Chancellor of the Exchequer George Osborne speaks during the British Chambers of Commerce annual conference in London, 3rd March, 2016. Kirsty Wigglesworth/AP/Press Association Images
If reports are to be believed, George Osborne, the Chancellor of the Exchequer, will need to find urgent savings in next week’s Budget. Revisions to nominal GDP numbers have left the economy £18bn smaller than expected. The Office for Budget Responsibility looks set to lower its growth as “storm clouds” form above the global economy. Over the weekend, Osborne also appeared to shelve pension reforms that would have brought forward tens of billions in revenue.
To meet this fiscal challenge, Osborne has acknowledged the need to find further efficiencies in government. To start, he should look no further than the £40bn central government spends on procuring goods and services each year. Reform research published today concludes that Whitehall could save £10bn of this spend each year by making greater use of digital procurement portals, which replace traditional, paper-based approaches with Amazon-like catalogues of goods and services.
Doing so would be a victory for government: conducting more business online squares with the government’s digital strategy. It would also build on the success of digital portals introduced by the Coalition, which have lowered barriers to entry and stoked competition through reducing administration for suppliers. One framework, the G-Cloud, has facilitated £1bn in IT spending since 2012, returning savings of 50 per cent when the costs of bidding for contracts were included. This has also diversified the suppler base (another aim for government): 50 per cent of spend has gone directly to small and medium sized enterprises. This is five times the figure for traditional procurement approaches.
This approach is a paradigm shift—but the government can go much further. The UK channels 1 per cent of its procurement expenditure through G-Cloud. This is dwarfed by Estonia which, bound by the same EU rules as the UK, directs 50 per cent of procurement spend through online portals. If the UK matched this level, central government could save a staggering £10bn a year.
Achieving these savings requires bold action. Departments should work together to identify opportunities for procuring products via digital channels. One opportunity will be Revenue and Customs’s £800m-a-year Aspire contract, which underpins the UK’s tax-collection system. This is due to be retendered in 2017—using digital portals to procure relevant parts of the next contract may help the government make the 25 per cent savings it seeks.
The government has committed to building on the digital revolution. It announced late last year that it would “extend the lessons” of digital procurement by introducing a new online platform, the “Crown Marketplace.” Bold action here will help the government find much-needed efficiencies in public spending. This would go some way to demonstrate Osborne’s view that “we can deliver value for money for the taxpayer while giving improved public services for people.”
