Consultants 'fleece' the public purse

In the second of a three-part series, the <i>IoS</i> looks at how Government has spent a cool &pound;20bn on management advisers

Famously described by Robert Townsend, former chairman of Avis, as "people who borrow your watch to tell you what time it is and then walk off with it", the army of management consultants employed to help to run the UK has come at the staggering estimated cost of £20bn in the past 10 years. Some consultants are being paid daily rates in excess of £3,000.

If the sums spent on IT programmes is added, the figure spirals to £70bn – sufficient to pay for hundreds of new hospitals. Instead, the main result appears to be the growth of an industry benefiting from lucrative contracts, according to David Craig, a former management consultant and author of Plundering the Public Sector.

Now all political parties are competing to plug the yawning financial chasm in the public budgets. Gordon Brown has promised to slash consultancy bills by half while the Tories have pledged to cut expenditure on consulting and advertising spending if they form the next government. Last night, the shadow Cabinet Office minister Francis Maude accused the Government of fuelling "a culture of waste" by frittering away millions on "incompetent projects".

An analysis by The Independent on Sunday has revealed the extent of the Government's profligacy. Among the big spenders are the Department of Health, whose expenditure on consultants totalled £125m last year. The most recent figures for defence chiefs' spending was £107m for 2007-08. The Department for Children, Schools and Families (DCSF) claims £59m went on consultants last year, but the figure rises to £70m if £11m cited for advice from "external experts" is included. The Department for International Development spent £21m on consultancy in 2009 – yet this excludes expenditure relating to developing countries.

One department, Defra, parted with more than £1bn for consultants and "professional services" between 2002 and 2007 – £187m of which went to management consultants. And the Home Office got through £662m on consultants in the past five years. The Department for Culture, Media and Sport is among the most parsimonious, spending £1.22m on consultants last year. That figure reaches almost £6m when IT costs and "professional services" are included.

The scale of spending is staggering, claims Mr Craig. "All too often, greedy management consultants are completely fleecing government departments because of the incompetence and inexperience of the people they are dealing with." He believes typical mark-ups for consultants can be more than 800 per cent. "Take a basic consultant on a salary of around £30,000. You sell that consultant to government for £6,000 a week – the equivalent of £250,000 a year. Nobody in the public sector ever asks why you are charging so much, but it is a back of a fag packet calculation; any idiot can do it. It becomes immoral when you're taking money from public services."

"Risk-averse" civil servants are a big part of the problem, according to Edward Leigh MP, chair of the Commons Public Accounts Committee. He accused them of being "always willing to pass the buck to the consultants instead of making decisions themselves", adding: "More civil servants have got to have courage to say 'no minister, we can't afford to do this', not 'yes minister'."

The civil service union, the Public and Commercial Services Union, defended its members' record. "It is scandalous that nearly 100,000 civil and public servants have been cut while billions of pounds has been wasted on consultants, often doing the same work as civil servants, but at 10 times the cost," a spokesman said.

The consulting industry said the bill is much smaller. It estimates the government consultancy business was worth £2bn last year. In 2006, the National Audit Office said almost £3bn a year was spent on external expertise. Alan Leaman, chief executive of the Management Consultancies Association, insisted the industry provided good value. "What you are buying is access to specialist skills, knowledge, understanding and experience." However, he conceded: "I think the biggest challenge for the industry is the ability to say 'no, although you're asking us to do that and we'd make money from doing it, we wouldn't recommend it'."