House Of Commons Committee Of Public Accounts Cabinet Office Iimproving Government Procurement And The Impact Government S Ict Savings Initiatives Hc 137

Central government spent a total of around £45 billion on buying goods and services in 2011-12, including an estimated £6.9 billion on ICT. Since 2010, the government has introduced a range of procurement reforms designed to save money. These include centralising the procurement of goods and services bought by all departments, such as energy and travel. All ICT spending over £5million must be approved by the Cabinet Office, and a programme to develop ICT infrastructure which can be shared across government organisations has been developed. These reforms are beginning to have an impact: the proportion of spending that goes through central contracts has increased steadily; the ICT initiatives have resulted in some savings; and there are signs that departments are starting to think more intelligently about why and how they use ICT. But the accountability arrangements for centralised procurement remain a barrier; the centre manages the contracts yet departments remain liable for their own spending decisions so they are reluctant to cede authority to the centre. Management information on spending and savings is incomplete, so departments do not always trust the figures on savings claimed. These gaps in accountability and data make it harder to make the case for procurement across central government and in the wider public sector to be centralised. The commitment to localism seems to be at odds with buying through central contracts, and government's desire to give more government business to small firms does not appear to have changed the way large procurements are managed.

The Whole of Government Accounts for 2011-12 presents the combined financial activities of some 3,000 organisations. It provides vital data on which Government needs to act. Key issues have been identified, such as the £19.4 billion liability for clinical negligence claims. But it is frustrating to see other issues seemingly ignored in long-term policy making and spending decisions. In one year, the public sector was defrauded of over £20 billion and the tax gap rose to £35 billion. The financial liabilities for dealing with nuclear waste also keep growing. There is room for improvement in the document itself and how it is used. Users find it hard to understand, for example, why the Government debt and deficit highlighted in the WGA differ from those reported in the ONS's National Accounts. Also, by changing definitions in its commentary published alongside the WGA, the Treasury makes it difficult to track changes over time. The Treasury's introduction in the commentary of a new concept of so-called 'direct' expenditure leaves out key costs such as the interest paid on the National Debt. The publicly owned and controlled bodies - such as Network Rail and the taxpayer owned banks - are still being excluded, in defiance of normal accounting rules. The usefulness of the WGA is also being limited by the length of time it takes to produce the document and by poor quality data from some of the bodies. The accounts have again been qualified over the completeness, timeliness and accuracy of the information supplied for schools and academies

Police forces pay widely varying prices for very similar items, which means money is being wasted. The price paid for such basic items as standard-issue boots can vary from £25 to £114, or £14 to £43 for handcuffs. This is even the case where items are identical. It cannot be right that prices paid for the same type of high-visibility jacket varied by as much as 33%. With central funding being cut, police forces must ensure they get best value for money from procurement so that they can focus resources on fighting crime. Forces can make big savings through bulk-buying of items, but have been unable to agree on the most simple things, like how many pockets they should have on their uniforms. The Department cannot persuade enough individual forces to cooperate with its attempts to introduce more centralised procurement, in part because forces are sceptical about the commercial competence of procurement officers working at the centre. National contracts with suppliers are not used by enough forces and do not cover many basic goods and services. Forces' use of the new, online police procurement 'hub' is also woefully below the Home Office's expectations. By 2013, a miniscule 2% of items were being bought through this central hub, against a target of 80% by the end of this Parliament. Police and Crime Commissioners have authority over local spending but, as the Department remains accountable for public money voted by Parliament, it cannot step back from value for money issues

The New Homes Bonus was introduced as a financial incentive for local authorities to encourage the building of new homes. The scheme is funded from existing local authority grants. £7.5 billion will have been redistributed between councils by 2018-19, so there is a lot of money at stake. It is clearly vital that the incentives work and the Government achieves its aim. It is therefore disappointing that after more than two years of the scheme being up and running, no evaluation is in place and no credible data is available to show whether the scheme is working or not. So far the areas which have gained most money tend to be the areas where housing need is lowest. The areas that have lost most tend to be those where needs are greatest. The Department has yet to demonstrate whether the New Homes Bonus works. Is it helping to create more new homes than would have been built anyway? Is it the best way for Government to use its limited resources to create more homes where they are needed most? Its planned evaluation of the Bonus scheme is now urgent

The Department for International Development is committed to tackling malaria, which affected 219 million people in 2010 and led to 660,000 deaths. However, there is concern that spending by DFID on measures to combat the disease, rising each year to £500 million a year by 2015, may not provide good value as the Department does not have good enough infrastructure everywhere to manage the expenditure effectively. About half of the total number of malaria cases worldwide occur in just two countries - Nigeria and the Democratic Republic of Congo - but the Department has been spreading its resources across 17 countries. It now agrees it should do more work in these two countries but has yet to complete an analysis which would ensure well-informed decisions on where to focus resources. Cuts in funding carry their own risks. On the other hand, long-term commitments can create an equally long-term dependence on UK funding. DfID need to plan and support long term sustainable programmes to combat malaria for which developing countries can take responsibility themselves. DfID must ensure their actions do not have unintended consequences. The Department, for example, the mass distribution of free or subsidised bed nets can damage local businesses selling locally produced nets. It is also essential that the Department make the most of quick, cheap and easy diagnostic tests to increase the number of people who can be quickly diagnosed and effectively treated. This could lead to a halving of the current expenditure on drugs.

In the three years to December 2012, the BBC gave 150 senior managers severance payments totalling £25 million. The BBC paid more salary in lieu of notice than it was obliged to in 22 of the 150 severance payments for senior managers in the three years to December 2012, at a cost of £1.4 million. It is unacceptable for the BBC, or any other public body, to give departing senior managers huge severance payments that far exceed their contractual entitlements. Some of the justifications put forward by the BBC were extraordinary. The Committee welcomes the changes that the BBC's Director General, Lord Hall, has made to cap severance pay. Recommendations include: the BBC should remind its staff that they are all individually responsible for protecting public money and challenging wasteful practices; to protect licence fee payers' interests and its own reputation, the BBC should establish internal procedures that provide clear central oversight and effective scrutiny of severance payments; the BBC Executive and the BBC Trust need to overhaul the way they conduct their business, and record and communicate decisions properly; the BBC Trust should be more willing to challenge practices and decisions where there is a risk that the interests of licence fee payers could be compromised; the BBC Trust and the BBC Executive need to ensure that decision-making is transparent and accountability taken seriously, based on a shared understanding of value for money, with tangible evidence of individuals taking public responsibility for their decisions.

Universal Credit is the DWP's single biggest programme and enjoys cross-party support, yet its implementation has been extraordinarily poor. The failure to develop a comprehensive plan has led to extensive delay and the waste of a yet to be determined amount of public money. £425 million has been spent so far on the programme. It is likely that much of this, including at least £140 million worth of IT assets, will now have to be written off. Lack of day-to-day control meant early warning signs were missed, with senior managers becoming aware of problems only through ad hoc reviews. Pressure to deliver a programme of this magnitude within such an ambitious timescale created a fortress culture where only good news was reported and problems were denied. There has been a shocking absence of control over suppliers, with the Department failing to implement the most basic procedures for monitoring and authorising expenditure. The pilot programme is not a proper pilot. Its scope is limited and does not deal with the key issues that Universal Credit must address: the volume of claims; their complexity; change in claimants' circumstances; and the need for claimants to meet conditions for continuing entitlement to benefit. The programme will not hit its current target of enrolling 184,000 claimants by April 2014. The Department will have to speed up the later stages of the programme if it is to meet the 2017 completion date but that will pose new risks. Meeting any specific timetable from now on is less important than delivering the programme successfully

There is at present around £46 billion of outstanding student loans on the Government's books, and this figure is set to rise dramatically to £200 billion by 2042 (in 2013 prices). By 2042 there will be an estimated 6.5 million borrowers of student loans. At the same time estimates for the amount of loans that will not be repaid are also rising and the Government assumes that 35-40% of outstanding loans will never be repaid. That is some £16 billion to £18 billion on the current debt of £46 billion and £70 billion to £80 billion on the estimated value of student loans by 2042. The Department for Business, Innovation & Skills (the Department) is not doing enough to secure value for money from its collection arrangements. The Department is unable to accurately forecast student loan repayments, and does not have a sufficient understanding of the likely future cost of non-repayment to the taxpayer. The Student Loans Company is not doing enough to ensure that it identifies and collects all the repayments due, given the substantial size of the financial assets involved, and will need to demonstrate value for money from the proposed sale of the student loans book.