‘Scandalous’ £3.4bn UK state spending on private consultants last year

Private consultants were paid a “scandalous” £3.4bn by public bodies last year, new figures reveal.

The statistics, from outsourcing data company Tussell, show that government spending on private consultants was £1.3bn (62%) higher in 2023-24 than 2019-20. They also reveal that the surge in consultant spending seen during Covid has failed to come back down to pre-pandemic levels.

The new figures demonstrate the scale of the challenge facing Keir Starmer’s government, which aims to halve the government’s spend on consultants during this parliament. The Financial Times reported last week that KPMG has won a government contract worth up to £223m to train civil servants, beginning in August.

Since Labour won power, nearly £650m of new government contracts to consultants have been awarded, many agreed before the transition to a new government. They include the deal with KPMG to oversee civil service training for the next 15 months – the second biggest public sector contract awarded to the firm.

Prem Sikka, an academic specialising in finance and accounting and a Labour peer, said: “The whole thing is scandalous because the real problem is that we’re living in an era when there is a cult of hiring consultants. Consultants contribute little. There is no way you can walk into a complex organisation for a few weeks, understand the issues, join the dots and prepare a meaningful report.

“If you are using consultants, that means you have no in-house, institutionalised knowledge, because when these consultants walk away, whatever they know goes with them. This then makes you forever permanently dependent on consultants.”

The total cost of consultants at the Department of Health and Social Care, its agencies and NHS bodies was more than £570m in 2023-24, according to Tussell. This has fallen significantly in the last two years, but compares with about £310m in 2019-20 before consultancy costs rose dramatically to help cope with the pandemic.

At the Home Office, spending on consultants in 2023-24 rose to £237m last year as the government worked to clear asylum backlogs and launch the now abandoned Rwanda scheme . That was almost double the £121m recorded the year before.

Meanwhile, the Department for Transport spent £165m on consultants last year, often to advise on infrastructure projects such as the HS2 high speed railway, and the Ministry of Defence spent £86m.

The money was largely spent by government departments and public bodies with a small group of firms such as PA Consulting and Accenture, which made £247m and £240m respectively from government contracts in 2023-24.

The “big four” firms – KPMG, Deloitte, PricewaterhouseCoopers and EY – collectively were paid just under £900m in 2023-24.

KPMG temporarily withdrew from bidding for government contracts in 2021 after a series of corporate scandals, including being found to have forged documents and misled regulators over audits for companies including the now collapsed Carillion .

Government use of consultants has been criticised in the past, including up to about £1m a day paid to private consultants to work on the Covid test-and-trace programme, which a Commons committee concluded was an “eye-watering” waste of taxpayer money that “failed to deliver on its central promise of averting another lockdown” despite “the vast sums of money” invested.

Related: UK ministers promised to kick the consultant habit but they can’t: they’re addicted – and we pay the price | Mariana Mazzucato and Rosie Collington

Economist Mariana Mazzucato, director of the University College London Institute for Innovation and Public Purpose and co-author of the The Big Con: How the Consulting Industry Weakens our Businesses, Infantilizes Our Governments and Warps Our Economies , described the government’s relationship with the sector as “parasitic”.

She said: “We’re facing challenges from digitalisation to climate and more, and these require huge amounts of collective intelligence, capacity and capability. And if you don’t invest in that within the state, of course, you will become addicted to other [organisations].”

Mazzucato added: “One of the biggest issues is not just the rise in consulting spending but that these consultants coming in have very little knowledge about the stuff they’re consulting on.”

She said the new government would not succeed in dislodging its reliance on consultants “without investment within the civil service”.

Tamzen Isacsson, chief executive of the Management Consultancies Association (MCA), said consultancies worked in partnership with the government to improve public sector productivity and innovation, enabling them “to do more with less”. She said consultancies had helped drive the transition to net zero and improved cyber security.

She said: “It is unrealistic to expect government to employ a vast pool of private sector experts and resources and far more cost efficient to use them for short term projects helping improve the efficiency and delivery of critical national services. We stand ready to serve the next government in power and recognise the financial constraints the new administration faces. The UK consulting sector is a great British success story – a thriving force in the economy, driving growth and jobs and recognised across the world as a global centre of excellence. Our MCA member firms have highly stringent governance procedures which ensure staff working on public sector projects meet the highest standards in ethics and are held to account to ensure the public interest is being served.”

Previous governments have made multiple pledges to reduce reliance on consultants since 2010, but last yeardepartmental restrictions implemented by former prime minister David Cameron were quietly removed . These required central authorisation for contracts over certain limits, initially set at those lasting more than nine months or exceeding £20,000.

Officials say that Tussell’s figures are typically higher than recorded in annual departmental reports, which is likely to reflect different methodologies. A government source said: “We are taking immediate action to stop all non-essential government spending on external consultants as we tackle the £22bn black hole in the public finances this year, which was left because of the recklessness of the previous government.

“Through our plan to halve the amount spent on consultancy services in coming years, we are determined to deliver a saving of £550m in 2024-25 and £680m in 2025-26.

“We will develop a plan for a more efficient and effective civil service, including bold measures to improve skills, harness digital technology and improve public services.”

• This article was amended on 2 September 2024 to add a comment from the Management Consultancies Association.