Cost reduction in central government : summary of progress, eightieth report of session 2010-12, report, together with formal minutes, oral and written evidence

This report examines recent progress made with cost reduction by central government departments and planning for the current spending review period from 2010 to 2015.

After the 2010 election, the incoming government reduced departments' budgets for the 2010-11 financial year by a total of GBP6 billion.

Departments successfully lived within these reduced budgets in 2010-11 and reduced spending within their control by 2.3% in real terms compared to 2009-10.

Most departments, however, now face a more significant challenge: to reduce spending by a further 19% over the next four years with the prospect of further savings being required thereafter.

The bulk of the spending reductions must be delivered by individual spending departments and their arm's length bodies.

Departmental financial planning has not yet made it clear how these cost reductions will be achieved.

Departments lack clear information on costs which, when coupled with the difficulty of linking inputs with outputs, raises the risk that future spending cuts may not maximise efficiency in delivery and may have a greater than intended impact on frontline services. There is an essential role for the central departments to lead a more structured cost reduction programme across government so that spending is reduced, as far as possible, by improving value for money, not cutting services.

The Treasury and Cabinet Office need to set out exactly what they expect of departments in planning for, and reporting on, cost reductions.

Accounting officers must be held accountable for the successes and failures of their departments not just to reduce spending in absolute terms, but to deliver more with less