Government could save billions by improving productivity, says watchdog chief

The Government could save tens of billions of pounds by improving productivity, but needs more skilled leaders to do so, the head of the National Audit Office (NAO) has said.

Gareth Davies, the Comptroller and Auditor General, set out a blueprint for achieving value for money in an annual speech in Parliament on Tuesday afternoon.

But while he said billions more could be made available for Government priorities, he also warned of the significant challenge facing whichever party wins the next election.

Pointing to demographic changes, “crumbling” national infrastructure, “out-of-date IT” and difficulties retaining staff, he said: “It is relatively easy to cut spending, but it requires skilled leaders and managers to deliver genuine efficiencies that release resources for Government priorities”.

We will only see these potential savings if Government makes improving its own productivity a high priority

Mr Davies criticised the management of major infrastructure projects such as HS2 and the New Hospital Programme, both of which have been on the receiving end of damning NAO reports, saying they “lacked sufficiently robust and realistic assessments of affordability at the outset”.

Asked why this was the case, Mr Davies said incentives “push you in the other direction”, with a drive to get projects approved leading to “heroic assumptions” that meant allowances for “optimism bias” were not large enough.

While he acknowledged the planning system could present problems, he stressed that it was not the only barrier and “many, many changes to the specification requirements” of major projects also did not help.

He said: “I think a lot comes back to being realistic at the outset.

“The legal framework is known at the outset of that project. Why is it so difficult to come up with a realistic cost estimate?”

Addressing public buildings more widely, he added: “Schools, hospitals, prisons, roads and flood defences must be adequately maintained to meet their purpose. The NAO’s recent work has highlighted the false economy of allowing maintenance backlogs to build up.

“Our report on school buildings found more than a third are beyond their design life, leading to higher running costs and in some cases expensive emergency repairs, which continue to affect pupils, teachers and parents even now.

“The same issues are significantly affecting patient care – and costs – at many NHS hospitals.

“A more disciplined approach to asset management, with maintenance plans for each part of the public estate, is an essential component of the Government-wide efficiency drive I am recommending.”

He also called for “a stronger focus on leadership skills”, adding: “We will only see these potential savings if Government makes improving its own productivity a high priority.

“That requires a disciplined, focused and cross-government approach over several years to realise the potential, and make the exceptional, the norm.”

Both main parties have acknowledged the need for improved public sector productivity as the UK grapples with crumbling infrastructure and increasing demand for services.

In June 2023, the Chancellor, Jeremy Hunt, announced a wide-ranging review of public service productivity aiming to “deliver more for less”.

His Labour shadow, Rachel Reeves, has also spoken about productivity, saying her party would introduce an “office for value for money” that would check spending before it happens.

Shadow chief secretary to the Treasury Darren Jones said: “Waste and inefficiency has become normal under the Conservatives.

“Labour will treat taxpayers’ money as if it were our own and get tough on waste by creating a new Office of Value for Money, tackling pandemic-related fraud with a Covid Corruption Commissioner and by strengthening the Office for Budget Responsibility.

“Labour’s plans to get Britain building again, modernise our public services and get the finances under control will turn around 14 years of failure and unleash a decade of national renewal.”

Laura Trott, the Chief Secretary to the Treasury, said: “We’ve done a huge amount since 2010 to increase the efficiency and productivity of public spending, but we want to do even more on cutting admin, safely introducing new technology, and preventing problems before they occur.

“The public sector productivity programme is a key part of this mission and will ensure we deliver a more productive public sector while cutting your taxes.”