UK public expenditure on management consultancies has returned to COVID-era levels, despite repeated plans by the previous government to reduce dependency on external expertise.
The latest data from market research company Tussell shows that the spending traceable on frameworks is dominated by tech-based management consultancies.
Its report confirms the pay out to these suppliers increased 57 percent over five years to reach £3.4 billion in fiscal 2023/24. The splurge is dominated by central government, which has accounted for between 52 percent and 63 percent in the last five years.
Spending escalated dramatically during the period of the pandemic between 2020 and 2022 as central government scrambled to deal with the spread of the global virus, particularly in standing up a national Test and Trace capability. Although spending fell to £3 billion in fiscal 2022/23, it is back up to the peak in the most recent year.
The use of taxpayers' cash via framework agreements – designed to lower prices and the cost of procurement for buyers, as well as providing suppliers with an indicative amount of work – shows how much of the money might be going to tech consultancies.
The highest framework spending over the five years of the report – at £2.7 billion – comes through MCF3, which provides consultancy services including business, strategy and policy, finance, HR, procurement, health/social care and community, infrastructure, and environment. However, the next four frameworks in the spending top ten are all dedicated to technology. G-Cloud enabled £1.2 billion, and so did Technology Services. Digital Outcomes and Specialists enabled £1 billion while £474 million was lavished on the Digital Specialists and Programmes framework. HMRC's Digital and Legacy Application Services (DALAS) enabled £306 million in spending, made up entirely of a single award to Accenture.
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In the most recent financial year, the framework agreements and Dynamic Purchasing Systems (DPS) accounted for 42 percent of management consultancy spending.
The UK's new finance minister, Rachel Reeves, has pledged to reduce the public sector budget binge on external management consultancies, joining a long list of ministers who have planned to do the same with varying outcomes.
In 2010, the Conservative-Liberal Democrat coalition government said it would cut down on consultancy spending as part of broader austerity measures. But by 2020, UK Parliament's Public Accounts Committee continued to warn that an underlying lack of skills in the civil service contributes to much of the ineffectiveness and inefficiency.
At the time, Meg Hillier MP, PAC chair, said: "Government's preferred response to failing projects is too often to pay out billions to consultants rather than investing in developing skills, expertise, and knowledge in public services. This short-term approach does nothing to improve the civil service's capacity and capability for the future. Instead it is a constant drain on public funds with little evidence of benefits."
In 2021, the government renewed its pledge to review and reduce consultancy contracts in light of increased spending due to COVID-19.
Time will tell whether the new government has the determination to invest in internal skills and provide sufficiently attractive remuneration and career development to attract and retain the right people, thereby reducing the public sector's dependency on outside tech help. ®