Source · Select Committees · Public Accounts Committee
Recommendation 8
8
We asked the Treasury how it will ensure efficiency plans consider the risk of ‘cost...
Conclusion
We asked the Treasury how it will ensure efficiency plans consider the risk of ‘cost shunting’, where money saved in one area increases costs in another area, and whether it would be asking departments to identify where knock-on impacts could occur. The Treasury said that the Spending Review process will encourage different parts of government to come together and will require departments to have good understanding of where investment will be required and where benefits will be seen.18 The Treasury also said that guidance helps establish potential impacts across government. It highlighted 11 Q 54 12 Q 54, Boardman Review of Government COVID-19 Procurement final report (publishing.service.gov.uk) 8 December 2020, page 2 13 Qq. 55, 57 14 Q 57 15 C&AG’s Report, para 11 & 15 16 C&AG’s Report, para 17 17 C&AG’s Report, para 14 18 Q 60 10 Efficiency in government the New Burdens Doctrine, which requires departments to set out any consequences of planned changes to local government in order to provide the resources needed, as an example.19 Additionally, we heard that the Treasury’s ‘Managing Public Money’ guidance sets out departmental Accounting Officers responsibility to constantly assess the impact of the delivery of savings, efficiencies and transformation programmes for the exchequer as a whole.20 We asked the Treasury whether these impact assessments should be made publicly available to the taxpayer, and whether it is confident that they are being done well enough. The Treasury agreed that they should be made visible to the taxpayer, but that it could not be certain impact assessments are done properly for every policy.21
Government Response
Not Addressed
HM Government
Not Addressed
2. PAC conclusion: Past experience shows that attempts to improve efficiency can inadvertently reduce the quality of services or increase costs elsewhere – what this Committee has called cost shunting. 2: PAC recommendation: HM Treasury should ensure that, in their efficiency plans, departments consider what the potential impact might be on service users, and that data around user behaviour and sentiment is tracked as programmes are implemented. 2.1 The government agrees with the Committee’s recommendation. Recommendation implemented 2.2 HM Treasury published at Spending Review 2021 (SR21) an updated set of Priority Outcomes and Metrics. The outcomes capture the real-world impacts for public service users that departments have committed to achieve with their SR21 settlements. Agreed metrics are being used to track these impacts and include metrics that measure user sentiment with public services. Departments are required to report on their progress against these metrics, which enables Ministers and officials to identify outcomes at risk of not being achieved and take prompt action to improve performance. 2.3 Treasury guidance also requires departments to consider the impact of their plans on the wider economy and service users. For example, the Green Book (2.3) requires departments to appraise social value, also known as public value, based on welfare economics principles and ideas and concerns overall social welfare efficiency, not simply economic market efficiency. Therefore, social or public value includes all significant costs and benefits that affect the welfare and well-being of the population (eg, carbon impacts), not just market effects. 2.4 The Green Book (2.12) also guides users to run stakeholder workshops to consider the longlist analysis and selection of the shortlist, including key experts and stakeholders. This method brings together the results of research, advice of experts, and knowledge of stakeholders 2.5 In addition, the Magenta Book (1.1) instructs users to include an evaluation that is useful, credible, robust, proportionate and tailored to the needs of various stakeholders, such as decision-makers, users, implementers and the public. The outputs should be usable and valuable by responding to potential users' needs. 2.6 And in its recent Efficiency and Savings exercise, HM Treasury required departments to demonstrate that their savings and efficiencies proposals were credible and deliverable. Starting before the formal launch of the Spending Review, HM Treasury commissioned departments to identify efficiencies and savings in line with Green Book principles. The proposals were then reviewed, where appropriate, by the Government functions. 2.7 The Chief Secretary to the Treasury led a process of engagement in summer 2021 to test departmental savings and efficiency proposals to test whether proposals were deliverable. This process also involved the Government Functions reviewing relevant efficiency proposals to ensure they were realistic and deliverable. These sessions agreed steps for departments, Government Functions and HM Treasury to further develop plans before being agreed at the Spending Review.