UK's Consultancy Spending Cuts: A £1.2bn Target Built on Unmeasurable Data

The government's flagship pledge to halve consultancy spending and save £1.2bn by 2026 faces a fundamental problem: Whitehall cannot accurately measure how much it spends on consultants in the first place. A Public Accounts Committee report has revealed that estimates vary wildly from £1.36bn to £2.23bn for 2022-23 alone, whilst the systems needed to track and control such spending simply do not exist.

For Rachel Reeves, who has positioned consultancy cuts as central to Labour's fiscal credibility, the findings are politically awkward. The Cabinet Office claims to have delivered £550m in savings during the 2024-25 period already, but the PAC's assessment of poor data quality and absent tracking mechanisms casts serious doubt on whether anyone can substantiate such figures.

The data vacuum at the heart of government

What's striking about the PAC investigation is not just the uncertainty around total spending, but the structural reasons why that uncertainty persists. Andrew Forzani, the government's chief commercial officer, confirmed to the committee that some departments are not following guidance when defining consultancy requirements. The Cabinet Office issues procurement rules but does not monitor whether departments actually comply with them.

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This hands-off approach stems from a 2023 decision by the previous Conservative government to scrap Number 10's central spending controls. The stated aim was reducing administrative burden, but the practical effect has been a decentralised free-for-all where departments self-regulate without Cabinet Office oversight. Individual ministries now develop their own internal controls, with no mechanism for enforcing consistent standards across Whitehall.

The committee has demanded a detailed breakdown of what each department spends with individual consultancy firms. That such basic information is not routinely collected or centrally held tells you everything about the governance gap that now exists.

Departments are essentially being asked to police themselves on consultancy spending whilst pursuing their own operational objectives, with predictable results.

Why consultancy costs remain opaque

Part of the measurement challenge lies in how consultancy services are categorised and procured. Different departments use different definitions, making aggregation difficult. Some consultancy work gets bundled into broader professional services contracts. Other spending might be classified as temporary staffing rather than consultancy, even when the function performed is essentially advisory.

The PAC report notes that emerging technologies, particularly artificial intelligence, have transformed the consultancy sector since 2022. Firms increasingly embed AI tools and platforms into their service offerings, blurring traditional boundaries between software licensing, implementation services, and strategic advice. The committee has called for updated guidance on how departments should handle these hybrid arrangements, but no such framework currently exists.

Clive Betts, the PAC's deputy chair, characterised consultancy spending as 'wound so tightly into how Departments run their contracted-out work' that bearing down on costs will be 'a tough knot to unpick'. That phrasing understates the problem. Consultancies have become structural dependencies for parts of Whitehall, filling capability gaps that should arguably have been addressed through permanent civil service capacity.

The credibility question for Reeves

The Chancellor has staked political capital on demonstrating Labour can control public spending more effectively than its Conservative predecessors. Consultancy costs offer a tempting target: they feel wasteful to voters, appear discretionary, and come without the political pain of cutting frontline services. Promising to halve such spending sounds like competent fiscal management.

But promises require delivery mechanisms. The PAC findings suggest those mechanisms do not exist. Without accurate baseline data, how can departments demonstrate they have achieved a 50 per cent reduction? Without central monitoring of compliance, what prevents individual ministries from reclassifying consultancy spending or simply ignoring guidance when operational pressures mount?

The Cabinet Office's claim to have already saved £550m looks increasingly like a number constructed from unreliable departmental estimates rather than verified through rigorous measurement.

When the underlying data is acknowledged to be poor quality, asserting specific savings figures becomes an act of faith rather than financial reporting.

What the PAC has effectively documented is not just a data problem but a governance failure. The previous government dismantled central controls without establishing adequate alternative oversight. The current government wants to impose spending cuts without first rebuilding the architecture needed to track and enforce them. The result is a policy built on sand.

Betts acknowledged that consultancies will continue playing a legitimate role filling specialist capability gaps and bringing expertise in new technologies. The question is whether government can distinguish between genuinely necessary specialist input and the structural over-reliance that comes from inadequate in-house capacity. Based on the committee's findings, Whitehall currently lacks both the data and the governance systems to make that distinction reliably. Unless those fundamental weaknesses are addressed first, Reeves' £1.2bn savings target will remain an aspiration without a credible delivery plan behind it, even as business leaders warn her broader Budget measures may fail to support economic growth amid concerns over consultancy spending remaining poorly tracked across government departments.

More articles by Ross Williams