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19 January 2024

Where Labour finds the money

Sorting out government inefficiencies would be a good place to start.

By Will Dunn

Amid the fighting over the Rwanda bill, the fighting in the Red Sea and the fighting over who should take the most blame for the Post Office scandal, you may have missed an important speech this week.

On Tuesday afternoon the head of the National Audit Office (NAO), Gareth Davies (or the comptroller and auditor general, to give Gareth his full title) told MPs gathered in parliament’s Churchill Room that the government could free up “tens of billions of pounds per year” with better governance, procurement and oversight.

This speech is particularly important for Labour, because Starmer and Reeves need to persuade the electorate that they will improve public services without breaking fiscal rules. Major tax reforms, such as taxing wealth properly, are seen as electorally dangerous, and progressive tweaks (ending the tax breaks currently enjoyed by private schools and “non-domiciled” residents) will only raise a couple of billion each. It is encouraging, then, to hear one of the government’s chief bean-counters confirm that simple competence could raise ten times that amount.

Better yet, this is an opportunity the Conservative government has created. A large expansion in public-sector outsourcing under the Tories – from £64bn in 2009-10 to £222bn in 2022-23 – means there is a lot of spending to be looked at. As I found when I looked through Fujitsu’s contracts, competition (which is supposed to make outsourcing efficient) is often lacking at the tendering stage, and this is true across the board: it’s why, in December, the Public Accounts Committee reported that the government “cannot demonstrate value for money for untold billions of taxpayer-funded procurement”. 

It is also, to be fair, something the Conservatives have tried to do something about through the Procurement Act, which came into law in October and could (according to government estimates) save £4bn-£7.7bn. However, these benefits may not become evident for some time.

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Labour hasn’t revealed much detail on its plan for a new Office for Value for Money, but a party source told me the main point is to weigh up spending before it happens. This new body wouldn’t replace the NAO, then, (which counts how much money has been wasted after it’s been spent), but it might reduce the enormous power of the Treasury – which currently appoints principal accounting officers to every government department, and assesses the business case for every major project – over public spending decisions.

The other major lever would be the threat of “insourcing”, which is perhaps the only solution to the fact that when you rely on private companies to provide very complex services, there is often only one bidder (who can therefore charge what they like). The calculation changes if the state can realistically threaten to do the work itself.

Electorally, “we’ll do the accounts properly” may not have the same ring to it as an offer to slash taxes, which is perhaps why Labour also has a more expressly political plan to appoint a Covid corruption commissioner, with a brief to “claw back” misspent funds (some of which may have been misspent with donors to, or friends of, the Conservative Party).

It’s also true that eight years of back-stabbing, rebellion and performative resignation have obviously made government less efficient. Since the Brexit vote, the average tenure of a chancellor, home secretary or foreign secretary has dropped to less than 18 months, according to the Institute for Government. There have been 16 housing ministers in the past decade. Every new leader brings a swing in policy – such as cancelling HS2 – that creates extra work, disruption, demoralisation and confusion. For all the smug little notes Jacob Rees-Mogg has deposited on the desks of civil servants who were in the loo or – perish the thought – working away from Whitehall when he sidled into their offices, inefficiency and waste have increased at pace.

For some time the narrative has grown that Labour is trapped between its middle-ground tax position and its fiscal rules, but this might not be true. Never underestimate the power of good bookkeeping.

This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.

[See also: The SNP has been mugged by reality on tuition fees]

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