Why Labour’s Pledge to Cut Public Sector Consultants is Failing

UK government spending on management consultants climbed to £3.7bn for the 2024/25 period despite the Labour Party’s election pledge to slash external advisory costs, according to procurement data from Tussell. The commitment to cut back on external consultants was first announced at the Labour Party Conference in October 2023. Addressing the conference in her capacity as shadow chancellor at the time, Rachel Reeves pledged that a Labour government would drastically scale back outlays on outside advisors, which had multiplied nearly fourfold over a span of just six years. In the wake of that initial announcement, the government introduced measures for tighter procurement oversight in November 2024, deploying a strategy aimed at achieving £1.2bn in savings by 2026 through a freeze on non-essential advisor recruitment alongside a goal to halve expenditures in subsequent years. Reeves pointed to heavy spending under the previous Conservative administration. According to data from Tussell, spending on direct management consultancy in the 2020/21 period, marking the first year of the Covid-19 pandemic, surged by over 30 per cent from the previous year to reach £2.7bn. However, Labour government spending on public sector management consultancy procurement rose to £3.7bn for 2024/25, according to Tussell data. For the central government alone, the bill rose by over £150m in Labour’s first 12 months.

Government Defense of Spending Figures

When approached for comment by City AM, a government spokesperson defended the administration’s track record on procurement. Our latest figures show we have reduced consultancy spending by over £600m in 2024/25, exceeding our £550m target and bringing spend to a five-year low, the spokesperson said. The government is committed to halving consultancy spending and has announced further targets which will deliver over £700m in annual savings by 2028/29. A November publication from the National Audit Office highlighted that authorities lacked a uniform, dependable overview of total outlays on consultants and how those costs shifted over time, drawing attention to disjointed data collection across different departments. Emma Carroll, a consultant at Source Global Research, noted the underlying structural drivers for the spending. Many of the big areas of spend are where the work is complex, internal talent in the public sector is in short supply, and external expertise is particularly valuable, Carroll said.

Civil Service Constraints and Skills Shortages

The Conservative government previously navigated issues such as Brexit and the pandemic, while Labour faces pressures including the rise of artificial intelligence and defense funding requirements. These challenges demand specialist skills that may not exist within the current civil service workforce.

Official data shows that since March 2023, the headcount in the civil service has grown by nearly 40,000 to over 557,000. At the same time, governments face persistent pressure to cut administrative bills. To rein in administrative expenditures, Labour is projecting the elimination of tens of thousands of civil service roles, including a targeted reduction of 12,000 London-based positions by the year 2030.

Public sector pay bands complicate recruitment for highly technical roles. Government postings seeking specialized skills, such as a head of the Office for Quantum paying just over £60,000, often trail private sector compensation packages for equivalent six-figure roles.

The UK consulting sector remains a significant contributor to the professional services industry and generates tax revenues for the Treasury. Carroll noted that the public sector represents an important market for the UK consulting sector, making up around 14 per cent of the total. Source Global Research data forecasts that the market will grow by around 5 per cent to reach £2.7bn in the 2026 calendar year, making it the second largest sector after financial services.

Tussell data from April also indicated that management consultancy spending represents a fraction of total government procurement, accounting for two per cent of total procurement spend. While political messaging targets external advisory costs, ongoing public-sector skills shortages suggest reliance on consultants will remain a feature of government business.