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Operational Efficiency Programme

Operational Efficiency Programme

HM TREASURY News Release (PN 40/09) issued by COI News Distribution Service on 21 April 2009

The findings of the Operational Efficiency Programme (OEP), a year-long programme examining operational spending in the public sector, are published today showing scope for £15 billion of efficiency savings.

The five senior external advisors have identified a total of £15 billion annual savings from back office operations and IT, collaborative procurement, asset management and sales, property and local incentives and empowerment. Their assessment is that around £6 billion of these will be delivered as part of plans in the current spending review period, contributing to the £35 billion efficiency target, with the rest being delivered by the end of the next spending period.

These findings make it possible to deliver efficiency savings alongside continuing to increase investment in frontline services.

The delivery of the full £15 billion of savings will take time to achieve, due to the nature of the areas being considered. Procurement contracts will need to be renegotiated, back office functions merged, and market conditions considered before property sales are undertaken. However, on the basis of their interim findings, at the Pre-Budget report the Government increased the previous target of £30 billion savings over the current spending review period to £35 billion.

These savings follow on from the significant overachievement of the Government's efficiency target for the previous spending review. The Gershon efficiency programme, which considered spending between 2004-05 and 2007-08 delivered £26.5 billion of efficiencies against a target of £21.5 billion. Significant progress has also been made towards achieving the target for the current spending period.

The Government will also announce an increased target for relocations of civil service posts from London and the South-East by next year, as it is significantly ahead of schedule in meeting its current target of 20,000.

In the foreword to their report, the five advisors stated that:
"the private sector never stops seeking greater efficiency in the ways that it purchases and provides services, and neither should Government. There is scope to go further and increase the value for money the public sector achieves from both its activities and from some of its most valuable assets - the insight and energy of its people, as well as its bricks and mortar."

Today's publication of Operational Efficiency Programme: Final Report sets out the advisors' findings and recommends structures and tools to help organisations achieve savings and improved accountability and performance management to encourage greater value for money throughout the public sector.

The report contains an ambitious series of recommendations from each advisor to deliver the savings they have identified in their specific areas of expertise. Government is expected to respond to the advisors' recommendations in tomorrow's Budget, but the advisors believe the following savings can be realised by the end of the next spending period, including some savings which are already included in plans for this spending review period:

* Back office operations and IT, led by Dr Martin Read, recommends better management information, benchmarking and review of costs and better governance of IT-enabled change programmes to achieve £4 billion of savings a year on back office operations, and £3.2 billion of savings a year on IT spending;

* Collaborative procurement, led by Martin Jay, has found that £6.1 billion of savings a year are possible through harnessing the public sector's collective buying power by buying more goods in a collaborative way and driving more procurement spending through collaborative channels;

* Asset management and sales, led by Gerry Grimstone, has concluded that there is potential for the Government to realise greater value from its commercial asset base, and reports progress on studies into specific assets (including British Waterways, the Dartford Crossing, Land Registry and the QE II conference centre) that were launched at the 2008 Pre-Budget Report. He has also identified a number of further assets that will be the subject of a second wave of studies to ensure that their commercial potential is being considered and fully harnessed;

* Property, led by Lord Carter of Coles, has found that up to £1.5 billion of annual running cost efficiencies could be achieved by 2013-14, rising to £5 billion a year over a ten year period. Furthermore, £20 billion of proceeds from property sales (excluding council housing) may be possible over a ten year period. To achieve this, he has recommended a series of specific incentives and mechanisms, including the creation of a small, strategic central property function to drive the efficiency and rationalisation agenda across the public sector;

* Local incentives and empowerment, led by Sir Michael Bichard, has made a series of recommendations aimed at empowering professionals to collaborate and innovate, and creating the space for this by reducing burdens on the frontline. This includes taking forward the new 'Total Place' programme that will map flows of public spending in local areas and make links between services to identify where public money can be spent more effectively.

Notes for Editors

1. The full Operational Efficiency Programme: final report will be published online at

2. In the Pre-Budget report, the Government announced that it had overachieved against the Gershon Efficiency Programme target for the 2004 Spending review, delivering £26.5 billion efficiencies against a target of £21.5 billion.

3. The target for the current spending review was efficiencies of £30 billion. On the basis of the interim findings of the 5 OEP advisors, the Government increased this to £35 billion by 2010-11.

4. Advisors
Dr Martin Read (Back office and IT)
Martin is a non-executive director of British Airways and a senior adviser to Candover Partners. He was chief executive of international IT services company Logica from 1993 to 2007 and has served as a non-executive director of Boots (1999-2006) and ASDA (1996-1999). Prior to 1993, he was supervisory managing director of the GECMarconi Radar and Control Systems group of companies. Martin's other interests include being a director of homelessness charity Shelter, a trustee of the Council for Industry and Higher Education and the Vice Chair of the Council of Southampton University.

Martin Jay (Collaborative procurement)
Martin Jay was appointed a non-executive director of Invensys in January 2003 and became Chairman in July 2003. He retired as Chairman of VT Group plc in July 2005, where he was also Chief Executive for 13 years. He previously held a range of leadership positions at GEC and was a member of the GEC Management Board. Martin is the Chairman of the Tall Ships Youth Trust.

Gerry Grimstone (Asset management)
Gerry is Chairman of Standard Life plc, having been a Standard Life director since July 2003. Prior to this Gerry Grimstone held senior positions with the Department of Health and Social Security and HM Treasury until 1986. He then spent 13 years with Schroders in London, Hong Kong and New York prior to becoming Vice Chairman of Schroders' worldwide investment banking activities. Since then, he has held a number of senior appointments in the private and public sectors.

Lord Carter of Coles (Property)
Lord Carter of Coles is a Labour Peer who, in addition to a career in business, has advised the Government on a wide range of issues and has chaired a number of government reviews. In 1985, he founded Westminster Health Care which he built into a leading health care provider and sold in 1999. He is a private investor and director of companies in the fields of insurance, healthcare and information technology. He was Chair of Sport England from 2002 to 2006, was a member of the Home Office Board and of HM Treasury's Productivity Panel.

Sir Michael Bichard (Local incentives and empowerment)
Sir Michael Bichard is Director of the independent Institute for Government, a charity dedicated to supporting the development of leadership in government, and Chair of the Design Council. In a career spanning both central and local government, he has served as: Rector of the University of the Arts London; Chair of the Legal Services Commission; Chairman of the Soham Inquiry; Permanent Secretary for the Department for Education and Employment; Chief Executive of the Benefits Agency; Chief Executive of Gloucestershire County Council and of the London Borough of Brent.

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