Cabinet Office lifts consulting spending cap

20 February 2023 Consultancy.uk 5 min. read
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The UK government has once again courted controversy over consulting spending, with the news that it has relaxed spending controls on external advisors. The move comes after the government also axed plans to create an inhouse ‘Crown Consultancy’, and allows Whitehall departments to potentially spend millions more on professional services contracts – something critics have branded “indefensible” amid the cost-of-living crisis.

From 2010, the UK’s government enacted stringent spending cuts across the public sector. This saw the civil service decimated, as part of then-Prime Minister David Cameron’s strict austerity policies – which claimed that the UK had amassed an unaffordable public debt that needed to be addressed by any means necessary.

Cameron’s policies did not only apply to inhouse spending, though. His government also put in place a series of rules which were designed to limit the spending of tax payer’s money on private advisory firms. In 2011, this saw Whitehall required to gain central authorisation, if contracts with consulting firms such as the Big Four of PwC, EYDeloitte or KPMG lasted more than nine months – or exceeded £20,000.

Cabinet Office lifts consulting spending cap

Successive Prime Ministers have loosened those rules in the subsequent decade. Earlier in 2023, the incumbent administration of Rishi Sunak has set the limit for the value of advisory contracts at £600,000. Now, however, news has emerged that the rules have been scrapped outright.

As reported by The Guardian, Cabinet Office Minister Jeremy Quin and Chief Secretary to the Treasury, John Glen, wrote to departments confirming that restrictions on consulting work would be lifted “effective 31 January 2023” in line with “the agreed lifting of burdens [and] realignment of focus and impact of Cabinet Office spend controls”. According to the same update, the decision came after “workshops during January on an operational level,” adding that “the removal of the controls is welcomed”.

The news will be cause for relief among some over-stretched departments in Whitehall, which have been spread think thanks to a decade of austerity cuts. Understaffed civil service teams have often had to rely on sourcing temporary expertise from consultants in order to deal with the sudden burdens of Brexit and the Covid-19 pandemic – and with both still impacting the UK, will now be able to avail themselves of consulting support more easily.

A Cabinet Office spokesperson told the newspaper, “We are committed to improving efficiency and reducing consultancy spend across government. The recent changes removed a number of administrative processes and the Cabinet Office will continue to assess data on departments’ consultancy spend.”

Divisive policy

However, beyond Whitehall, or the consulting industry, the move may not be universally welcomed. Even with the limits in place the government’s spending of public funds on temporary engagements with consultants, without investing in the long-term development of its civil service talent, has caused outrage among critics. With the government once again priming for austerity – Chancellor Jeremy Hunt announced billions in spending cuts in his November budget, while axing support for consumers struggling with spiralling energy prices – the idea of heightened consulting spending might not sit well with the public.

Possibly anticipating this, the move was not announced. Instead, as The Guardian put it, the guidance page of the Cabinet Office website on consulting contracts was “quietly” changed. The page noted that the spending controls on “consultancy and professional services” had ceased as a requirement. However, limits that are not specific to consulting still apply. At present, all government contracts worth more than £20 million require central authorisation.

This was little consolation to Shadow Chief Secretary to the Treasury, Pat McFadden, who commented, “It is simply staggering that a government which has crashed the economy, crippled the finances of millions of households, and brought our NHS to breaking point, has decided now is the time to loosen the Whitehall purse strings when it comes to hiring outside consultants. Ministers already waste billions each year hiring consultants to tell them how to do their jobs, so who knows what that bill will look like when these controls are removed. To make this change at any time would be inexplicable, but during the worst cost of living crisis for decades, it is downright indefensible.”

Defending the government's consulting spend, however, Tamzen Isacsson, Chief Executive of the Management Consultancies Association contended that the professionals had provided both vital expertise, and value for money. This included the provision of "multi-disciplinary capabilities and senior experience very quickly" to support the government in dealing with an "unprecedented volume of workload".

Isacsson added, “Firms have strict internal governance procedures to ensure that government is receiving value for money and ensure staff working on public sector projects meet the highest standards in ethics and are held to account to ensure the public interest is being served. All MCA Member Firms used by the government have been procured through competitively tendered Crown Commercial Service frameworks which evaluate bidding firms against quality and cost criteria. As part of these contracts, consultancy firms are required to upskill civil servants and transfer knowledge to increase capability for the future.”    

Earlier in the year, it was also revealed that the government had ditched plans to create an in-house advisory wing scrapped. After two years of planning for a ‘Crown Consultancy’ as a means to reduce taxpayer spending on private sector professional services giants – such as the Big Four and the MBB – the plan was abandoned, as government departments reportedly still preferred to use external consultants.