Comment Blog 18 October, 2023

An efficiency mindset

Patrick King
Senior Researcher

Spending public money well is fundamental to good government. Every pound that’s wasted, or used ineffectively, is a pound that could have been used to improve people’s lives — to increase investment in closing the educational gap, diagnosing cancers earlier, or supporting disabled people into work. Efficient spending, in other words, is not just a technicality or a ‘nice to have’, but a moral imperative — the thing that enables government to maximise the good it can do.

Yet, despite spending record sums (government spending now accounts for 46.5% of GDP, up from just over a third in 1990), the public increasingly feel that taxpayer pounds aren’t achieving their greatest impact, or worse, that the State simply isn’t working. In a poll conducted last year, more than three quarters said things were “worse than in the past” (a higher number than immediately after the financial crisis) while a majority thought that “nothing in the country works anymore”.

The fiscal constraints facing the next government are well known, meaning efficiency must be front of mind. Unfortunately, Whitehall’s historic approach to efficiency has too often been synonymous with crisis-driven cuts, or Treasury dominated target-setting, rather than with a sustained, whole-of-government culture, or ‘mindset’, of striving to do more for less. Reform’s paper, ‘An efficiency mindset’, out today, sets out a framework for prioritising efficiency in Whitehall’s everyday work.

This starts with how government matches spending with its top priorities. Until people, capital, and other resources are well-matched with the outcomes being sought by government, government will be wasting precious pounds.

Unfortunately, Outcome Delivery Plans (ODPs) — the main vehicle government has for setting priority outcomes and the strategies for achieving them, including resource allocations — haven’t been published since the 2021 Spending Review. Even then, worryingly few departments (38%) provide sufficient detail to link resources with outputs and outcomes in their ODPs. Or too put it another way, we have no way of knowing if great swathes of expenditure are going on long-forgotten programmes or previous government priorities.

Putting ODPs on a statutory footing is a technical, but essential, first step for getting government to take seriously the link between its top priorities, and the way in which it allocates resources to ensure these are delivered.

There should also be much more direct accountability for the delivery of ODPs. Public Service Agreements (or PSAs), New Labour’s answer to the same challenge, involved regular stocktake meetings with secretaries of state, the Prime Minister and permanent secretaries, as well as dedicated representatives, ‘Senior Responsible Owners’ (SROs), who reported into a cabinet committee every six months with updates.

This kind of accountability should be established for ODPs. And to ensure public confidence and external audit, departmental select committees should hold annual scrutiny meetings to assess progress against ODPs and, as with pre-appointment hearings, publish a report detailing their assessment. Named SROs responsible for each of the Plans’ priority outcomes should appear before the committee alongside the permanent secretary.

Next, government needs to know that the money its spending is achieving the greatest possible impact. With public spending exceeding £1 trillion annually, the small sums currently sets aside for evaluation — less than £100 million, in total, for external evaluation contracts — are inadequate. Worse, many departments don’t even know how much they’re spending on evaluation or how many staff they have working on it.

Across the pond, in Canada, evidence from evaluations plays a decisive role in departments gaining spending sign-off from Treasury. There is also a requirement that all spending should be periodically evaluated. Both things the UK can and should learn from.

Third, day-to-day, government must have a clear sense of whether its activity, programmes and projects — the things that ultimately turn policy into results — are on track, budget and delivering efficiently. Yet, worryingly, interviewees told us even the people running things, including SROs, “often find it hard to get an accurate picture of progress” and information gaps about the objectives and key results of spending are “baffling and unconscionable”.

Turning this around will require action from the executive centre of government. We recommend that a “Performance Taskforce” is set up in Cabinet Office to set clear standards and monitor the use of real-time information on performance across government. To boost accountability there should be a presumption to publish evaluation and performance data.

Finally, we must shatter the notion that ‘spending efficiently’ is a job for public finance directors, Treasury officials, or politicians alone. Instead, as Lord Nick Macpherson, former Permanent Secretary to the Treasury, argues in his foreword to our paper, it should be “central to the public servant’s mission”.

From Director-Generals, to those involved in frontline delivery, everyone must have opportunities, and incentives, to make sure that each pound of public spending is going as far as possible.

This will require creating a sense of “ownership” among senior leaders which means that even if people move on from long-term projects they still feel a sense of responsibility for the results a project delivers. Work by the Infrastructure and Projects Authority — which oversees the delivery of major projects in the UK — to boost the retention of project leads, including through setting firm tenure commitments and applying flexibility in renumeration and grading, has shown signs of success in this regard. This should be replicated more widely across government.

But crucially, an efficiency mindset must be embedded at every level. Government should much more intentionally reward staff who identify and put forward ideas for unlocking savings and improving delivery – and many of those working on the frontline will have practical insights and ideas that policy professionals lack.

Together these ideas offer a template, for whoever forms the next government, not just to set an efficiency target in a spending review — or a specific area of wasteful spending to focus on — but a new approach for maximising the impact of public spending. The ambition should be to inculcate and reward a genuine mindset of efficiency in Whitehall.