Cuts get fashionable

October 12, 2010 11:50 AM

101012 Philip_Green Cuts in public spending just got fashionable.  Sir Philip Green, the owner of Topshop and Bhs has detailed the staggering waste of money that is happening in Whitehall departments.  And, as far as I can see, a self-made billionaire is a man you should listen to about money.

Sir Philip has written a 33 page report showing where hundreds of millions of pounds could be saved through driving efficiency in areas like communications, hire cars, the purchase of computers and other goods and services as well as catering and hotel charges.  Read that report here (as Mike Denham pointed out this morning, it’s 33 pages long and very concise – contrast that with the EHRC’s 700+ page report on fairness released yesterday and you begin to see what Sir Philip is getting at).

He wants to see the sort of level of efficiency seen in procurement in the best areas of the private sector, brought into the public sector.  Stories of disastrous IT projects costing taxpayers millions are nothing new, but Sir Philip has also discovered that right down to cups of coffee and boxes of paper there are savings that can be made.

Some key findings:
Common items are being bought at "significantly" different prices across different departments; with a box of paper ranging from £73 to £8 (a difference of 89 per cent) while printer cartridges range from £398 to £86 (a 78 per cent difference).

Fixed line telecoms (phones, not including mobiles) costs the Government £2 billion a year, Sir Philip estimated that this could be 30-40 per cent cheaper.

Expensive computer services are being contracted out for too long with no flexibility.

Vending machines and staff cafes in Whitehall are operated by at least eight different companies through 16 different contracts.  The price of a cup of coffee ranges from £1.45 to 90p (a 38 per cent difference).

    "Credit rating and scale in virtually every department has not been used to make Government spending efficient."

(Sir Philip Green)

Paper and coffee might seem like the wrong place to start when you are trying to cut billions from public spending, but the scale of Government spending and the size of its operations must be taken into account.  Central Government spends £84 million a year on office supplies alone.  But it is spent through 83 different contracts.  The Government is the biggest tenant and property owner in the country, yet the use and management of space is “wholly inefficient” according to Sir Philips report.  The Government has massive clout to bargain down prices for everything it buys, because of its credit rating and buying power, this currently isn’t being used.

    "If you don't have consistent pricing for products that your staff buy with their own money, how is your business going to be efficient?"

(Sir Philip Green)

One suggestion then is to start centralising procurement.  The Government could save money if it stopped acting as a series of independent departments and there was more accountability and transparency in budgets.   Within departments Sir Philip pointed out that there is little motivation to save money.  On top of this, as many as 71,000 staff members have spending power of £1,000 a month or more, with no real scrutiny as to how that money’s spent; worryingly this is coupled with inconsistent commercial skills among staff.  Let’s review that, thousands of people, potentially with no expertise, spending around £1 billion of pounds of your money.  As John O’Connell blogged here earlier this year, centralising how the public sector acquires goods and services doesn’t have to mean taking away choice locally.  Centralising would mean less duplication but would harness the buying power of all areas of Government into a sort of head office.  Local expertise would not be lost as regional hubs could advise on this, whilst bureaucracy would be minimised.

It’s common sense that civil servants should apply the same principles to buying goods and services as if they were spending their own money.  As Cabinet Office Minister Francis Maude pointed out, Government is different in many ways to business, but that does not mean that it should not act in a more business-like manner.  There are clearly savings that can be made now; Sir Philip urged that all contracts with more than £100 million left to run should be audited to see if they could be broken.

What Sir Philip’s report found – a summary of waste

A Government agency wasted £15 million in property rent in west London, while another agency relocated from London to the Midlands, signing a 20-year lease on a building with no break for 15 years, only to be abolished after nine months, wasting £18 million.

In just one Government department, 119 properties were surplus to requirement.

Hotels - the Government uses 400,000 room nights in London every year at a cost of £38 million, ranging from £77 to £117 each (a difference of 34 per cent). Halving the number of rooms by using communications such as video conferencing could save £50 million

Travel - the Government spends £551 million a year on travel, but departments have different contracts with travel management companies and different policies

Computers - laptops and desktops cost £61 million a year from 13 different providers, with prices ranging from £2,000 to £353, a difference of 82 per cent

Hire cars - vehicle hire cost £29 million a year. The daily rate for a Ford Mondeo type car ranged from £119 to £27 (a 77 per cent differential)

Mobile phones - the annual cost of mobiles was £21 million, with 105,000 devices, mainly with one provider, through 68 contracts, usually negotiated separately

Work was charged at more than £1,000 per person per day, "well in excess" of market rates

101012 Philip_Green Cuts in public spending just got fashionable.  Sir Philip Green, the owner of Topshop and Bhs has detailed the staggering waste of money that is happening in Whitehall departments.  And, as far as I can see, a self-made billionaire is a man you should listen to about money.

Sir Philip has written a 33 page report showing where hundreds of millions of pounds could be saved through driving efficiency in areas like communications, hire cars, the purchase of computers and other goods and services as well as catering and hotel charges.  Read that report here (as Mike Denham pointed out this morning, it’s 33 pages long and very concise – contrast that with the EHRC’s 700+ page report on fairness released yesterday and you begin to see what Sir Philip is getting at).

He wants to see the sort of level of efficiency seen in procurement in the best areas of the private sector, brought into the public sector.  Stories of disastrous IT projects costing taxpayers millions are nothing new, but Sir Philip has also discovered that right down to cups of coffee and boxes of paper there are savings that can be made.

Some key findings:
Common items are being bought at "significantly" different prices across different departments; with a box of paper ranging from £73 to £8 (a difference of 89 per cent) while printer cartridges range from £398 to £86 (a 78 per cent difference).

Fixed line telecoms (phones, not including mobiles) costs the Government £2 billion a year, Sir Philip estimated that this could be 30-40 per cent cheaper.

Expensive computer services are being contracted out for too long with no flexibility.

Vending machines and staff cafes in Whitehall are operated by at least eight different companies through 16 different contracts.  The price of a cup of coffee ranges from £1.45 to 90p (a 38 per cent difference).

    "Credit rating and scale in virtually every department has not been used to make Government spending efficient."

(Sir Philip Green)

Paper and coffee might seem like the wrong place to start when you are trying to cut billions from public spending, but the scale of Government spending and the size of its operations must be taken into account.  Central Government spends £84 million a year on office supplies alone.  But it is spent through 83 different contracts.  The Government is the biggest tenant and property owner in the country, yet the use and management of space is “wholly inefficient” according to Sir Philips report.  The Government has massive clout to bargain down prices for everything it buys, because of its credit rating and buying power, this currently isn’t being used.

    "If you don't have consistent pricing for products that your staff buy with their own money, how is your business going to be efficient?"

(Sir Philip Green)

One suggestion then is to start centralising procurement.  The Government could save money if it stopped acting as a series of independent departments and there was more accountability and transparency in budgets.   Within departments Sir Philip pointed out that there is little motivation to save money.  On top of this, as many as 71,000 staff members have spending power of £1,000 a month or more, with no real scrutiny as to how that money’s spent; worryingly this is coupled with inconsistent commercial skills among staff.  Let’s review that, thousands of people, potentially with no expertise, spending around £1 billion of pounds of your money.  As John O’Connell blogged here earlier this year, centralising how the public sector acquires goods and services doesn’t have to mean taking away choice locally.  Centralising would mean less duplication but would harness the buying power of all areas of Government into a sort of head office.  Local expertise would not be lost as regional hubs could advise on this, whilst bureaucracy would be minimised.

It’s common sense that civil servants should apply the same principles to buying goods and services as if they were spending their own money.  As Cabinet Office Minister Francis Maude pointed out, Government is different in many ways to business, but that does not mean that it should not act in a more business-like manner.  There are clearly savings that can be made now; Sir Philip urged that all contracts with more than £100 million left to run should be audited to see if they could be broken.

What Sir Philip’s report found – a summary of waste

A Government agency wasted £15 million in property rent in west London, while another agency relocated from London to the Midlands, signing a 20-year lease on a building with no break for 15 years, only to be abolished after nine months, wasting £18 million.

In just one Government department, 119 properties were surplus to requirement.

Hotels - the Government uses 400,000 room nights in London every year at a cost of £38 million, ranging from £77 to £117 each (a difference of 34 per cent). Halving the number of rooms by using communications such as video conferencing could save £50 million

Travel - the Government spends £551 million a year on travel, but departments have different contracts with travel management companies and different policies

Computers - laptops and desktops cost £61 million a year from 13 different providers, with prices ranging from £2,000 to £353, a difference of 82 per cent

Hire cars - vehicle hire cost £29 million a year. The daily rate for a Ford Mondeo type car ranged from £119 to £27 (a 77 per cent differential)

Mobile phones - the annual cost of mobiles was £21 million, with 105,000 devices, mainly with one provider, through 68 contracts, usually negotiated separately

Work was charged at more than £1,000 per person per day, "well in excess" of market rates

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