In her first speech to the Commons as Chancellor, Rachel Reeves committed to “reining in” consultancy spending in government departments.
Both Labour and Tory campaigns in the general election promised to reduce the public sector’s dependence on external firms, which failed so massively, so expensively and so publicly to deliver functioning test and trace systems as the Covid pandemic took hold.
But Ms Reeves’ speech came a week after NHS England – which has time and again been told since the election to batten down the hatches as the NHS is plunged into yet another winter crisis with no extra funding – signed yet another 4-year £40m contract for management consultants to give “commercial advice”.
A fortnight before Ms Reeves’ speech NHS England had also required nine of the 42 Integrated Care Boards (Black Country, Cheshire & Merseyside, Greater Manchester, Lancashire & South Cumbria, Mid & South Essex, Nottingham & Nottinghamshire, Shropshire, Telford & Wrekin, South East London and South Yorkshire), the ones seen as facing the biggest financial problems for 2024/25, to bring in management consultants to find ways to make immediate cuts in spending, in the hope of preventing the combined deficits exceeding the £2.2 billion that NHSE has already agreed to cover.
This should be no great surprise since a PwC director, Hannah Cross, whose Linkedin profile boasts that she is a “cost improvement professional” experienced in “cost improvement programmes and strategies” and “turnaround strategies” has been seconded to NHSE. And while Ms Cross would have no say over which companies might get the work, she can be expected to be pressing hard for any questions to be answered by appointing more management consultants.
According to the HSJ which has seen the documents setting out this intervention, the consultancy firms initially have just 4 weeks to draw up proposals and report to an ‘NHSE-nominated leader,’ who will “oversee and challenge both the work delivered, and the system itself.”
By the end of August, roughly the end of the initial 4 week phase, the HSJ was reporting widespread concern over conflict of interest, as the same consultancy firms that had helped shape earlier ICB plans were in some cases being brought back in to the same ICBs to effectively “mark their own homework.”
Most of the contracts had gone either to PwC or to PA Consulting. Half of the ICBs singled out for further intervention went back to the same consultancy, even if they have opted not to follow their advice previously.
NHS England’s aim seems to be to ensure that cutbacks too outrageous for ICB chiefs themselves to put them through (such as cuts in non-clinical and clinical staffing levels and in service provision) can be imposed, and then implemented over the following 12 weeks.
But a few years ago the Commons Public Accounts Committee was harshly critical of PA Consulting in a scathing report on its failed contract with UK Trade & Investment (UKTI). The report noted:
“The incompetence by all parties involved in letting the contract, managing the contract and keeping records is an extraordinary coincidence. Such a lack of competence across the board leaves us with serious concerns.”
While pointing to major weaknesses in UKTI’s approach, the PAC said of PA Consulting:
“For its part, PA fell well short of the appropriate duty of care that we expect contractors to demonstrate when in receipt of taxpayers’ money; instead of looking out for its client, PA took advantage of UKTI’s poor decision making.
“It sold UKTI a service it is not clear it needed and failed to give the fair breakdown of its costs and profit that UKTI asked for. Instead, it used the negotiations to pass on costs to UKTI that it had said in its bid that it would bear, and to increase its profit from the contract while telling UKTI that its profit had not increased.”
It’s hard not to see potential parallels between that situation and the ICBs that are now being compelled to bring in consultants and submit to their proposals.
Only last year PA Consulting threatened to take out an injunction and seek recovery of legal costs “likely run to tens of thousands of pounds” if Schools Week published details of the day rates paid to consultants in their £7.6 million government contract to test proposed reforms of the Special Educational Needs and Disabilities system.
We don’t know how much the ICBs will be paying for the advice they have been required to procure, or how much they and previous commissioning bodies forked out for plans of limited value, such as the ‘Sustainability and Transformation Plans’ expensively drawn up by management consultants in 2016, most of which were almost entirely discarded as impractical the year after.
NHSE of course (advised by Hannah Cross) insists that any money forked out on consultants is well spent:
“Any costs that systems may incur is significantly outweighed by the substantial financial benefit of systems meeting their collective financial plans this year.”
But the real cost is far more than the money that goes down the drain for management consultants’ impractical or politically impossible proposals, which in some cases – such as the long running efforts to reconfigure hospital services in North West London – can run into £millions and tens of £millions.
It is the weakening and undermining of NHS management and the bypassing of the already feeble pretence of local accountability.
As Mariana Mazzucato and Rosie Collington point out in The Big Con, reliance on consultancies for delivering services undermines the capacity of the management of public sector institutions and services to plan and organise to meet the needs of citizens.
The less the NHS does itself, the less it is able to “learn-by-doing”, and the more any big task is delegated to so-called “experts.”
Mazzucato and Collington point out the massive growth of spending on management consultancies by the UK government bodies between 2019 and 2023. In 2022 alone the UK public sector awarded £2.8bn of consulting contracts – a 75 per cent increase on 2019. Eight of the largest companies – including Deloitte, PwC and McKinsey – have been awarded £7.1 billion in contracts since December 2019.
At the end of August the Tussell Trust revealed that the Department of Health and Social Care, its agencies and NHS bodies spent more than £570m on consultancy in 2023-24 compared with about £310m in 2019-20 before consultancy costs rose dramatically to help cope with the pandemic.
What nobody has done is present any value for money analysis of the work actually done by management consultants, to show it is worth anything at all, never mind the eye watering daily rates which we hear have been paid time and again for advice of dubious usefulness.
Six years ago a blog by Peter Spilsbury of the West Midlands NHS Strategy Unit dared to raise the question of whether external management consultants were the solution – or part of the problem. He argues that “the NHS is the single biggest client for many of them and the daily rates charged by many … can only be explained by very substantial profit margins.”
Instead he sets out the alternative model of the Strategy Unit as an ‘internal NHS consultancy’ specialising in analysis, decision support, research and development, strategic change and formative/summative evaluation.
“We are NHS staff on NHS salaries. We seek to cover our costs through charging for specific costed projects … on a ‘consultancy basis’, working for customers locally and nationally across the NHS, the third sector and local government.”
Other advantages were that all of the unit’s margin is retained in the NHS and used to fund innovation work (“our national work on mental health/physical health, ultimately secured for all 44 STPs by NHSE, was kick started and developed methodologically through use of margin”).
“All the knowledge we gain is for the NHS and is shared openly…. we publish,” and with obvious relevance to the present:
“We don’t do ’12 week team drop and leave’ projects…. we work on things that matter, taking the time it takes to do the work properly.”
There have been previous efforts to create an internal consultancy resource for the NHS (such as the NHS Institute for Innovation and Improvement), but they have been restricted by short sighted cutbacks.
Mazzucato and Collington warn, in the context of more years of austerity limits on public spending that “The decimation of public sector capacity can itself drive further dependence on consultancies, with evidence suggesting that the more public services use management consultancies, the more their demand for them increases.”
A serious break from dependence on consultancies requires a commitment to invest in developing NHS expertise rather than private sector advice. And if the NHS is to be repaired and restored it needs its own experts to draw up plans based on a commitment to public services rather than private profit.
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