Ministers have quietly dropped restrictions on spending controls, allowing Whitehall departments to potentially spend millions more on external consultants.
The limits were introduced under David Cameron in 2011, requiring central authorisation if contracts with firms such as Deloitte or KPMG lasted more than nine months or exceeded £20,000. The value of the contracts has been rising – with the limit earlier this year set at £600,000.
But now those spending limits have been cancelled altogether, paving the way for department to spend millions more of taxpayers’ money on external advice.
Labour said the change was “simply staggering” and it was indefensible it had been made during a cost of living crisis when government purse strings were being tightened in other areas of public spending.
The Cabinet Office minister Jeremy Quin and the chief secretary to the Treasury, John Glen, wrote to departments this month ending restrictions on consultancy “effective 31 January 2023 in line with the agreed lifting of burdens [and] realignment of focus and impact of Cabinet Office spend controls”.
The update concluded that “following workshops during January on an operational level, the removal of the controls is welcomed”.
The move was not announced, but changed on the guidance page of the Cabinet Office website, which said the spending controls on “consultancy and professional services” had ceased as a requirement. All government contracts worth more than £20m still require authorisation centrally.
The Cabinet Office says management consultant advice will be “time limited” and likely to be “related to business change or transformation”, and that the individuals employed on a consultancy basis “will operate outside of the client organisation’s structure and staffing establishment”.
Spending on outside consultants has soared in recent years, although some additional spending was connected to Covid. The UK public sector awarded £2.8bn of consulting contracts in 2022, according to data from the contract analysts Tussell Ltd in the FT last week. That figure was up 75% on 2019.
Deloitte was awarded contracts worth £278m in 2022, more than any other consultancy, though spending was down on levels during the UK height of the pandemic.
Others in the “big four” accountancy firms were also awarded millions in contracts, including £152m for PwC and £101m for EY. KPMG had withdrawn from bidding for work because of a series of scandals reported last year, but was still awarded contracts worth £12m.
The shadow chief secretary to the Treasury, Pat McFadden, said: “It is simply staggering that a government which has crashed the economy, crippled the finances of millions of households, and brought our NHS to breaking point, has decided now is the time to loosen the Whitehall purse strings when it comes to hiring outside consultants.
“Ministers already waste billions each year hiring consultants to tell them how to do their jobs, so who knows what that bill will look like when these controls are removed. To make this change at any time would be inexplicable, but during the worst cost of living crisis for decades, it is downright indefensible.”
The Financial Times reported last month that the government’s in-house consultancy hub was being scrapped by the end of January because government departments continued to prefer hiring support from major outside consultancy firms.
A Cabinet Office spokesperson said: “We are committed to improving efficiency and reducing consultancy spend across government.
“The recent changes removed a number of administrative processes and the Cabinet Office will continue to assess data on departments’ consultancy spend.”
