National Audit Office: Government lacks a clear picture on how much it spends on consultants

• Consultants should only be used where they represent best value for money and not to replace capability required inside the civil service. Used well, consultants provide specialist expertise in areas of unpredictable demand, and 86% of respondents to an NAO survey found them to bring valuable contributions. 
• However, a lack of comprehensive data on what government spends on consultants may delay progress towards ambitious targets to halve spending. 
• The NAO has highlighted several examples of good practice when using consultants throughout the process, from procurement to evaluation. 

Government does not have consistent data on how much individual departments are spending on external consultants or how this expenditure has changed over time, complicating efforts to track spending cuts, according to a new National Audit Office (NAO) report.1  

Consultants can provide expert insight or specialist skills that government departments require, or provide an external perspective, particularly where demand for those skills is for a short period or unpredictable.2   

86% of respondents to an NAO said that consultants provided a valuable contribution to government, and that consultants were deemed to be most valuable when hired to solve specific problems using expertise that the civil service lacks. However, hiring consultants can be costly, and potentially wasteful if they are used unnecessarily or result in government failing to build the inhouse capability it needs.   

In July 2024, the government set targets for savings on consultancy spending. This included an immediate stop to all non-essential spending and a halving of overall expenditure on consultants in 2025-26.  

HM Treasury (HMT) estimated that central government spend on consultants in 2022-23 was at approximately £1.36 billion, but other sources suggest the figure could be significantly higher. HMT aimed to halve government spending on consultants by £550 million in 2024-25, reaching £700 million in savings by 2028-29, but a lack of clear data may present challenges in monitoring progress towards this target.    

The NAO report finds several reasons as to why the data on consultancy spending is inconsistent. These include different definitions being used within departments of what constitutes consultancy work, and difficulties in classifying services that consultants deliver.3   

The lack of consistent data prevents HM Treasury from making effective decisions on how to reduce spending on consultants and from understanding the roles for which consultants are repeatedly hired. As a result, it does not have a clear picture of where money could be saved by hiring full-time workers or by promoting internally.    

In 2023, the previous government withdrew centrally-directed spending controls on consultants in an effort to cut administrative workloads within departments. Instead, departments were encouraged to develop their own internal controls on consultancy spending. But an NAO survey found that this led to discrepancies in how stringently these controls were being applied.4   

The NAO has developed lessons that can help government to achieve improved value for money from the use of external consultants:   

• Proper planning for skills in department workforce plans, so they do not need to procure consultants unnecessarily or at short notice.  
• The right scrutiny and oversight so consultants deliver the best value. See NAO good practice guide for further guidance. 
• Engagement with suppliers when procuring consultants to encourage competitive bids and innovative proposals.
• Clearly establishing roles and responsibilities, with expectations and timelines set out from the start.
• Ensuring that civil servants learn from consultants while they are working together by building knowledge transfer agreements into contracts.   

A corresponding Good Practice Guide for government departments will be published alongside the report.   

ENDS 
Notes to editors

1. The report will be available on the NAO website from 00:01 Friday 21 November.
2. The government departments that the NAO spoke to used consultants in areas including project assurance, digital transformation, project delivery, policy development, research, evaluation, and scientific advice. Respondents to the NAO's survey said that they frequently used consultants for project delivery, digital transformation and change management.  
3. Cabinet Office and government departments use several data sources to measure spending on consultancy. Data is drawn from the following: Departments' annual report and accounts; departments' spending returns (OSCAR); private sector commercial analysis platforms like Tussell and Oxygen Finance Insights; and spend management software systems like Jaggaer Spend Analytics. For further information, see Figure 10 in the report.   
4. Current Cabinet Office controls only affect contracts that are greater than £20 million in value. The Cabinet Office encouraged departments to develop their own internal controls to replace the more important central ones. Departments have told the NAO that they have taken various approaches to establishing these controls, setting varying spending thresholds and performing different checks on consultancy spending. While this may allow for more proportionate approaches, it also creates a risk that some departments are scrutinising consultancy spending less than others.