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17 January 2025

Has the bonfire of consultants begun?

Labour’s struggle to reduce government waste.

By Will Dunn

Labour’s 2024 manifesto is very clear that it “will not tolerate fraud or waste anywhere”, and specifically identifies an area in which money is wasted: “The excessive use of consultants.” It states that the government aims to halve spending on management consultancy, saving £750m a year. How’s that going?

From Labour’s arrival in power to today, 1,979 contracts have been awarded that fall into the category of “business and related consultancy and related services” (CPV code 794000000, public-sector procurement fans). This amounts to £2.17bn in new business for the consultancy sector, according to the government contracts data platform Tussell.

In the same period (5 July – 17 January) last year, the (Conservative) government awarded 1,872 consultancy contracts, with a value of £1.29bn. The same period in the year before, £1.32bn. Before that we have the pandemic, which was a bonanza for consultants – public spending on the “big four” of PwC, Deloitte, KPMG and EY peaked at £1.2bn in 2021 – but the trend of high spending on external advisers has continued after the pandemic. The bonfire of management consultancy Labour promised has yet to appear.

This is partly because many of the contracts awarded since Labour came to power would have been agreed or tendered for before the election. But it’s also because management consultancy is like toenail fungus: once it’s there, it’s there, and getting rid of it can take years.

Let’s look at the biggest of all of those newly awarded consultancy contracts. It’s very expensive, with a total award value of £509,600,000. Depending on the type of public spending you’d like to compare it to, that’s either enough to provide free school meals to around a million children for a year, or to build just over a mile of HS2. The contracting authority is HMRC, which employed 63,442 people (full-time) at last count. You may think that an organisation the size of Loughborough should be able to find some people to go to meetings, but these are special meetings. These are meetings that have to happen because of Brexit. The consultants have been contracted to support businesses dealing with the new rules of the Northern Ireland protocol – to help them understand the new paperwork and file it.

Readers not already foaming at the mouth at the prospect of half a billion pounds being spent on highly paid consultants to help struggling companies cope with the economic damage inflicted by your uncle’s desire for a blue passport may wish to know that the winner of this contract is Fujitsu Services Ltd. Previous contracts won by Fujitsu include a Connecting for Health contract for NHS IT services, of which the entire project was ultimately abandoned having cost £2.7bn (not including the ensuing court case in which Fujitsu sued the government for a further £700m), and the Post Office Horizon contract.

The fact that it went to Fujitsu tells us something about how the system works, because HMRC didn’t really choose Fujitsu for this latest award; it’s the extension of a contract originally awarded in 2020. Because the company was already providing the services, switching provider would have been expensive and disruptive. This is true of a lot of government outsourcing and privatisation; it becomes an addiction. Any sensible private company will obviously make it easier to start using its services than to stop.

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This contract also demonstrates the conditions in which consultancy thrives: the disruption of political change (Brexit) or an emergency (Covid) drops a bucket of new and unfamiliar work on the desk of a government body that has already been stretched thin by austerity. It is easy to see why bringing in outside experts looks like a good idea. But in 2023 Mariana Mazzucato, whose book The Big Con is a critique of how consultancy “infantilises” governments, told the New Statesman that the business model of consultancy involves maintaining weak governments that need this kind of help. In When McKinsey Comes to Town, a deep investigation by two New York Times reporters into the world’s biggest consultancy firm, one McKinsey consultant advising the NHS is quoted as advising another: “Wedge yourself in and spread like an amoeba.”

Labour is already showing signs of allowing consultancy to become involved in some of its key ambitions. On Monday of this week Keir Starmer gave a speech in which he declared that AI could “radically improve our public services” and make government more efficient. On Wednesday the government quietly published a contract awarded to consultants PwC for £4,148,645 to start implementing part of its AI strategy. In November, the consultancy Capgemini was awarded a £1.875m contract to be Department for Science, Innovation and Technology’s AI strategic business partner; Deloitte is already engaged in AI work for the NHS and the Ministry of Defence, among others.

If consultancy thrives on a combination of underfunded government and disruptive events, then the future looks bright for the PowerPoint guys. If the government wants to rein in its spending on these services, it should probably get started.

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

[See also: Rachel Reeves will soon need to pick a side]


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