending, better understanding of costs is imperative to meet further cuts by 2014-15.
In ‘Cost Reduction in Central Government: Summary of Progress: Cabinet Office and HM Treasury’ (HC 1788) the National Audit Office warns that long-term changes are required by Cabinet Office and HM Treasury to achieve a further 19% of cutbacks as required by the spending review.
Spending was cut in real terms by £7.9 billion compared to 2009-10. Account analysis findings support the Efficiency and Reform Group's estimate that Government efficiency initiatives, including cuts to back-office and avoidable costs, contributed around half of the figure of £3.75 billion.
The NAO comments on gaps in the departments’ understanding of costs and risks, making it more difficult to identify how to deliver activities and services at a permanently lower cost. Fundamental changes will be needed to achieve sustainable reductions on the scale required.
It is unclear how far spending reductions represent year-on-year changes in efficiency, or whether front-line services are affected; and the departments' forward plans examined by the NAO are not based on a strategic view.
Departments' financial data on basic spending patterns is sufficient to manage budgets in-year, but information about the consequences of changes in spending is less good.
Longer term reform is a Cabinet Office priority and departments will need to look beyond short-term cost cutting measures and make major operational change.
Cost reduction plans also need to build in contingency measures to cover unexpected risks.
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