Penny smart, pound foolish?
Senior Researcher
Government spending is often lost in the margins: a procurement deal that takes an overly narrow view of value for money, a team held back by poor performers and unable to work productively, or through legacy IT that slows down routine tasks. Efficiency drives then focus on a belief that pennies trimmed across the board will result in pounds saved by the Exchequer.
Certainly, each of these sources of inefficiency warrant Whitehall’s attention. And Re:State has a lengthy back catalogue analysing each. However, it is also worth considering where public money is being spent in the round and where the key levers are to affect change. Yes, in ministerial departments, but also through public bodies: which now account for 60 per cent of day-to-day spending.
By targeting efficiency in departments but not prioritising public bodies, government risks being penny smart but pound foolish. The problem is that, in too many cases, we just do not know whether public bodies are securing value for money or delivering their core functions well.
It can take a national scandal for us to identify poor performance. Take last year’s review of the Care Quality Commission, which found that the health regulator lacked expertise to assess whether healthcare was being delivered safely — in other words, to do its job. Or weaknesses in the oversight of Public Health England which came to light through the UK’s initial, sluggish response to COVID-19.
In interviews for our report, Quangocracy, published last week, senior officials told us that the independent status of public bodies meant they were “out of sight, out of mind” and that “no one really knows who’s accountable for these things”. Only around 250 people in Whitehall are responsible for the oversight of hundreds of arm’s-length bodies that together spend over £350 billion.
The Chancellor has announced that the upcoming Spending Review will mean budgets being subjected to “line-by-line” interrogation to promote efficiency. Our analysis of public bodies suggests this is the fiscal equivalent of going from not knowing how many beaches there are in Devon (there is no authoritative list of the number of public bodies), to promising to count each grain of sand on those beaches.
The upside is that there are certainly pounds to be saved. But the Chancellor must focus on where the majority of day-to-day money is actually being spent, by improving oversight of public bodies — not just taking a scalpel to the overall spending envelopes of Whitehall departments. That way, she will be able to save the pennies and the pounds.