The UK government wastes £500 million a year in outsourcing core skills requirements to consultants, a central government report said today.

The House of Commons Committee of Public Accounts report into central government’s use of consultants found that, while improvements had been made in the use of outsourced consultancy services, public sector reliance on this resource has risen by a third in the last three years.

The committee said spending had soared from £2.1 billion in 2003–04 to £2.8bn in 2005–06, largely due to increases in spending by the NHS. It also said consultants are still routinely used on key government initiatives such as the Identity programme at the Home Office and the Capability Review programme at the Cabinet Office. Public sector spending in England on consultants totalled approximately £2.8 billion in 2005-06, with central government accounting for £1.8 billion.

But the report concludes that “getting a better grip on the use of consultants would lead to efficiency gains of more than £500m a year,” through less central government reliance on third-party consultancy for core skills, including project and programme management and IT. It also said it is increasingly turning to a select list of suppliers through the Office of Government Commerce (OGC) procurement agency.

Edward Leigh MP, Chairman of the Committee of Public Accounts said: “It is impossible to believe that the public are receiving anything like full value for money from this expenditure. In fact, a good proportion of it looks like sheer profligacy.”

The report identifies five areas around the use of consultants that require ‘significant improvement’: the assessment of whether internal resources could be used instead of consultants; controls on awarding contracts by single tender; completing and sharing post-project performance reviews; actively engaging with and managing the relationships with key consultancy suppliers; and planning for and carrying out the transfer of skills from consultants to internal staff.