£7.2bn cuts in government back-office and IT spend: Where it will come from

The Treasury wants major IT savings

The Treasury will be expecting Whitehall departments, local authorities and other public sector bodies to deliver £7.2bn of annual savings in IT and back-office spending by 2013-14.

The planned savings will be enforced by including the figures in departmental and council budgets – which means organisations must deliver the targets or face cuts in spending elsewhere to compensate.

And government IT leaders will be encouraged to opt for standardised IT that can be re-used elsewhere wherever possible.

The Operational Efficiency Programme report says that IT is very fragmented across the public sector with little management information available on spending. Responsibility for IT is spread across so many different organisations, it has made standardisation too hard to achieve.

“There is a cost penalty from the lack of standardisation, simplification and sharing of back-office operations and IT across the public sector,” says the report.

“Devolution of delivery can provide greater responsiveness in the provision of services, but unchecked proliferation of separate back-office operations and IT systems and processes can and does lead to significantly increased costs.”

This fragmented situation has also made it hard to precisely quantify the amount that is spent on IT and there is little management information collected to help.

“This workstrand has estimated that around £16bn per year is spent on IT across the wider public sector, although this figure could vary from as low as £12.5bn up to around £18.5bn. The largest area of IT spend is in local government, but it is hard to conduct a detailed analysis of this expenditure as it lies in a very devolved landscape,” says the report.

Standardisation of IT will be a key theme to resolving these problems.

“Strategic oversight by CIOs and OGC Collaborative Category Boards should also ensure that all new IT infrastructure is reusable across the public sector,” says the report.

The report, which also covers four other areas of public sector spending – collaborative procurement; asset management and sales; property; and local empowerment – will form the basis of a total of £15bn savings built into the Budget to help balance the government’s books after the billions spent on bailing out banks.
The key areas that Martin Read, who wrote the back office and IT aspects of the review, has identified for savings include:

• Publishing more information about value for money and benchmarking operations.
• All but the smallest public sector bodies to conduct reviews at least every five years to identify areas where processes and systems can be simplified or standardised.
• Speed up the move towards shared services between Whitehall departments, and encourage further use of shared services across the whole public sector.
• Collect more and better management information on IT spending in each area of government.
• Improve governance of major IT projects, including regular updates to minister on high-risk or problem projects.
• Strengthen the existing Gateway review process and introduce a “starting” gate stage for all IT-enabled change projects to avoid commencing risky initiatives with little chance of success.
• Use portfolio management to prioritise IT-enabled change projects and resources and to reduce overlap and duplication across the public sector.
• Give government IT leaders the responsibility for delivering greater standardisation and simplification of IT systems and software.
• Continue to professionalise and improve the IT function across the public sector.

Of the total £7.2bn annual savings target, £4bn will come from back-office operations, and £3.2bn on IT spending.

The report concluded: “In future, management information on back-office operations and IT should be available on a regular, consistent, auditable and transparent basis, and be used to benchmark across the public sector.

“A system of Operational Reviews should be introduced to examine spending effectiveness and to ensure that poorer performing organisations improve. These reviews should be driven by the most senior leaders across the public sector.”