Whitehall unable to reduce consultancy spend amid digital skills shortages

The government faces scrutiny over its spending and reliance on third-party consultants, as the Public Accounts Committee (PAC) calls on Whitehall to get to grips with the costs.

While ministers have pledged to reduce consultancy spending and save more than £1.2bn, the PAC is in doubt whether government will succeed. In a report on consultancy spend, the PAC highlighted that there is currently no clear overview of how much government spends on consultants each year. While the government estimates the figure to be around £1.36bn a year, other sources suggest the figure could be significantly higher.

“The Cabinet Office and HM Treasury do not have accurate data on what government spends on consultants, which means the Cabinet Office is not able to set meaningful targets to reduce its reliance on them. The data available on departments’ consultancy spending are inconsistent and vary from one source to another,” the report said.

“Government does not have a clear picture of how much it spends or how this spending has changed over time. This makes it difficult to make decisions on use of consultants or monitor progress against its targets to cut consultancy spending.”

One of the issues is that not all departments are complying with government directives on reducing spend, and there is no up-to-date guidance on how to “procure, learn and manage consultancy”, according to the PAC.

The government’s consultancy playbook has not been updated since 2022 and it is now out of date due to new technologies on the market – however, the government has promised a new playbook will be issued by summer 2026.

“Since 2022, emerging technologies, such as AI [artificial intelligence], have transformed consultancy and professional services,” the PAC said.

Digital transformation projects rely heavily on outside expertise, with has increased demand for consultants, particularly programmes involving cloud migration, cyber security, data analytics and AI.

Reducing the spend on consultancy will require government to build stronger internal digital capabilities in the civil service, and MPs on the committee raised concerns that some departments with large estates of legacy systems will struggle with modernising these without specialist expertise.

PAC chair Clive Betts said the committee is concerned with value for taxpayers’ money and the pledge to reduce consultancy spending is the right way forward.

“But our inquiry has shown this may not be so simple, given that government does not yet have a grip on precisely what is being spent. With consultancy spend now wound so tightly into how departments run their contracted-out work, and with so little and such inconsistent data available, actually bearing down on this spending will be a tough knot to unpick,” he said.

“The consulting sector will of course continue to play an important role in filling any specialist gaps where government truly does not have the requisite skills for project delivery, as well as demonstrating cutting-edge practice in the use of new technologies from which the public sector can learn lessons.”

The government is also due to publish a new strategic workforce plan shortly, which will set out how it plans to tackle the skills gap across government, particularly in digital and technology skills.

Cabinet Office told the committee that it is looking at whether AI can play a role in shaping future consultancy but does not expect it to fully replace the reliance on external consultants.