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House of Commons Hansard
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Government Efficiency and Reform
23 March 2015
Volume 594

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With permission, I would like to make a statement on Government savings from efficiency and reform.

Since May 2010, my Department has led a cross-Government programme, working closely with the Treasury, to ensure that taxpayers’ money is focused on front-line services. With rising public expectations for high-quality services, coupled with the huge budget deficit we inherited in 2010, the coalition faced a huge challenge to do more—and better—for less. Over this Parliament, we have secured unprecedented levels of savings, delivering for successive years £3.75 billion, £5.5 billion, and £10 billion, compared with spending in Labour’s last year. For 2013-14, we saved £14.3 billion, against a 2009-10 baseline.

That is testament to the hard work of civil servants across Whitehall and the strong support of my right hon. Friends the Chancellor and the Chief Secretary and other Treasury colleagues. Last July, the Comptroller and Auditor General recognised the pace and priority we had injected into the efficiency agenda. We started this with the introduction of tight spending controls just days after we entered government, and these controls have delivered the largest share of savings. Since 2010, we have negotiated billions of pounds off expensive legacy contracts and cut central Government spending on consultants and interim workers by over half. Like for like, the civil service is 21% smaller. I publish today our annual “State of the Estate” report, which shows that we have exited in aggregate more than one building every day since May 2010, reducing the total size of our estate by 20%.

As part of our long-term economic plan, our aim was to save £20 billion from central Government efficiency and reform for the last year of this Parliament, including by reducing losses to the public purse through fraud, error and uncollected debt. I can tell the House that we are on course to meet and indeed exceed this target. Up to January 2015, we have already identified £11 billion of efficiency and reform savings—over a third up on the same point last year—with the largest savings coming in the final quarter every year so far. With fraud, error and debt benefits still to be counted, we are well on the way to the £20 billion target. The full year’s savings will need to be confirmed by independent audit, and, as in previous years, we will invite the National Audit Office to undertake this.

We have made significant progress in transforming government and cutting costs, but this is only the beginning. At the autumn statement, we published, with the Treasury, a document entitled “Efficiency and reform in the next Parliament”, which set out our intention to save a further £10 billion for 2017-18 and £15 billion to £20 billion for 2019-20 compared with the current year. We now set out our next steps. We will implement a new approach to land and property, based on central ownership and management of assets and Departments paying market-level rents. This will provide greater incentives for Departments to rationalise space, as well as releasing land and property for productive use—for example, for up to 150,000 homes. To do this successfully will mean working even more closely with local government, including through our One Public Estate programme, which now operates across 32 local authorities.

The UK is now a world leader in digital government, and we will work with local government to take this transformative approach into the wider public sector. Digital services improve the citizen experience, while being significantly cheaper to provide. We will continue to reduce the cost of technology in government, as extravagantly expensive legacy IT contracts fall in over the coming years. To that end, I have signed an innovative deal to create a joint venture for data hosting that will save up to £100 million.

All of this work has been driven by an increasingly strong corporate centre, supporting and challenging Departments to work together to maximise efficiencies and improve services. We are strengthening central leadership across 10 key cross- departmental functions, including commercial, digital and technology, project management, legal and human resources. Later this week, we will publish our functional leadership model.

The chief executive of the civil service will lead the build-out of this strengthened model, under which the Treasury and the Cabinet Office will work together as the corporate centre to support Departments to continue their programme of reform and to deliver future spending consolidations. Spending controls will remain in place and evolve in time to strong functional standards, while Departments will need to own more of the transformation agenda. As part of this, we are recruiting 25 commercial directors across government and launching a new project leadership programme at Cranfield university. This programme will help to build project management skills in parallel to our successful major projects leadership academy.

I am grateful for the collaborative way in which the shadow Cabinet Office Minister has approached this important programme, which continues that of her predecessor, the hon. Member for Barnsley East (Michael Dugher), and also for the support of the Chair of the Public Accounts Committee and its members, who have seen the point of what we are seeking to do and given significant support to it.

We have made substantial and long-overdue improvements to the way government operates, but much more lies ahead. We have shown that we can drive down the cost of government while improving the quality of services. We have shown that we can get more and better for less, and that we have a long-term plan to deliver it. I commend the statement to the House.

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I thank the right hon. Gentleman for advance sight of his statement. His statement today has a little bit more content than his empty statement of two weeks ago, but only a little bit more. One has to wonder again why it is that I keep being called to this House for his statements. Is it perhaps because he wants to continue his very long career of public office in the other place after May and is using Hansard to scrub up his CV? Or is it, more seriously, to distract me and this place from the disarray that is now besetting the Conservative party’s election campaign? Perhaps his and his colleagues’ time would have been better spent today deploring the despicable actions of the Tory candidate for Dudley North or by explaining to the public where the axe will fall, following last week’s confirmation of the Chancellor’s extreme spending cuts in the next Parliament.

The Minister has carried out his job in government of identifying efficiency savings with zeal and his work to reduce the cost of government bureaucracy is welcome. While I might disagree with him on occasion, I do not question his motives to reduce costs. I also commend the civil service for its work on the shared agenda.

The Minister for the Cabinet Office thanked the Chancellor for his support on this agenda, but I have to say to the right hon. Gentleman that it really should be the other way around. It is clear from the Office for Budget Responsibility and the Institute for Fiscal Studies that after the Chancellor’s Budget last week, unprotected Departments will face huge and colossal cuts to meet his spending plans and unfunded tax cuts. With all due respect to the Minister, no amount of back-office efficiencies will save front-line police, armed forces or social care services, or working families from the Government’s secret VAT plans. Only so much can be got from efficiency savings and even with his savings in this Parliament, the Government are still only halfway to their own deficit reduction targets. That is why, even with his savings, public services would face even bigger cuts in the next Parliament than they have in this one. Opposition Members have a better plan. We will balance the books in a fair way, ensuring a recovery for the many, not just for the privileged few.

We broadly support the approach to land and property that the Minister has outlined. On digital government, I am pleased to see that he has been reading our independent review on this topic. Just weeks ago, he was saying that the Government Digital Service could not work with councils to improve services and save money. Now he is championing this, and I welcome his conversion today. We agree that stronger functional skills in the civil service are important, and we will examine in detail the Minister’s plans for new commercial directors and a new project leadership programme.

Any new Government will have to think about how we can provide better and more responsive public services with less, but with just a few weeks to go, the country faces a clear choice at the election. No amount of spinning on efficiency savings will hide the Tories’ true agenda of cutting front-line public services and hitting families with a rise in VAT.

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I am very sorry that the hon. Lady has been so mean-minded about this. She has cast some unworthy aspersions on the reasons for my statement. The historic purpose of the House is to vote Supply and scrutinise the way in which Governments spend their money. I am astonished that, when I come to the House to explain how this Government have delivered savings running into tens of billions of pounds, and have protected front-line services by taking out the cost of government, the hon. Lady should trivialise something that is at the core of the historic mission of the House of Commons. She has done no honour to her position.

The hon. Lady should reflect on the fact that the Office for National Statistics, which began its series on public sector productivity in 1997, has shown that during the years of the Labour Government, up to 2010, productivity in that sector remained flat, while productivity in the nearest analogue, the private services sector, rose by nearly 30%. She should reflect on the difference that could have been made to the deficit of historic proportions that her party bequeathed to the coalition.

The hon. Lady talked about the future, and about the contribution that could be made by what she described as back-office efficiencies. We are talking about much more than back-office efficiencies; we are talking about the introduction of very different and improved ways of delivering public services. That can be done, and we have shown that it can be done. The public’s expectations in terms of the quality of public services are, properly, rising; the demand in terms of the quantity of public services is also rising as people—happily—live longer; and the amount of money that is available to support those public services is less, thanks to the deficit that we inherited.

We therefore must do more, and do it better, with less money. We have shown over the last five years that that can be done, and we have also shown that it needs to be done again. There should never be an end to efficiencies. The most efficient organisations in the world always look for further efficiency savings every year, and that is what this Government, under a Conservative leadership, will do in the next Parliament.

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Why has the rigorous challenge that the coalition Government have had to make to the way in which money is spent in many Departments not been applied to the criminal justice system? Having a larger prison population than nearly all the other European countries is not necessarily the most cost-effective way of keeping people safe. Will the Minister look at the American states that are trying to reverse that trend in order to spend the taxpayer’s dollar in the way that is most likely to keep the taxpayer safe?

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Let me say to my right hon. Friend, as we both enter our last week in the House of Commons, that, as he knows, the reason our prison population is so large is the rate of reoffending. I know that he will support, as I do, the rehabilitation revolution, led by our right hon. Friend the Lord Chancellor, which is committed to a radical reduction in the rate of reoffending that is the sole reason why our prison population is so much higher than those of comparable countries.

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The Treasury’s problems are, above all, about income, not expenditure. There is a gap of £120 billion a year between the tax that should be paid and the tax that is actually paid. However, the Government have presided over tens of thousands of job cuts in Her Majesty’s Revenue and Customs, where senior staff collect 20 times their own salaries and junior staff 10 times theirs. Are the Government not shooting themselves in the foot?

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The hon. Gentleman is completely mistaken if he believes that there is a direct linear relationship between the number of HMRC officials and the amount of tax that is being collected. There is absolutely no evidence of that. The size of HMRC, in terms of headcount, was falling before the 2010 election, and the amount of tax being collected has risen. We can do things differently and we can do things better—we have already shown that that is the case—but if the hon. Gentleman thinks that the only problem with the public finances is that we are not taxing enough and not raising enough taxes, I am afraid that he and I differ. I think that we must cut our costs first, which is what we are doing and will continue to do.

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May I congratulate my right hon. Friend and parliamentary neighbour, who has done a superb job in driving these savings and thereby ensuring front-line services can be protected? He has done a fine job behind the scenes and will be much missed from this place, but I hope he will be able to continue in some way in this important public service. Does he agree that the key part of his statement was that these savings have been achieved as a result of a strong corporate centre—a central drive for efficiency—and is it not the case that that centre will have to be strengthened further if significant additional savings are to be achieved?

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I am grateful for my right hon. Friend’s kind comments, and I also hugely appreciate what he and the right hon. Member for Wentworth and Dearne (John Healey) have done in leading the work of GovernUp, which has made the case very powerfully, as indeed has the Public Accounts Committee, for a strong corporate centre in Government that can drive these sorts of changes. When we examined this, we found that, in almost all cross-government functions, the historical position of the British Government is to have an extraordinarily weak centre. That is part of the reason why it has been proved in the past to be so difficult to drive these sorts of efficiency savings, but we are changing that.

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This was a swansong statement, if I may say so, which largely looked backwards rather than forwards. Nevertheless, what the Minister has announced today about stronger central leadership within Whitehall, clearer professional standards right across the Departments and more power to the elbow of the new chief executive of the civil service are welcome on all sides. The right hon. Gentleman over five years has made something of a start in ensuring we get better and more for less, but his statement this afternoon is clearly passing the baton for the next five years to this side of the House and my hon. Friend the Member for Manchester Central (Lucy Powell) on our Front Bench.

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I agree with every part of what the right hon. Gentleman says except the last part, but I am grateful for what he says and the work he has done on this issue. He is a very experienced former Minister himself and he has seen very vividly how we can do these things better. We have made a start but there is much, much more to be done.

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As my right hon. Friend has stated, public sector productivity flatlined between 1997 and 2010, but what assessment has he made of improvements in civil service productivity since 2010?

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Productivity has improved dramatically. Like for like, the civil service is 21% smaller, yet I do not think anyone would say the civil service is doing less. It is not; if anything, in some places it is doing more. Productivity has markedly improved and I pay a very warm and genuine tribute to those hundreds of thousands of civil servants who do a fantastic job, often in very difficult circumstances. All of us in this House should be warm in our tribute to them.

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I agree with what the Minister has said about extending digitisation in government, but what is he doing to ensure millions of people are not excluded from the process of digitisation?

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That is a very good point. When the now Baroness Lane-Fox reported to me at the very beginning of this Parliament when she introduced the concept, which we warmly adopted, of digital by default—if a service can be delivered online, it should be delivered only online—she made the point, which again we strongly supported, that there must always be an assisted digital option, which ideally can be used to help people who are currently digitally excluded to become full participants in the online world, so, for example, older people can more easily communicate with distant family members. There is a big programme here that we are strongly promoting.

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I am so pleased to hear that we are protecting public services while cutting down the cost of government, but does my right hon. Friend share my concern that we have been prevented from delivering one of the bigger cuts—namely, cutting the number of Members of Parliament by delivering our proposed boundary changes? Does he agree that although the Opposition refer to fairer cuts, they give no indication of what those cuts would be, and that the public therefore cannot trust anything they have to say?

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Aneurin Bevan once said:

“Why look into the crystal ball when you can read the book?”

The last Government did nothing to drive the sort of efficiency savings that we have achieved, so when it comes to making cuts in public spending, we can only fear that they would cut the services, whereas we are cutting the costs, which is the better way to go.

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Why has there been no reform of the continuing parliamentary scandals of cash for access to politicians and cash to buy peerages? Why has there been no brake on the revolving door that allows retiring Ministers to prostitute their insider knowledge to the highest bidder, and why are there no controls over lobbyists who are still free to buy influence and privilege in this House? Is not the Minister ashamed that, after his Government have been in office for five years, the reputation of politics remains firmly in the gutter?

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I cannot imagine a greater contribution to that reputation than the hon. Gentleman going on about it all the time. As he above all people ought to know, most people come into this particular form of public service, known as politics, for high reasons and with high motivation, and they do their job in an honourable way. He might just occasionally shrug off that carapace of cynicism and give due credit to the public servants in this House as well as to those outside it.

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My right hon. Friend can leave the House knowing that he has done an outstanding job in reforming our public services, and it would have been nice to hear a little more humble pie from the hon. Member for Manchester Central (Lucy Powell). On the question of getting better digital coverage across our country, does he agree that the public estate should be made more available for things such as mobile phone masts if we are to have a 21st-century digital economy? What more can be done to encourage the public sector estate to make up for the absence of support from the private sector estate in getting greater digital coverage?

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My hon. Friend makes a really good point, and there is much more that we can do. For example, we will make available public sector Government-owned land and buildings for the siting of mobile phone masts, which will be beneficial in lots of ways. It will provide locations for the masts as well as income for the Government. We have now also published the second iteration of our map of the publicly funded digital infrastructure. This includes the many thousands of miles of fibre that have been paid for by the taxpayer but which are massively underused and under-exploited. If that network can be mobilised to support the roll-out of mobile coverage and rural broadband, it could accelerate the programme to which my hon. Friend and I are both deeply committed.

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It is three years to the day since the Minister took up my invitation to visit Ark Data Centres in Corsham with me, and I am delighted to hear that the taxpayer stands to benefit to the tune of £100 million from the Crown hosting joint venture with the company. Does he agree, however, that the benefits of digital services extend much further than that, in that they allow a total redesign of the processes that underpin our public services?

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My hon. Friend is completely right. The digitisation of services is sometimes seen as just a pretty front end on a website, but this goes much deeper. It is about a fundamental redesign of the way in which services are delivered, with the processes being designed and built around the needs of the citizen instead of around the convenience of the Government, which has far too often been the case in the past.

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As this is probably my right hon. Friend’s last statement in the House, may I thank him for the numerous visits he has made to Pendle over the past few years and for recently meeting Training 2000 in the Cabinet Office to discuss its plans to set up a cyber-security institute in my constituency? Will he say more about public service mutuals, the increase in their number under this Government and how they can benefit productivity?

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I am grateful to my hon. Friend. The public service mutuals programme is important. There are now more than 100 of them, whereas there were fewer than 10 when the coalition Government were formed. More than 35,000 members of staff have joined public service mutuals, which are delivering public services to the value of more than £1.5 billion. Most of them choose to be not-for-profit, and have seen an extraordinary improvement in productivity by bringing together: entrepreneurial leadership, of which there is much more in the public sector than is generally thought; staff who are liberated from bureaucratic constraints; hard-edged commercial discipline; and the public service ethos. Those four factors, brought together, are an extraordinarily powerful driver of improved productivity and value.

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In my right hon. Friend’s swansong—I commend him for it and for his five years’ work, saving money for the public purse—I wonder whether I might pick up on one specific issue of government efficiency reform, which is the trade unions training fund. It was set up a dozen or so years ago by the previous Government; some £10 million to £12 million was given to trade unions’ training and, lo and behold, £12 million came back as a bung to the Labour party. Will he update the House on what has happened to that?

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My right hon. Friend should not assume that this is my swansong. Although it is my last week in the House of Commons, I am answering oral questions on Wednesday and I am looking forward to that—[Interruption.] I am looking forward to engaging with the hon. Member for Manchester Central (Lucy Powell) on that occasion. It is very nice to see my right hon. Friend the Chief Secretary to the Treasury here, as he has been my comrade in arms as we have driven forward these efficiency savings over that period. My right hon. Friend the Member for South Leicestershire (Mr Robathan) will know that I made a statement, either last week or the week before, about the reform of trade unions within central Government. We have cut the cost of the subsidies to trade unions significantly over that time, bringing into these things a proper sense of proportion.

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I thank my right hon. Friend for his statement and for the work he has done, saving taxpayers billions of pounds. Does he agree that by merging Departments even greater efficiencies and savings could be made?

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I understand what my hon. Friend says. The studies that have been done on machinery of government changes do not always indicate that they pay for themselves, but there are undoubtedly ways in which we can organise government to yield—in addition to what we have already done—significant improvements.

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I congratulate my right hon. Friend on his statement. Many of us recall my hon. Friend the Member for Cannock Chase (Mr Burley) making his suggestions to the House at the beginning of this Parliament and being vilified by some Opposition Members. May I say how resolutely and quietly the Minister has gone about this work? Not only has he made the savings, but he has taken the civil service with him to improve the public services of this country.

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I am grateful to my hon. Friend. This has been a long process and it is fair to say that the further we have gone, we have discovered a deep appetite for reform and change within the civil service, particularly among its younger members, who often get frustrated. They are the people who complain most about bureaucracy, and they have welcomed the fact that Ministers have taken a real interest in driving out bureaucracy and speeding things up.