Government consultants pledge under threat as spending jumps
Government spending on management consultants rose by over £150m during Labour’s first year in office, despite the party’s manifesto pledge to halve the amount departments dish out to third party advisers, CityAM can reveal.
Total spending on management consultancy contracts totalled £1.44bn during the first 12 months of the government’s four-year term, up from £1.28bn the year before, according to data from public sector contract platform Tussell.
The jump in spending has left the government’s pre-election pledge to crack down on what it branded “the excessive use” of the sector in jeopardy, and is further evidence of civil servants’ proclivity to lean on corporate advisers to help manage key government projects.
In her final party conference speech before last year’s general election, then-shadow Chancellor Rachel Reeves vowed to halve state spending on the sector, which she said had “almost quadrupled in six years”.
And the Labour manifesto published months later claimed the party’s savings from the move would boost the public finances by £745m a year, with the money funnelled into “prioritising frontline public service delivery and public sector capability”.
According to the Tussell data, the Cabinet Office spent the most of any department or authority on consultants over Labour’s first year, forking out over £221m. The Ministry of Defence spent the second highest amount with £167m, while third-placed Home Office spent £148m on consultancy fees.
The so-called Big Four consultancy firms dominated government contract wins, the data showed. Deloitte raked in £431m during the first year of the Labour government, considerably more than the next highest earning firm, PA Consulting, which collected £310m in government contracts. KPMG earned £301m, while EY and PwC pocketed £169m and £129m respectively.
Ever since ballooning at the onset of the pandemic, public sector spending on consultants has become an increasingly contentious topic. Government departments lent heavily on the sector to help manage their response to the spread of coronavirus, with spending rising nearly 50 per cent between 2019 and 2021.
But as the aftereffects of the pandemic receded, public bodies have struggled to rein in spending on the sector. Total outlay on the sector last year came close to eclipsing the record figure from 2021, which included the consultant-led rollout of the NHS’s major track and trace programme.
The government claims departmental spending on management consultants – the element of consultancy spending over which ministers have control – has fallen £550m between 2024 and 2025.
A Cabinet Office spokesman said: “We are rooting out wasteful spending and driving efficiency across government with over £550m saved from reducing spending on consultancy services in 2024/25.
“Alongside our previously announced target of saving £680m in 2025/26, we went further in the Spending Review and confirmed we would cut consultancy spend all the way through to 2029 saving £700m annually.”