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Government is currently unable to deliver on its strategic objective to reduce spending on consultants. In a new report, the Public Accounts Committee not only casts doubt on government’s ability to meet its aspiration to put an immediate stop to all non-essential consultant spending, but shows that it is not even clear if the Chancellor of the Exchequer’s intention to halve this spending in 2025-26 is an effective approach to achieving the £1.2bn+ in savings aimed for by this year.

• Read the report
• Read the report (pdf)
• Inquiry: Government's use of external consultants
• Public Accounts Committee

The previous government withdrew central spending controls on consultancy in 2023 to cut Departments’ administrative burden. Cabinet Office relies instead on Departments to develop their own internal controls on how much they spend on consultants, but Departments’ approaches here will vary.

The data on how much Departments spend on external consultants are inconsistent – the latest estimate by HM Treasury was c.£1.36bn in 2022-23, but other sources put the figure at as much as £2.23bn. Government seems unconcerned at the many and obvious inaccuracies in its own data on the potential billions in taxpayer money that Departments are spending on consultants.

The PAC’s report finds that Departments are not complying with Cabinet Office directives on consultancy spend, and that their compliance in this area goes unmonitored.

The PAC’s report calls for a list of which Departments are not complying with Cabinet Office requests on consultancy procurement, and a detailed breakdown of what each Department spends on individual private contractors, categorised by type of service.

The report further casts doubt on whether the Chancellor’s announced intention to halve the government’s spend on consultants in 2025-26 can be shown to be an effective way to reduce spending on external providers.

Government has said this could “save over £1.2bn by 2026”. But the PAC’s report points out that Departments often have large contracts that combine consultancy and professional services, making it difficult for departments to isolate the spend on consultancy services only.

As a result government bodies may be under- or over-reporting their consultancy spend. This state of affairs may also allow Departments to reclassify and under-report, rather than reduce, their spending on consultants.

The government’s strategic workforce plan has the potential to be a welcome step in supporting the better use of consultants, as Departments ought to be able to meet its requirements through proper planning and assessment of available resources rather than by hiring in a consultancy.

A Department may sometimes be able to look elsewhere in government for resources rather than going out for market, but the lack of a workforce strategy for the whole of government makes it very difficult for Departments to look beyond their own resources.

The PAC wants to see a workforce plan from the Cabinet Office by May 2026, and this should include an assessment of skills gaps in government that require external resources.

The PAC’s report further notes that emerging technologies, such as AI, have transformed the consultancy and professional services sector since 2022, and is calling for guidance for Departments to be published about the use of these technologies by these providers.

Member comment

Clive Betts MP, Deputy Chair of the Public Accounts Committee, said:

“Our Committee is concerned with value for taxpayers’ money, and the Chancellor’s pledge to stop public funds walking out the door to external providers where government could do the job itself is self-evidently the right course.

"But our inquiry has shown this may not be so simple, given that government does not yet have a grip on precisely what is being spent. With consultancy spend now wound so tightly into how Departments run their contracted-out work, and with so little and such inconsistent data available, actually bearing down on this spending will be a tough knot to unpick.

“The consulting sector will of course continue to play an important role in filling any specialist gaps where government truly does not have the requisite skills for project delivery, as well as demonstrating cutting-edge practice in the use of new technologies from which the public sector can learn lessons.

"At time of writing our report, we await the government’s strategic workforce plan, which will help Departments more intelligently approach their use. With such a plan, government can understand what resources are available to it inhouse, rather than instinctively pulling the expensive consultancy lever for any difficult project and spending unnecessary billions in public funds in the process.”