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Labour government increases consultancy spending despite pledge to cut

Created at 9 Sep · 5:06 AM1 source↑ Market-relevant
IN SHORT

Despite a pledge to slash government consultancy spending, data indicates Labour has increased its expenditure on external consultants. This trend highlights the public sector's reliance on specialized expertise due to internal skill shortages and complex challenges.

Key Numbers

£3.7bnLabour government consultancy spending 2024/25
£150mIncrease in central government consultancy bill in first 12 months
£600mClaimed reduction in consultancy spending in 2024/25
£550mTargeted consultancy spend reduction
£1.2bnProjected savings by 2026
£700mAnnual savings target by 2028/29
£2.7bnTotal management consultancy spend in 2020/21
30%Surge in management consultancy spending in 2020/21
2%Consultancy spending as a fraction of total government procurement
5%Forecasted growth of the UK consulting market
£2.7bnProjected UK consulting market value in 2026
14%Public sector share of UK consulting market
557,000
Current civil service headcount
40,000Increase in civil service headcount since March 2023
12,000Planned reduction in London-based civil service headcount by 2030
£60,000Salary for a highly skilled government role

Who's Involved

Labour
Political party that pledged to cut consultancy spending
Rachel Reeves
Shadow chancellor who promised to slash government consultancy spending
Tussell
Data provider on government consultancy spending
Emma Carroll
Consultant at Source Global Research discussing public sector expertise
National Audit Office (NAO)
Reported on government's inconsistent data on consultancy spending
Source Global Research
Provides data and forecasts on the consulting market
Labour government increases consultancy spending despite pledge to cut

↳ Why This Matters

The reliance on external consultants highlights a persistent challenge for governments in balancing cost-cutting pledges with the need for specialized expertise to address complex issues, impacting public service delivery and taxpayer expenditure.

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.

Frequently asked questions

Labour pledged to slash government consultancy spending, which had nearly quadrupled in six years, as announced in October 2023.

According to Tussell data, Labour government spending on public sector management consultancy procurement rose to £3.7bn for 2024/25.

A government spokesperson stated that consultancy spending was reduced by over £600m in 2024/25, exceeding targets.

Complex issues, the rise of AI and defense pressures, and shortages of specialized internal talent within the civil service contribute to this reliance.

What Happens Next

01The government aims to achieve over £700m in annual savings from consultancy spending by 2028/29.

How It Developed

Labour pledged to cut government consultancy spending in October 2023.
The government announced plans in November 2024 to save £1.2bn by 2026 by freezing non-essential consultancy hires.
Spending on management consultancy surged by over 30% in 2020/21, reaching £2.7bn.
Labour government spending on public sector management consultancy procurement rose to £3.7bn for 2024/25.
Central government's consultancy bill increased by over £150m in Labour's first 12 months.
A government spokesperson stated consultancy spending was reduced by over £600m in 2024/25, exceeding targets.
A National Audit Office report noted the government lacks a clear picture of its total consultancy spending.
Consultancy spending represents 2% of total government procurement.

Sources

T1
Why Labour can’t kick Whitehall’s consultancy habitCity AM

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