No 10 explores ‘Crown Consultancy’ to stem billions going to private firms

Boris Johnson’s government is quietly working on creating its own in-house consultancy arm — dubbed “Crown Consultancy” — to cut its dependence on high-charging private sector firms.

The idea, driven by efficiency minister Theodore Agnew and championed by Downing Street adviser Dominic Cummings, would bring bright civil servants and graduates together in a new division to improve delivering policies across Whitehall.

“There’s a lot of reliance on consultancies,” said one official close to the project. “It would be sensible to look at what we can do internally, rather than externally.”

There have long been concerns over the spiralling costs spent on consultants by the government. The UK spent a total of £2.6bn on just eight consultancies between 2016 and 2020, according to research firm Tussell. These were the Big Four accountants PwC, KPMG, Deloitte, and EY; US advisory giants McKinsey, Bain, and Boston Consulting Group; and UK group PA Consulting.

Lord Agnew, a former businessman now based in the Cabinet Office, last month claimed in a leaked letter that Whitehall had been “infantilised” by “an unacceptable” reliance on expensive consultants.

He said their extensive use had “deprived” public servants of the experience of working on complex projects. Francis Maude, a former cabinet minister, is also conducting a short review looking at government functions including human resources, property management and project management.

An in-house “Crown Consultancy” operation would recruit young graduates to work alongside talented civil servants and some recruits from the private sector to help manage government projects.

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While the civil service is unable to compete on salaries with the likes of the Big Four, many graduates choose to begin their careers in Whitehall before taking their knowledge of government into the private sector.

Mr Cummings appealed for project managers to apply for jobs at the heart of government in January — part of his “weirdos and misfits” blog — saying only a small group of people in the world were great at the job.

“It is obvious that improving government requires vast improvements in project management. The first project will be improving the people and skills already here,” he wrote at the time.

Government officials said the name Crown Consultancy had not been agreed and that work on the proposed new body was at a relatively early stage. “It’s a good idea,” said one. “We should be doing more internally.”

This year alone, PwC has been paid £180m for its public sector consultancy work, making it the largest single beneficiary of UK state consulting contracts in 2020.

The sum included more than £120m in fees from central government departments, plus fees from the NHS, local authorities and national railways. Deloitte, EY and KPMG have earned a combined £361m from public sector consulting work this year. 

Dozens of lucrative contracts have been awarded to the Big Four despite concerns about the quality of their work for a string of collapsed companies and accounting scandals, such as at Carillion, BHS, Tesco and Thomas Cook, as well as political and regulatory intervention to force them to break up their businesses.

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Spending on consultants has climbed rapidly in the four years since the UK voted to leave the EU. Between 2016 and 2018, fees paid to private firms trebled from around £500m to £1.5bn, according to the National Audit Office.

This year, coronavirus has deepened concerns about the costs of relying on large consultancies for big public projects. The government has spent more than £175m on management consultants during the pandemic, with the largest sums going to PwC, which has earned around £24m, and Deloitte, which has won contracts worth about £23m.

A number of the consulting contracts have come under fire over the services provided. Deloitte was appointed to manage PPE procurement for hospitals and support testing sites, but was criticised for a series of administrative errors and delays in providing kit.

Others questioned the value of a £560,000 contract with McKinsey to advise on the “vision, purpose and narrative” of England’s testing programme.

The extent of the firms’ use has long drawn criticism. A report by the National Audit Office in 2016 showed that consultants typically cost government departments twice as much as their counterparts, who are permanent members of staff.

Day rates for consultants advising on government projects can reach thousands of pounds per day. Executives at Boston Consulting Group, one of the three largest US advisory firms, were charged out to the government at rates of around £7,000 a day to work on developing the UK’s test-and-trace system.

Many government officials go on to work for consulting firms during their careers, resulting in close relationships between the City and Westminster. In the last year, PwC hired Gavin Barwell, former chief of staff to Theresa May, and Philip Rycroft, who ran the UK’s Brexit department. Large consultancies also regularly loan staff to government agencies as secondments.

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