Recommendation 3

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.