The Coalition government's Comprehensive Spending Review has identified 8% of spending cuts over the next four years. However, many of the proposed cutbacks lack details and seem overly dependent on "procurement and back office" savings.
The current government's priority is closing the deficit between tax receipts and government expenditure, which currently exceeds 10% of GDP. The burgeoning fiscal shortfall is also causing debt interest to rise. Interest repayments currently stand at £43 billion this year, rising to £63 billion in 2014-15. This is greater than the national schools budget.
Savings will be sought in other departments, with central government departments facing average cuts of 19%. The main target for these appears to be "administrative" savings, with miraculous procurement savings identified as major drivers for further cost reductions. In all, the government plans to cut £81 billion of spending by 2014-15.
The CSR accepted the findings of Sir Philip Green's report that government still had the potential to deliver efficiencies through exploiting Whitehall's scale. Indeed, the Treasury planned that "in central government, there will be an overhaul of procurement processes and the financial appraisal of suppliers will now be coordinated from one point."
Individual departments are also expected to deliver these savings. For instance, the education budget requires "procurement and back office savings" to deliver a further £1 billion of savings. The police budget will be reduced by 14%, funded by "savings made from efficiencies in IT, procurement and back office functions."
The Green Report recommended "mandating centralised procurement for common categories to leverage this buying power and achieve best practice." But the government's ability to deliver on these is doubtful. Only in July the government moved to decentralise procurement responsibilities to individual doctors in the National Health Service. Numerous reports have now been published outlining government's inefficient buying practices.
The burden on deficit reduction has fallen heavily on an area of government activity in which it has consistently failed to deliver results. Inculcating a culture where procurement best practice is observed will take prolonged commitment over a long period and this will take longer than the four-year period allotted for savings.
Moreover, if the government is serious about turning around its underperforming buying function, it requires a serious rethink of its procurement capability. This will mean that government will need to bring in new people from the private sector that are familiar with modern procurement techniques, as well as managing large-scale contracts and working with competing stakeholders. Such talent will also be expensive, as will the move to reformulate buying procedures into a centralised body.
These improvements will come at a cost and the benefits will not be realised fully until the fiscal crisis has entirely abated. It seems doubtful whether the government is willing to pay the cost for real procurement savings in the current crisis. Procurement savings do not magically appear - they require concerted effort and intelligence.