In Autumn 2009, HMRC reported it had achieved savings of some £300 million. The NAO examined reported savings in staffing, estates, IT and procurement which totalled £288 million a year, some 90 per cent of the reported total savings. The NAO rated 42 per cent (£121 million) as sustainable savings (green), 45 per cent (£129 million) as savings but with some uncertainty (amber) and 13 per cent (£38 million) as overstated (red). This report accompanies the broader NAO progress report on VFM savings (HC 291, 9780102965391)

This report contains two independent reviews that are part of a series of reports the NAO will be producing into savings reported by departments as part of the targets set by the 2007 Comprehensive Spending Review. The Department for Transport reported savings of £892 million, of which the NAO found that 43 per cent fairly represent realised cash savings, 22 per cent may represent realised cash savings but with some uncertainty, and 35 per cent may be overstated. At the Home Office, the NAO sampled £338 million of £544 million reported savings and found 59 per cent of these fairly represent realised cash savings, 24 per cent may represent realised cash savings but with some uncertainty, and the NAO has significant concerns over 17 per cent. Overall, the Government has set a target to generate annually cash-releasing savings of £35 billion by 2010-11. The savings programme is based on the principle that the planned savings have already been removed from departments' budgets. Departments therefore have to deliver savings to release enough cash to meet their spending plans or reduce activity compared with the planned level. The NAO is satisfied that, in many cases, both departments are achieving long term savings. The main reasons for the NAO's concerns are: Eighty per cent of the Department for Transport's reported savings relate to support for the rail industry. The NAO considers the benchmarks against which these savings were measured should have been revised in the light of the most recent information, which would reduce the savings reported in 2008-09. The main reasons for the NAO's concerns with around 17 per cent of savings reported by the Home Office were that reported gains were one-off cash savings which will not permanently reduce the Department's expenditure, or were not new annual savings as the procurement actions had been taken in prior years.

This report discusses how much the Treasury's Value for Money savings programme has improved value for money across government. The programme aims to achieve government-wide annual savings of £35 billion from 2008-09 to 2010-11. Today's report concludes that the Treasury's design addressed some weaknesses in earlier savings programmes, and departments have made some progress in their management of their programmes compared with previous spending periods. Nevertheless, departments' planned programmes did not contain sufficient contingency and it is unlikely that departments will achieve the government-wide target of £35 billion of annual savings, which fully meet the Comprehensive Spending Review criteria, in 2010-11. To date the NAO has reviewed reported savings amounting to some £2.8 billion from five major departments which are to deliver around 40 per cent of the government-wide total. The NAO has concluded that 38 per cent fairly represented sustainable savings (green); 44 per cent may represent savings but with some uncertainty (amber); and 18 per cent do not represent, or significantly overstate, savings (red). Common problems include the use of unsuitable baselines for the calculation of savings, a lack of transparency over arms-length bodies' reporting processes, and difficulties in demonstrating links between savings and performance. This report is accompanied by the NAO's reviews of the value for money savings reported by the Ministry of Defence (HC 292, ISBN 9780102965407); HM Revenue Customs (HC 293, ISBN 9780102965414); and the Department for Education (HC 294, ISBN 9780102965421)

This report endorses the conclusions and recommendations of the following nine reports by the Comptroller and Auditor General: HC 878, session 2008-09 (ISBN 9780102955088); HC 546, session 2008-09 (ISBN 9780102963250); HC 465, session 2008-09 (ISBN 9780102963205); HC 1028, session 2008-09 (ISBN 9780102963274); HC 962, session 2008-09 (ISBN 9780102963281); HC 86, session 2009-10 (ISBN 9780102963366); HC 293, session 2009-10 (ISBN 9780102963465); HC 216 (9780102963519); HC 452, session 2009-10 (ISBN 9780102963618)

Since 2010, the government has made a number of changes to its procurement structures and processes. There have been signs of good progress in key areas: expenditure on common goods and services is more centralised; participation by small and medium enterprises (SMEs) has increased; and the Government Procurement Service is an improvement on its predecessor. The creation of a Chief Procurement Officer and associated positions has formed clearer lines of responsibility at the centre, and the Cabinet Office now has a firmer grip of procurement expenditure. Overall, the NAO expresses confidence in the Service's reported savings of £426 million in 2011-12 as a result of reductions in price owing to centralised procurement. Nevertheless, there have been problems in implementing the reforms, including ineffective governance structures, unrealistic targets, incomplete data and weaknesses in contract management. Government is not maximising the potential for savings through centralised procurement. There are some operational issues with GPS's management of the central contracts, with departments raising concerns about the inconsistency of contract management and the quality of customer service. And some weaknesses in implementation mean that the centralised approach is not releasing procurement resources in departments as originally expected. Roles and responsibilities for day-to-day contract management are unclear and there are inadequate mechanisms by which departments and the centre of government can hold each other to account. The Cabinet Office will have to lead a major cultural shift across government if the centralising of buying goods and services is to deliver the significant benefits on offer.

The Department of Health has reported that the NHS achieved £5.8 billion of savings in 2011-12, virtually all of the forecast total of £5.9 billion. Most of the savings were generated through the pay freeze for public sector staff, and reductions in the prices primary care trusts pay for healthcare. NHS bodies also made savings by cutting back-office costs. However, there is limited assurance that all the reported savings were achieved. The NAO substantiated a total of £3.4 billion of NHS efficiency savings. Although the savings made by NHS providers as a percentage of operating costs are increasing, it is not clear what level of savings is sustainable over time. Changes to transform services take time to implement and the Department has always expected that these savings will predominantly come in the latter half of the four-year period. The NHS is seeking to maintain the quality of, and access to, healthcare at the same time as making efficiency savings. In 2011-12, the NHS performed well against headline indicators of quality, including waiting times and healthcare associated infection rates. The indicators focus mainly on hospital care and the Department faces a significant challenge in monitoring quality across the NHS as a whole. The Department does not know whether the demand for healthcare is being managed in ways that inappropriately restrict patients' access to care. Reducing demand and redesigning care pathways to treat patients in the most appropriate setting are key ways of generating savings

In challenging circumstances in 2011-12, HM Revenue and Customs maintained its performance in key strategic areas at the same time as reducing its staff and spending. The challenge for HMRC will be to make more and deeper reductions over the spending review period while increasing tax revenues, improving customer service and introducing its 'real time information' project and changes to benefits and credits. HMRC made £296 million of savings in 2011-12, exceeding its target by 19 per cent. This is about a third of the total savings it is required to make over the four years of the spending review period. However, HMRC expects these projects to save £162 million less over the spending review period than when the NAO last reported on this subject, in July 2011. This is partly because its forecasts are now more refined and realistic, and partly because, as some projects took longer to start, the benefits will take longer to be realised. HMRC has strengthened how it manages its change programme in ways that address NAO and Public Accounts Committee recommendations. The Department has also started to address the recommendations that it should improve its understanding of interdependencies between projects and of the cost and value of its activities though it has more to do in these areas. At September 2012, HMRC was on track to exceed its 2012-13 cost reduction target by £29 million. However, the reduction in planned savings being delivered by change projects means that HMRC needs to find £66 million more savings than it originally planned through other initiatives