Government's use of external consultants

The Cabinet Office is unable to deliver on its strategic objective to reduce consultancy spend because departments are not complying with its definitions and directives. The Chief Commercial Officer stated that some departments are not following Government Commercial Function guidance or the good practice set out in the Consultancy Playbook when defining consultancy requirements, going to market, or contracting. Cabinet Office stated that it has often reiterated guidance for departments but does not monitor compliance. This is further complicated by the fact departments do not routinely monitor compliance by their arm’s-length bodies (ALBs). Cabinet Office is currently consulting with the Government Internal Audit Agency (GIAA) about what government can do to improve assurance over data, consistency controls and oversight of ALBs. 3 recommendation Alongside its Treasury Minute, the Cabinet Office should set out which departments are not complying with its requests on consultancy procurement and what it intends to do to address non-compliance.

The Cabinet Office is unable to demonstrate that the target to halve consultancy spend is an effective way to reduce spending on external providers. The Chancellor announced her intention to stop all non- essential spending on consultancy immediately and halve the government’s spend on consultants in 2025–26. Cabinet Office wrote to all departments, requiring them to ensure they had internal controls in place for consultancy spending and to follow existing government guidance for procuring consultants. However, departments often hire a consultancy firm to provide a package of services. Firms may provide consultancy, professional services and contingent labour within the same contract. This makes it difficult to isolate the amount spent and departments sometimes struggle to report in their accounts how they allocate portions of such contracts to consultancy. As a result, government bodies may be under- or over-reporting their consultancy spending. The variability in definition and lack of rigour in reporting consultancy spend may also allow departments to reclassify spending and under-report rather than reduce spending. recommendation The Cabinet Office should update the Committee by July 2026 with data on the past three years of spend on all external resourcing, including consultants, professional services, and contingent labour, to demonstrate reduction in expenditure.

The Cabinet Office has not provided departments with up-to-date guidance on how to procure, learn from and manage consultancy. The Government Commercial Function (GCF) is responsible for the Consultancy Playbook, as well as the related Sourcing Playbook. The Consultancy Playbook offers departments relevant guidance on how to procure, manage and learn from consultants, but it was last updated in 2022. The playbook has many references to the Government Consulting Hub, including its Knowledge Exchange platform, despite this hub closing in 2023. Since 2022, emerging technologies, such as AI, have transformed consultancy and professional services. The Chief Commercial Officer explained that the GCF is in the process of updating the Consultancy Playbook and should publish a new version by Summer 2026. 4 recommendation The Cabinet Office should publish the updated Consultancy Playbook by July 2026. It should incorporate guidance about use of emerging technologies by consultancy providers.

The soon to be released strategic workforce plan has the potential to be a welcome step to support better use of consultants. The Cabinet Office told us that all departments are complying with requests to update their strategic workforce plans, which will enable Cabinet Office to deliver the government wide strategic workforce plan. By properly considering the pipeline of upcoming work, and assessing the organisation’s staff resources and skills, a department should be able to meet its requirements with existing staff, a new permanent staff member or contingent labour, instead of hiring a consultancy. In some cases, a team may be able to rely on resources elsewhere in government instead of going out to market. However, the lack of a whole government workforce strategy makes it very difficult for departments to look beyond their own resources. Cabinet Office is developing a strategic workforce plan for the civil service, which may address these issues. The Cabinet Office stated that the workforce plan will also include further details on departmental spending limits set by HM Treasury. The Cabinet Office said it will publish the plan but has not confirmed when. recommendation The Cabinet Office should commit to publishing the workforce plan by May 2026. The Committee expects the workforce plan to include an assessment of skills gaps that will require external resources and further details on departmental spending limits. 5 1 Government data and spend on the use of external consultants Introduction

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Cabinet Office, from HM Treasury, and from the Department for Energy Security and Net Zero, about government departments’ use of external consultants.1

We questioned whether government has a breakdown of the amount spent on consultancy services in government with individual consultancy firms, separating audit fees from consultancy work. The Chief Commercial Officer explained they have the total annual spend, broken down by department.14 This is not currently broken down by type of service, but the Cabinet Office stated that they could provide these figures as departments are likely to hold this information. The Department questioned the relevance of the request, noting that most audit services are not provided by external firms, and said that the best way to provide full transparency is to look across all categories of expenditure and show that each is reducing.15

We asked about the current processes for improving data quality and reducing labour intensive data checking processes. The Cabinet Office acknowledged that data processes are not yet as good as they need to be, but that it is investing in new technology through the shared services programme. When questioned further on where progress is currently being made, the Cabinet Office explained that departments are at different stages of maturity. Some departments already operate on advanced systems, while others still rely on spreadsheets. The current work across government therefore involves finance and commercial directors ensuring reconciliation controls, as well as leadership and culture change. Over time, as the shared services programme is rolled out, Departments will be expected to move to more integrated systems.16 Definitions and lack of departmental compliance

Inconsistent data prevent departments from understanding which consultants they use, or what skills gaps they repeatedly hire consultants to address. Departmental annual reports use different definitions of what constitutes consultancy spending, which may or may not be based on the Cabinet Office definition of consultancy. Departments also do not always 11 Q 4 12 Q 33 13 C&AG’s Report, para 1.32 14 Q 73 15 Qq 74-75 16 Qq 24-26 8 separate the core department’s spending on consultants from departmental group spending, which includes ALBs, agencies and nondepartmental public bodies.17

We asked the Department why there is no uniform definition for consultancy used across government. The Chief Commercial Officer explained there is a standard definition for consultants across government, which is published in the Consultancy Playbook, and that the differences stem from inconsistent application across departments.18 Some of the confusion around definitions and spend arises from large contracts that combine consultancy and professional services, making it difficult for departments to isolate the spend on consultancy services only.19 The Cabinet Office stated that it expects departments to comply with the set definitions and confirmed that ALBs are subject to the same definitions.20 The Chief Commercial Officer said that the Cabinet Office is bringing Departments together to achieve greater consistency.21

The Department said it plans to ensure compliance by departments with standard definitions through a combination of audit, data and technology improvements, and strengthening its mandate. The Cabinet Office has also established a working group and is seeking advice from the Government Internal Audit Agency to identify where Departments diverge from the definition across government.22 When asked how long it expects to take to strengthen its mandate, the Cabinet Office stated that it issues directions in the annual accounts and will contact any non-compliant departments directly. It has also already reminded Departments of the best practice shared in the Consultancy Playbook, and the definitions it contains, to improve data quality.23 However, the Department could not commit to a timeline.24 Reducing consultancy spend

The Chancellor’s July 2024 speech set targets to cut consultancy spending, including an immediate halt to non-essential services and halving future spend to save £550 million in 2024–25. These goals were reiterated in the 2024 Autumn Budget. Cabinet Office and HM Treasury are jointly monitoring departments’ progress against the savings targets.25 17 C&AG’s Report, para 1.33 18 Q 27 19 Qq 27-28 20 Qq 30, 39 21 Q 29 22 Q 30 23 Qq 27-28 24 Q 31 25 C&AG’s Report, para 1.30 9 In written evidence provided after the session, the Cabinet Office explained that the baseline for achieving £550 million in savings in 2024–25 was calculated using departmental forecasts, submitted through OSCAR in June 2024. This amount totalled £1.5 billion, excluding expenditure related to the NHS, the Devolved Governments, and Local Authorities.26

The Cabinet Office told us that central spending controls over consultancy spending were withdrawn in 2023 to improve the pace of decision-making in government.27 It has since encouraged departments to develop their own internal controls.28 When asked how government ensures these controls are applied consistently across government, the Cabinet Office explained that departments have demonstrated varying levels of control and that it is seeking advice from the Government Internal Audit Agency (GIAA) on how best to achieve consistency and to provide assurance that spending controls are appropriate. The Cabinet Office stated that it will also receive feedback from the GIAA on how to improve controls within ALBs.29 The Department for Energy Security and Net Zero told us about its spending controls, which require approval for consultancy contracts over £100,000 within three months, with further controls at £600,000 or for longer than nine months. For contracts over £10 million, a commercial assurance board reviews proposals against value-for-money tests. Contingent labour is managed separately through financial processes using CCS contracts.30

The Cabinet Office told us that government is checking and validating the data it receives from departments. This includes HM Treasury working with departments to ensure the data reflects actual consultancy spend.31 The Cabinet Office stated that the data indicates that it is on track to meet the spending reduction targets. The Cabinet Office is confident in its data, but said it would prefer receiving external audit.32 In written evidence provided after the session, the Cabinet Office said that government has met the savings target of £550 million in 2024–25. The Cabinet Office, together with HM Treasury, have concluded this based on forecasts on OSCAR and Departments’ Spending Review returns.33

We asked what assurance the Cabinet Office and HM Treasury can give taxpayers that any savings will reflect actual reductions in spend, rather than shifting spend to other categories, such as contingent labour. The Cabinet Office explained that it is monitoring all categories of external 26 Letter from the Cabinet Office, 5 January 2026 27 Q 36 28 C&AG’s Report, para 1.29 29 Qq 35-39 30 Qq 39-41 31 Qq 32, 40 32 Q 32 33 Letter from the Cabinet Office, 5 January 2026 10 resourcing (consultancy, contingent labour and professional services) to see that cost reduction is happening across the board.34 In written evidence provided after the session, the Cabinet Office indicated that analysis of departmental accounts shows spending is forecast to reduce across all three categories, with a reduction of over £1.17 billion in real terms by 2030. In addition, during the Spending Review 2025, HM Treasury set individual limits on consultancy spending for each department who have all agreed plans to stay within these limits. The Cabinet Office stated that further details will be published in the Civil Service Strategic Workforce Plan.35 34 Q 33 35 Letter from the Cabinet Office, 5 January 2026 11 2 Government guidance and planning for the use of external consultants Out of date guidance

In May 2021, the government established the Government Consulting Hub (GCH) to improve its use of consultants and provide an in-house alternative. It employed around 70 to 100 staff and charged costs to departments using its services. The GCH published the Consultancy Playbook which offers departments relevant guidance on how to procure, manage and learn from consultants. The Cabinet Office closed the GCH on 31 January 2023 as part of efforts to reduce the civil service headcount. Following its closure, in-house consulting services and the knowledge- sharing platform were discontinued. Since GCH’s closure, the Government Commercial Function (GCF) has been responsible for the Consultancy Playbook, as well as the related Sourcing Playbook. The Consultancy Playbook was last updated in 2022.36

The Cabinet Office told us that The Consultancy Playbook sets out lessons learned on getting the best value from consultancy, including knowledge transfer and sharing best practice across departments. This may particularly apply to innovative digital and technology projects where a department does not have the necessary skills internally to undertake a transformation programme to increase efficiency.

However, the Playbook was last updated in 2022 and contains many references to the Government Consulting Hub (GCH), including its Knowledge Exchange platform, despite this hub no longer existing. We asked why the Consultancy Playbook has not yet been reissued despite it being outdated. The Chief Commercial Officer explained that the GCF is in the process of updating the Playbook and that the revised Playbook will be reissued by the summer of 2026.37 We also asked how the Cabinet Office will ensure departmental compliance with the Playbook. The Chief Commercial Officer stated that contracts up to £100,000 require formal governance 36 C&AG’s Report, paras 1.14, 1.19 and 1.21 37 Qq 44, 46 12 and sign-off by the accounting officer, while those over £600,000 need Ministerial approval. The Cabinet Office said that the Consultancy Playbook should be seen as the standard for defining requirements, going to market and contracting, and CCS should be the default route. The Cabinet Office also explained that spend on consultants is managed through each department’s commercial director, and the Cabinet Office monitors progress against departmental targets regularly through the commercial function.38

We also asked the Cabinet Office about the Government Consulting Hub and its usefulness before it was closed. The Cabinet Office said that the Hub was open just under two years and demonstrated that it was possible to provide expert advice to departments in a cost-effective way. However, it was also difficult for a small organisation to compete with the knowledge and skills of large private sector consultancy firms. Given the limited time the GCH was functioning, its overall impact is difficult to assess. The Cabinet Office told us that some of the services of the GCH have been transferred to other parts of Government, such as the advisory service provided by the Crown Commercial Service (Prosper).39

The Cabinet Office stated that it incorporates and shares lessons from international best practice through both functions, for example by attending the Global Government Forum. We asked how government measures the effectiveness of disseminating this information. The Cabinet Office explained that it is often applied within functions and that guidance is occasionally updated to reflect international best practice, such as with the digital work they are currently doing across government. When asked who is responsible for ensuring departments follow best practice guidance, the Cabinet Office stated that while it is the Cabinet Office’s responsibility to provide best practice, implementing it is the individual departments’ responsibility.40 Strategic workforce planning

Workforce planning ensures that organisations have the right level of staff for their needs, with the necessary skills and capabilities. Getting workforce planning right helps organisations carry out their operations effectively so that they can achieve their objectives and priorities. A lack of robust understanding of future need and not having the right information and data to understand workforce skills and any gaps can undermine strategic planning. Without this planning, departments are often not aware of what skills are available within their own organisation, which may lead to relying on consultants too much, or unnecessarily.41 38 Q 48 39 Qq 45, 47, 53 40 Qq 67-68, 70 41 C&AG’s Report, para 2.3 13

Written evidence we received highlighted that government has faced long-standing challenges in developing and retaining core skills, and recommends not only building up civil service capability and capacity where skills are repeatedly needed but also providing training in the effective use of consultants.42 The Cabinet Office told us that it plans to shift resources and capacity from back-office functions to frontline delivery, meaning the Cabinet Office intends to make greater use of civil service capacity and capability. These plans are presented alongside the spending reduction targets.43

The Cabinet Office told us that, for the first time, government is developing multi-year strategic workforce plans for the civil service. The Cabinet Office has directed departments to provide five-year forecasts outlining the skills and capacity required to develop their workforces, including those of arm’s-length bodies. The forecasts include both consultancy and contingent labour.44 The Department for Energy Security and Net Zero told us that its strategic workforce plan is aligned with Cabinet Office guidance and aims to build key professional skills and capabilities. The workforce plan balances building core internal skills with selectively procuring external expertise when it offers better value for money. The Department for Energy Security and Net Zero told us that it works together with the Cabinet Office’s complex transactions team, which in some cases has replaced the need to use external consultants.45

We asked the Cabinet Office when it expects to publish the new strategic workforce plan. It told us that there is no confirmed publication date at present, but it hoped the government would be able to release the plan within four months of when we took evidence (which was on 15 December 2025). The Cabinet Office told us that the strategic workforce plan will set out how government will tackle skills gaps across government and that the biggest gaps are in digital and technology skills, and in project delivery and project management. The Cabinet Office expects that consultants can add value in these areas.46 The Cabinet Office also stated that the workforce plan will contain further details on departmental spending limits set by HM Treasury.47 When asked whether it also expects to use AI to increase productivity, the Cabinet Office stated that it does and is providing training on AI to the civil service. The Cabinet Office said it would like to consider whether AI can play a role in shaping the consultancy sphere but does not expect AI to fully replace consultancy services.48 42 Professor Andrew Sturdy (GDA0010) 43 Q 2 44 Q 2 45 Qq 10, 42 46 Qq 54-55 47 Letter from the Cabinet Office, 5 January 2026 48 Qq 59, 63, 69 14