Is it any coincidence that the chancellor, Rachel Reeves, has promised to take an “iron fist” to public spending on the same day that Games Workshop, maker of the Warhammer 40k science fiction game and new entrant to the FTSE 100, has announced a new deal with Amazon for rights to its superhuman warriors, the Space Marines – who are as we all know divided into chapters including the Iron Fists and the Imperial Fists, and whose combat armour may wield the mighty Power Fist?
Yes. It is obviously a coincidence. The Chancellor is clearly a nerd, but probably not of the Warhammer 40,000 variety – although as a former national chess champion she would doubtless make an interesting tactical commander.
In the real world, Reeves is beginning the spending review process, which involves finding five per cent efficiency savings across Whitehall. The Treasury has pointed out that efficiency savings are not necessarily spending cuts, but the Treasury’s example of an efficiency saving – ending the £6.5m Social Workers in Schools programme – is a spending cut, and its press release on the new efficiency push is clear that “where spending is not contributing to a priority, it should be stopped”.
It is hard to see how government departments will, as the Treasury’s summer spending audit puts it, “absorb at least £3.2bn of… public sector pay pressure” without making redundancies. The same report did identify hundreds of millions of pounds per year in spending on management consultancy, comms and marketing that could be vulnerable, but that won’t cover it.
Meanwhile the civil service itself is bigger and costlier than ever. Since the last spending review in 2021 it has taken on an extra 38,000 employees, taking the total number of civil servants to more than half a million people. That increase alone is nearly five times the total number of people that the UK’s most valuable company, AstraZeneca, employs in this country.
This huge increase in headcount has accompanied a huge increase in public spending under the Conservatives, and not only because of the pandemic. Look at outsourcing, which grew from £69bn in 2009-10 to £222bn in 2022-23. One civil servant who has spent eight years in their department told me recently that most of the increase in numbers they’d seen was due to Brexit, which added £400m to Whitehall spending in the first 18 months after the referendum.
Civil servants aren’t necessarily all that well paid – the median salary at the Home Office and DWP is well below the UK median – but they are expensive, partly because of their very generous pension contributions (the government contributes a further 26 to 30 per cent of their salary) that are an ever-growing spending pressure for the future.
Having created a much larger state, the Conservatives then pretended they were going to hack away at it. In May 2022 the Johnson government claimed it would sack 91,000 civil servants; by the time the Tories lost the election they had hired an extra 35,000.
What this suggests is that taking a hatchet to things is difficult, and tends to be more expensive in the long run. When Eric Pickles declared in 2015 that he was having “great fun abolishing lots of stuff”, one of his main targets was the Audit Commission, which had for decades overseen spending by local government. This was politically expedient for Pickles (the Commission was not well liked by Tory councillors) but it came at spectacular cost: by the end of the Conservative government this year, almost one in five local authorities said they faced imminent insolvency.
The fact remains, however, that there are huge efficiency savings to be made in government; the head of the National Audit Office, Gareth Davies, puts the figure at £20bn a year.
The key to making these efficiencies happen well is to do the hard work of understanding where the money is wasted and why. This is something the last government did well, for a while: the Efficiency and Reform Group set up by Francis Maude in 2010 had saved the government £14bn by 2014. Partly this was achieved by the Cabinet Office bringing in people with experience of sitting on the other side of the government procurement table and asking them to help departments avoid being ripped off.
Reeves seems to be resurrecting this idea by bringing in “challenge panels” of bankers and other experts from the private sector to assess value for money. People from the real world have valuable knowledge to share with Whitehall, if it’s used properly. But they must also recognise that in many areas – public health, for example, or maintaining assets rather than planning shiny new projects – you’ve got to spend money to save money.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.
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