Government has given less attention to grants than to other policy funding mechanisms, despite grant funding being higher in value, according to the National Audit Office.
Government spending on grants makes up 41 per cent (£292 billion) of its total expenditure of £715 billion. Despite this, the use of grants is less developed as a practice than other government funding activities.
A large number of government bodies provide grants to around 850,000 recipients, including charities, private companies and individuals such as grant payments to students. In 2011, the National Fraud Authority estimated that in 2009-10 grant fraud cost the taxpayer £515 million. In October 2012, the Cabinet Office formally launched its Grants Efficiency Programme to improve the effectiveness of government grants and identify savings in grant fraud and administrative costs. Although the programme has been hampered by incomplete data and a lack of resources, it is now gaining momentum.
Today’s NAO report finds that the effectiveness of government’s grant funding is undermined by a lack of coordination and the centre of government not having information on the grant programmes currently operating. Obtaining information on government’s grant funding activities has proved challenging because levels of information and transparency vary in different parts of government.
Furthermore, different parts of government are providing grants to the same recipients. In some cases, universities and charities are receiving more than 10 different grants. With a lack of information on recipients beyond that held by individual programmes, the government typically cannot identify whether recipients are receiving other payments.
The NAO finds that the government has started to benefit from using alternatives to grants, but some departments use grants without systematically considering alternatives. Departments do not consistently evaluate the implementation and outcomes of their grant programmes.
The NAO concludes that departments and central government have a role to play to address these issues. The Cabinet Office, departments, and arm’s length bodies with responsibility for detailed grant allocations will have to work together to address these challenges before government’s use of its grant funding as a whole can demonstrate value for money.
Amongst the NAO’s recommendations are that government departments with grant programmes should share information on their grants and recipients with other departments and the Cabinet Office.
“Grants can be an effective method of achieving policy objectives, but should not be the default option as other alternatives may offer better value for money. There is no central good practice guidance and limited central data to support departments in implementing efficient and effective grant programmes. The Cabinet Office has begun work to improve government's use of grants, but this is at an early stage and will need more support from departments to be successful.”
Amyas Morse, head of the National Audit Office
Notes for Editors
Was provided as grants in 2011-12
Of total government spending is grant funding
Was grant funding to the non-public sector
Departments that pay grants
Central government grant schemes
Recipients of individual grant payments, including some 750,000 UK students
Cabinet Office high level estimate of potential savings from implementing all aspects of the Grants Efficiency Programme
Cost of the Grants Efficiency Programme so far
1. The government makes extensive use of grant funding to help implement its policy objectives. In 2011-12, it provided a total of £292 billion in grants to organisations and individuals in the public, private and voluntary sectors. This sum excluded grant-in-aid.
2. The government has now begun work to improve its grant programmes. In 2011, the National Fraud Authority estimated that in 2009-10 grant fraud cost the taxpayer £515 million. This led the Cabinet Office to set up a taskforce to explore ways these levels of fraud could be reduced and to start collecting more information on government's use of grants. Following the taskforce's exploratory work, the Cabinet Office decided to set up the Grants Efficiency Programme in October 2012. This is designed to reduce costs and losses from government grants and to make grants more effective.
3. The definition of a grant varies across government. In this report we define a grant as a permanent transfer of funding for a specific purpose and used in accordance with a set of terms and conditions. This definition is consistent with the Whole of Government Accounts.
4. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk. Hard copies can be obtained by using the relevant links on our website.
5. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Amyas Morse, is an Officer of the House of Commons and leads the NAO, which employs some 820 employees. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.1 billion in 2013.