Source · Select Committees · Public Accounts Committee
Recommendation 3
3
The Plan’s affordability relies on the Department achieving a number of different types of savings,...
Conclusion
The Plan’s affordability relies on the Department achieving a number of different types of savings, including £7 billion of ‘cost reductions’ by 2031. The Top Level Budgets (TLBs) do not yet have plans to achieve £4 billion of the ‘cost reductions’, which is almost as much as the savings expected from capabilities cut as a result of the Integrated Review. Two-thirds of this £4 billion needs to be achieved by March 2025 even though contractual commitments limit the flexibility to make savings in the short term. The Department is relying on a “sense of cost control throughout the Department” to achieve these cuts. Higher inflation means that any decisions to deliberately delay projects would be costly, and the Department told us that in any case it wants the capabilities to be delivered. Without a realistic plan to achieve savings, the Department risks remaining caught in a trap of short-term, affordability-driven decisions. Recommendation: The Department should urgently set TLBs targets to develop and implement concrete plans to achieve the cost reductions allocated to them in the Plan.
Government Response
Not Addressed
HM Government
Not Addressed
3.1 The government agrees with the Committee’s recommendation. Recommendation implemented 3.2 This recommendation has been implemented and TLBs have targets and plans to achieve these savings. 3.3 As outlined in the Equipment Plan 2021-2031 (EP21), the department’s top level budget holders (TLBs) have planned £7 billion of cost reductions over ten years. The department closely monitors and scrutinises Top Level Budget (TLB) planned cost reductions in the annual budget cycle. If there are concerns about the deliverability of these savings the department would work with TLBs to identify remedial action. 3.4 As explained in EP21, the department considers that the savings are achievable. This was demonstrated in financial year 2020-21 when the department held spending to within budget without the need for a centrally directed savings exercise. 3.5 Further information on TLB cost reductions will be included in the upcoming Equipment Plan 2022 due to be published in Autumn 2022.