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For Business, Corporate Travel & Meeting Buyers & Arrangers

Look after the pennies

Swingeing government cuts mean public sector departments are scrambling to make savings. Bob Papworth evaluates the impact on travel

SPARE A THOUGHT, IF YOU WILL, for those hapless souls currently gainfully employed at the UK Statistics Authority and gearing up for the decennial national census taking place on March 27.

Recognising that the flood of information pouring from some 25 million households will take some processing, the government has increased the number-crunchers' budget from £287 million in 2010/11 to £317m in 2011/12.

Then the axe drops.

In 2012/13, the statisticians will receive only £166m; a year later, a mere £154m; and in 2014/15 they'll be getting a paltry £145m - near as makes no difference, half what they're getting right now.

At the end of 2010, the Authority employed around 4,000 people, the majority of whom were headquartered in Newport, South Wales. The prospect of there still being 4,000 staff on the payroll in 2014/15 is looking pretty remote.

As far as can be reasonably established, the Statistics Authority is by far the biggest loser in Chancellor George Osborne's battle to balance Britain's books. However, if we're being brutally honest, statisticians don't generally move about very much, so why should the business travel industry really care? The answer to that, of course, is that there is a much bigger picture.

The UK Statistics Authority is just one of a couple of dozen "small and independent bodies", ranging from the Food Standards Agency to the Supreme Court, which are funded by central government and which, over the next five years, are going to find those funds are becoming seriously depleted.

Not one of them will be in receipt of more money in 2014/15 than in 2010/11. And some of them do an awful lot of travel - Ofsted inspectors, for example, are all over the place, while the people at UK Trade & Investment spend a great deal of time abroad helping to flog stuff.

Overall, small and independent bodies' funding will plummet more than 20 per cent from £1,806m in the current financial year to £1,442m in 2014/15. To make ends meet, they are expected to cut spending on administration by 33 per cent.

Translate that level of parsimony to the Department for Work and Pensions (DWP), whose £151.6 billion budget is one hundred times larger, and the scale of the cuts begins to sink in.

In fact, the DWP is one of only three big government departments - the others are Health and International Development - whose budgets will rise consistently over the spending review's five-year time-frame.

A dozen more will be receiving less money in 2014/15 than they are now (the Treasury, which holds the purse-strings, has ensured its £200m-a-year budget remains unscathed), and that's before inflation is taken into account.

If the government objectives are to be met, savings clearly have to be made. The trouble is that no-one has yet identified - beyond the odd Harrier jump-jet or two - precisely where they will be made. There is, however, no shortage of ideas.

In the months leading up to the October 2010 comprehensive spending review, the coalition government issued what it called the Spending Challenge, inviting individuals to suggest ways in which taxpayers' money could be saved.

More than 100,000 suggestions were received, including 63,000 from public sector employees, although only a few were travel-specific:

  • HM Revenue & Customs was urged to "stop allowing the HMRC Extradition Team to travel using first or business class" and to "stop all travel and subsistence allowances except where it can be shown to be business-critical".

  • The Department for International Development (DfID) was advised to "require staff assigned to overseas positions to use the cheapest flights possible - don't base the kitty on return business flights with BA".

  • Vince Cable's Business, Innovation and Skills department received a rather simpler exhortation: "Crack down on travel spending within UK Trade & Industry". The Department of Health was advised to "make greater use of video-conferencing to save travel time and costs".

  • Rather more creatively, one contributor suggested that the Foreign & Commonwealth Office could "save money on hotels by offering incentives for staff to host visitors".

The very fact that the suggestions have been posted on the Treasury website implies that they represent 'new' thinking, which in turn demonstrates that there is huge scope for the introduction of a wealth of very basic travel management practices.

(Best idea of the lot, and one which would surely meet with Jeremy Clarkson's approval, was a two-word snippet of advice to the Department for Transport, presumably as a means of reducing road congestion. It said simply: "Tax caravans.")

Sir Philip Green, the Topshop boss commissioned by Prime Minister David Cameron to take a necessarily-cursory look at government procurement practices, is clearly of the opinion that while 'new' thinking may have some merit, there is a lot of 'old' thinking that needs to take precedence.

In the introduction to his report, Green does not pull his punches. "Having carried out this review and discussed it with the senior civil servants I have worked with, they all believe that it is impossible for the civil service to operate efficiently with the current processes in place.

"There is a huge opportunity that has been clearly identified both in central government and beyond, but without a clear mandate, energy, focus and commitment, this cannot be delivered.

"I am deliberately not going to place a total number on the waste and/or the saving. I think from this report it is clear that the prize for the taxpayer is too big and significant not to chase."

Green calculates that in 2009/10, central government alone spent £166bn on procurement - of everything from IT and travel to "consultancy" - £2bn more than it spent on the civil service payroll.

"We were initially advised that the average travel spend for central government was £2bn; the second estimate was £500m; the third estimate was £768m," the billionaire retailer complains. "A thorough review revealed that the actual spend was £551m.

"Departments contract separately with travel management companies, with different contract terms and conditions, and operating to different travel policies."

The end-result, he suggests, is utter chaos. As an example, he singles out the government's £38m annual spend on 400,000 London hotel room-nights. The highest per-night price paid was £117, while the lowest was £77 - 34 per cent cheaper.

Adding in travel and subsistence costs, Green estimates the government is spending around £20 per person per night. "Halving the number of room nights by mandating the use of video-conferencing and other solutions could save £50m," he claims.

The harangue goes on. "There are clear reasons why government conducts its business so inefficiently," he says. "There is no mandate to purchase even basic commodities through a central team. Government does not leverage its buying power, nor does it follow best practice. Procurement data is shocking - it's both inconsistent and hard to get at. There is inefficient buying by individual departments, with significant price variations across departments for common items."

Just in case anyone had missed the point, he goes on to savage "poor and often inaccurate" data as well as a lack of motivation to save money, of a process for setting and challenging detailed departmental budget, and of a mandate for centralised procurement. To rub salt into the wounds, he adds that there are "inconsistent" commercial skills across departments.

The word "mandate" crops up so frequently in Sir Philip's fulminations that Buying Business Travel decided to ask the government's Buying Solutions procurement team - of whom more later - whether use of the dozen or so recognised travel management companies and hotel booking agencies is mandated.

After a couple of weeks, a spokesperson responded: "Greater standardisation and aggregation of common goods and services as a means of achieving increased efficiency savings is at the heart of the Efficiency and Reform Group agenda. Buying Solutions' framework agreements and other procurement arrangements are key deliverers of such savings.

"Historically, use of Buying Solutions' framework agreements has not been mandated. However, our new vehicle purchase and vehicle lease framework agreements, which are both currently at Invitation to Tender stage, will be mandated for use by central government departments (including executive agencies and non-departmental bodies).

"Central government departments are being actively encouraged to use existing procurement arrangements to ensure maximum efficiency savings are achieved." Or, put into considerably plainer English: "no".

To be fair, the Buying Solutions people may have been in a spot of turmoil, having just become - along with the Office of Government Commerce (OGC) - part of the Efficiency and Reform Group (ERG), which comes under the aegis of the Cabinet Office and is overseen by an Efficiency Board.

With a command structure like that, cynics might ask how could it possibly fail to be anything but efficient, but Cabinet Office minister Francis Maude - a criminal lawyer by training, a former vice-chairman of the All Party Parliamentary Group on AIDS, and MP for Horsham - professed himself delighted with the addition to his little empire.

"We want a slim but strong centre that can drive down the cost of government, so protecting as best we can the crucial frontline services on which our citizens depend," he said, without irony.

Just in case the message hadn't filtered through, he then said it again, only with more words: "The changes I am announcing today will bring together our operational capability to form a single strong but streamlined group to drive efficiency across government. By taking this really tough stance on inefficiency and waste, we can tackle Britain's massive budget deficit and bring order back to the country's finances, whilst protecting vital frontline services."

A couple of months later, Maude announced that John Collington, the Home Office's group commercial director, was to become the new head of procurement in the Efficiency and Reform Group.

"We need to make sure that the government saves every penny it can and this means being completely committed to taking internal costs out of government wherever possible.

"As in any big complex organisation, there are some things that government must mandate centrally. By giving a really big push to the centralisation of its procurement mandate we can make sure we take advantage of government's buying power to drive down the costs of goods and services.

"The work that John Collington will lead from the Efficiency and Reform Group will help all departments across government address the pressing demands of necessary spending reductions. He brings with him considerable commercial experience and expertise to the role, and the necessary drive to take forward important and necessary reforms in Government's procurement activity."

Collington himself said: "There has never been a greater need for smarter, aggregated approaches to government spending on commodities. Financial challenges faced by departments means it is imperative solutions are acted upon quickly.

"Pockets of best practice already exist within Whitehall, but so much more can be achieved. I am looking forward to deliver the necessary reforms, building on the current best practices, and realising the full potential of the programme."

That all sounded good, so Buying Business Travel asked for an interview. Sadly, those extant pockets of best practice within Whitehall do not extend to responding to phone messages or emails.

In his time at the Home Office, Collington claims that procurement changes implemented there had resulted in savings of £243m - more than 10 per cent of the department's annual goods and services spend - over three years.

Travel and expense management specialist KDS has helped the Ministry of Defence save more than 10 per cent of its business travel spend. Serendipitous happenstance, maybe, but at least it meant that someone would have an opinion.

Sure enough, when asked whether public sector spending cuts represented a threat or an opportunity for the travel industry, Dean Forbes, KDS' executive vice president for sales and marketing worldwide, made it abundantly clear that he can do 'opinion'.

"I think anybody who thinks that the introduction of a new travel policy, or tighter controls around when and how people travel, might be some kind of threat - well, he's an idiot. "Curbs and caps are being introduced because people were frivolous. They spent money on travel that was unnecessary, and they spent too much money on travel that was necessary.

"If the amount of travel comes down, that amounts to a recognition that people have been reckless where travel spending is concerned. I don't think that will be the case. I think the amount of travel will remain kind of consistent, but people will be a bit more rigorous, and they will buy more smartly."

The Buying Solutions' move to the Cabinet Office came in June last year. John Collington's appointment was announced in August, and he took up his post in September.

Sir Philip Green's savage critique of Whitehall procurement practices was published on October 11, nine days before George Osborne delivered his comprehensive spending review speech in the House of Commons. The financial year in which his curbs begin to bite starts on April 1 - about 12 weeks' time.

So far, no-one - in the travel industry, in other sectors, or in Whitehall - appears to have any clear picture of how it's going to work. Come 2015, however, when the current austerity package is due to run out, we'll all want to know whether the pain has resulted in gain, or whether we have to do more time on the recessionary rack. We'll need facts and figures.

And statistics.

Back in Newport, South Wales, in the once-bustling headquarters of the UK Statistics Authority, as a bone-chilling draught repeatedly slams an unhinged office door, our petulant, plaintive demands will merely echo down eerily-empty, graffiti-sprayed corridors populated only by the ghosts of number crunchers long gone.