Source · Select Committees · Public Accounts Committee
Recommendation 10
10
‘Optimism bias’ refers to the tendency for project appraisers to be impractical and unrealistic, which...
Conclusion
‘Optimism bias’ refers to the tendency for project appraisers to be impractical and unrealistic, which can lead to a failure to deliver, delays, poor service quality or a need for later funding injections.24 The prevalence of optimism bias in government has been highlighted before. For example, the Shared Service centres initiative fell far short of the planned savings and failed to achieve value for money and, more recently, we reported on the Ministry of Defence’s Equipment Plan for 2019–2029 including unrealistic expectations for £4.7 billion of efficiency savings, a figure for which it had no plans.25
Government Response
Not Addressed
HM Government
Not Addressed
3. PAC conclusion: Previous efficiency programmes have over-promised and under- delivered. 3: PAC recommendation: HM Treasury need to ensure plans are subject to adequate challenge, testing the realism of departments’ expected savings, and considering the use of pilots where appropriate. 3.1 The government agrees with the Committee’s recommendation. Recommendation implemented 3.2 HM Treasury recognises the need to underpin the planned efficiencies and savings agreed through SR21 with departmental plans for delivery. SR21 confirmed savings of 5% against day-to-day central departmental budgets in 2024-25 from the Efficiency and Savings exercise ahead of Spending Review 21. The Chief Secretary to the Treasury led a process of engagement in summer 2021 to test departmental savings and efficiency proposals to test for deliverability. This process also involved the Government Functions reviewing relevant efficiency proposals to ensure they were realistic and deliverable. 3.3 HM Treasury tests, and reviews business cases and departmental benefits realisation plans in practice through the spending control process led by HM Treasury spending teams. Spending teams use gated approvals such as Major Project Review Groups (MPRG) or Treasury Approval Panels (TAPs) to review departmental projects or programmes to test whether they are suitably designed to deliver the desired outcomes. HM Treasury also works closely with the Cabinet Office to undertake performance stocktakes, jointly reviewing policy and financial performance. Spending teams’ scrutiny is supported by enhanced financial reporting and management information (such as Finance Board Packs) developed by the Government Finance Function and delivered by departmental finance teams. 3.4 HM Treasury and Cabinet Office are also working with departments to develop Outcome Delivery Plans (ODPs) covering 2022-25, that will set out how each UK government department will use its resources to work towards the delivery of the priority outcome agreed at SR21. ODPs will test the deliverability of all of the government’s spending plans, including plans for efficiency and savings. They will be published after the start of the next financial year on gov.uk. 3.5 HM Treasury plans to collaborate with Government Functions to share best practices across the Civil Service. The Government Functions will be encouraged to share departmental best practices to generate further opportunities for efficiencies across government based on these successful pilots in departments.