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Sir John Bourn, head of the National Audit Office, reported to Parliament today that, halfway into the three-year efficiency programme, government departments have reported £13.3 billion in annual efficiency savings, 62 per cent of the £21.5 billion target.

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But departments’ progress towards achieving their individual targets varies, indicating that some departments still have a lot more to deliver than others. Progress ranges from the Home Office and the Department for Work and Pensions reporting the achievement of more than 90 per cent of their efficiency targets by September 2006 to the Department for Education and Skills reporting only 28 per cent of its target.

There is clear evidence of positive change across the public sector, such as the £1.2 billion saved annually by the Department of Health in procuring pharmaceuticals. On the measurement of efficiencies, the NAO’s assessment shows that:

  • 26 per cent (£3.5 billion) of the £13.3 billion reported efficiency savings fairly represent efficiencies made;
  • 51 per cent (£6.7 billion) represent efficiency but carry some measurement issues and uncertainties; and,
  • 23 per cent (£3.1 billion) may represent efficiency gains but the measures used either do not yet demonstrate efficiency or the reported gains may be substantially incorrect.

The report concludes that the Office of Government Commerce (OGC) is fulfilling its role in co-ordinating the Efficiency Programme well. However, the problems in measurement identified by the NAO show that efficiency gains require greater review before they are reported.

The OGC has issued comprehensive measurement guidance to departments and initiated a new reporting system that emphasises the need to maintain service quality. As a result, departments have shown a greater focus on measuring service quality and all projects across the programme have established baselines against which to measure efficiencies. There are many examples across the Programme where service quality has been at least maintained. But some projects are finding it hard to demonstrate fully that quality has not been affected.

Departments are also making good progress in achieving the 70,000 headcount reduction target and have reported 45,551 (65 per cent) headcount reductions. The NAO found reported reductions by departments to be broadly robust. However, while the resulting reductions are not significant in relation to the size of the Programme, there are some differences in baseline dates and these diminish confidence in what has been achieved. Furthermore, only limited assurance can be given on reported reallocations to frontline roles.

In today’s report, the NAO has called for a number of improvements to assist the government in meeting the £21.5 billion efficiency target by 2008 and beyond in order to embed efficiency for the long term.

Among the recommendations are that the Office of Government Commerce makes progress across the Programme more transparent by making more information on progress publicly available. The NAO also recommends that departments should improve their measurement of efficiency gains and report their headcount reductions with greater transparency. They should also focus on the efficiency of all aspects of their business, not just those covered by efficiency projects, and do more to encourage staff to put forward ideas for improving efficiency.

“When I last reported on the Efficiency Programme, nearly a year ago, I concluded that reported efficiency gains should all be treated as provisional. Since then, progress has been made in improving the robustness of how gains are measured. But many reported efficiency gains still carry a significant risk of inaccuracy.

“In this spending period, there is more to do to show that all reported gains are both genuine and sustainable. Looking further ahead the next spending period provides an opportunity to ensure that efficiency is improved across all aspects of the business.”

Sir John Bourn


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