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The British government could save at least £20bn a year by modernising IT systems, tackling fraud and getting a grip on failing mega-projects such as the HS2 rail line, according to the head of the UK government’s independent spending watchdog.
Speaking to the Financial Times ahead of his annual speech to parliament on Tuesday, the head of the National Audit Office, Gareth Davies, painted a picture of a troubled British state buffeted by Brexit, Covid-19 and the war in Ukraine, with “out of date IT systems”, “crumbling” infrastructure and growing “maintenance backlogs”.
He also warned that Whitehall had a “governance problem” when it came to managing large programmes such as HS2 and building big hospitals, and he recommended that such projects be taken out of the hands of individual government departments.
“We think that our work demonstrates that there are tens of billions of savings available a year,” he said, urging the government to focus on better management of leading infrastructure projects and maintenance of existing public assets, as well as improved procurement, digital transformation and fraud prevention.
He added, however, that the news was not all bad: there were some success stories — such as the recent rapid upgrade of the Passport Office IT systems — which showed that improvement was possible when better management, procurement processes and IT systems were deployed.
Davies said the exact level of potential savings would depend on government decisions and investments, but confirmed it could reach “at least £20bn” in potential annual savings from areas to be outlined in his speech.
These include more than £7bn of savings from increasing competition in public procurement processes, £10bn from fraud prevention and £6bn in cracking down on tax evasion and avoidance.
In a wide-ranging interview, Davies said there were a host of opportunities for the government to perform better to save money at a time when the public finances were tightly constrained.
He proposed that mega-projects such as HS2 and a programme to build 40 new hospitals should be removed from the control of individual Whitehall departments and be overseen by new “cross-government oversight boards” to stop costs spiralling out of control.
“Where these projects reach tens of billions of pounds over several parliaments the overspend risk in those projects is so big, they can’t be handled within a departmental budget,” said Davies.
Instead, he suggested that such projects be controlled centrally by the Cabinet Office and Treasury with expert advice from UK Government Investments (UKGI), the company that manages state-owned businesses, including Channel 4, the Royal Mint and the Post Office.
Improved IT systems were also vital to delivering better public services, he said, noting that some parts of government, such as the pensions system, were using 30- and 40-year-old computer systems.
He acknowledged that the recent scandal over the Post Office’s Horizon system had highlighted that technology posed risks as well as offering rewards, and said it was important that computers weren’t used “to make bad decisions faster”.
But he added that the government should maximise the opportunities offered by responsibly used artificial intelligence despite the fears raised by the Horizon scandal.
“Our view, as auditors, is that those are risks that need to be embraced rather than [government] being so risk-averse that you fail to take advantage of the big opportunities that are coming,” he said
Davies said that failures, such as Horizon and the now-abandoned £10bn national IT system for the NHS, pointed to the value of smaller, better-targeted projects.
“The phrase used in the IT industry is ‘dolphins not whales’. So manageable projects compared to gigantic, overambitious attempts to change the whole world with one IT system,” he added.
Davies was most damning on the UK government’s maintenance of public infrastructure, saying that NAO audits had shown that there was no “demonstrable asset management plan for huge parts of the public estate”.
He added that the crisis in British schools caused by last year’s crumbling concrete scandal had highlighted a systemic failure in Whitehall to properly weigh up the benefits of spending on maintenance against starting new projects.
“At the moment, there’s a tendency to downplay the required spending on annual maintenance in order to make room for more glamorous new projects,” he said, adding that the failure to maintain schools and hospitals had a direct negative effect on public sector productivity.
Asked if the British state was failing overall, Davies said “no”, but warned that a series of shocks in recent years, including Brexit, Covid and the war in Ukraine, had absorbed capacity across Whitehall for implementing much-needed reform.
“There are enough positive examples, like the Passport Office, that we can be confident there’s more to come,” he said. “The challenge is having the bandwidth and leadership and management capability to make the most of these opportunities.”
