The newly launched Office for Value for Money will play a key advisory role in the upcoming multi-year Spending Review, the chancellor has said, as she revealed departments will be expected to make 2% efficiency savings next year.
In her first Budget speech this afternoon, Rachel Reeves said she has set departments a 2% “productivity, efficiency and savings target” as part of what she called “Phase 1” of the Spending Review.
The target is part of a “renewed focus on public sector productivity” in the first phase of SR25 and will “ensure that departments are focusing on the delivery of what matters most”, according to the Red Book, which sets out details of spending pledges in the Budget.
Reeves said departments would make the savings "by using technology more effectively and joining up services across government".
Progress towards the target will be monitored through the Government Efficiency Framework, which was published in July 2023 and which sets out how civil servants should categorise, track and report on the efficiencies they are responsible for.
Reeves also used the speech to formally launch the Office for Value for Money, appointing former chief executive of Houses of Parliament Restoration and Renewal Delivery Authority David Goldstone as its inaugural chair.
Goldstone, who was previously chief operating officer at the Ministry of Defence and has also held executive and non-executive posts on major projects such as HS2, the Nuclear Decommissioning Authority and London Legacy Development Corppration, will advise Reeves and the chief Treasury secretary, Darren Jones, on the decisions for Phase 2 of the Spending Review.
Phase 2 will cover the years to 2029-2030, with details to be announced next spring.
Among the OVfM’s first steps will be to conduct an assessment of “where and how to root out waste and inefficiency”, according to the Red Book. It will carry out value-for-money studies in specific high-risk areas of cross-departmental spending and scrutinise investment proposals to ensure they offer value for money.
The watchdog will also develop recommendations for system reform, which will be informed by "lessons learned from the past, international best practice and the views of external organisations", the document says. "This will underpin a ruthless focus within government on realising benefits from every pound of public spending," it adds.
Reeves first set out her plans to establish the OVfM in 2021, when Labour was in opposition. She said at the time that the office would keep a “watchful eye on how public money is spent and equipped with meaningful powers so no government is allowed to mark its own homework”.
Documents published alongside the Budget speech also set out savings that will be made this year as a result of measures Reeves shortly after becoming chancellor. In July, Reeves instructed departments to stop all non-essential spending on consultancy and communications this year, with an aim to halve consultancy spending in future years.
The government expects to meet its £550m consultancy savings target, based on Treasury forecast figures and planned spending, according to the Red Book, which says the government will "continue to bear down on consultancy spending" next year in line with Reeves's existing plans.
The Government Communications Service is meanwhile expecting to save £85m from cuts to its spending on comms, exceeding the £50m target Reeves set in July.
The document also confirmed plans to continue with efforts to dispose of government's "surplus estate", setting a target to raise at least £1bn by 2030.