Key facts
- Labour pledged to cut government consultancy spending, but data shows an increase.
- Government spending on public sector management consultancy procurement reached £3.7bn for 2024/25.
- The central government's consultancy bill rose by over £150m in Labour's first 12 months.
- A government spokesperson claims consultancy spending was reduced by over £600m in 2024/25.
- Consultancy spending constitutes 2% of total government procurement.
Despite a pledge to cut government consultancy spending, data indicates that Labour has increased its expenditure on external consultants since coming to power. The party, which promised to 'slash government consultancy spending' in October 2023, has seen its procurement of public sector management consultancy rise to £3.7bn for 2024/25, an increase of over £150m in its first 12 months for central government alone.
A government spokesperson stated that recent figures show a reduction of over £600m in consultancy spending for 2024/25, exceeding targets and reaching a five-year low. They remain committed to halving consultancy spending, with further targets aiming for over £700m in annual savings by 2028/29.
However, a National Audit Office report highlighted inconsistencies in the government's data regarding consultancy expenditure. Experts suggest that complex projects and shortages of specialized internal talent within the civil service necessitate the use of external expertise. Areas like navigating Brexit, managing the pandemic, and addressing the rise of AI and defense pressures require skills not always available in-house.
While the civil service headcount has grown, governments face pressure to reduce administrative costs, with Labour planning tens of thousands of job cuts. Strict public sector pay bands make it difficult to attract highly skilled individuals for roles that command significantly higher salaries in the private sector.
The UK consulting sector, a significant contributor to tax revenue, values public sector work, which constitutes about 14% of its market. Management consultancy spending represents a small fraction, only 2%, of total government procurement. Reliance on consultants is likely to persist due to ongoing public sector skill shortages.