If the coalition government’s moves to reduce public expenditure on consultants surprised nobody, the scale and speed of the cuts almost certainly did. By most reasonable estimates, central departments slashed expenditure by somewhere between a half and three quarters in the few months following the general election in 2010; and although the cutbacks took longer to take effect in local government, the evidence now emerging points to a similar level of reductions there.

It is interesting to compare the UK’s use of consultants to those of other European countries – particularly to consider whether Britain has leant much more heavily on consultants than its neighbours, and whether it has hired them to do work often carried out by civil servants on the continent. Having interviewed more than 250 people working for 150 consulting firms in 35 countries around the world, we at sourceforconsulting.com recently published a report on the consulting market, and this showed that – despite some underlying consistencies in the way consultants are appointed in Europe, linked in part to EU procurement rules – the picture varies considerably between countries. In general, it was clear that those countries that have spent the most on consultants in recent years are now those keenest to cut spending, but there are important exceptions to this rule.

We estimate that, in 2010, large public institutions across Europe spent about €3 billion with large consulting firms (defined for these purposes as firms with more than 50 employees). A third of that spending was in the UK, where the public sector represented 18 per cent of the market for these larger consultants.

Scandinavia is a smaller consulting market overall, but the public sector there was still more important to consultants, representing 20 per cent of this market. Within Scandinavia, though, the picture is variable: Sweden isn’t drastically squeezing spending, while Denmark is. Meanwhile, in Germany public sector consulting represents just 8 per cent of the total market, but the government is keen to reduce spending still further. France, by contrast, hasn’t historically had a very big public sector consulting market, but it’s actually starting to spend more.

The explanation for these differences appears to be that the level of expenditure is closely linked to how consultants are being used. Some are particular to an individual country. Expenditure in Sweden, for example, is being driven by both privatisation and publicly-owned corporations; and in France, the government’s ‘Competitiveness in Business’ initiatives effectively make a virtue of using consultants. We identified three factors as consistently reliable measures of the extent to which a country’s public sector is likely to be closing its doors to external advice.

The first is the extent to which the private sector is getting involved in delivering public services. When working with businesses, many civil servants want to tap into the commercial experience that consultants can provide.

The second concerns the ongoing difficulty most organisations have in measuring the value consultants deliver. On paper at least, this is the big one: find a way to measure value, and many of the debates about using consultants could be resolved using evidence. That would also make it possible for public organisations to share risk and reward with consultants, rather than simply paying for the time and materials they use to deliver their work.

Unfortunately, this one isn’t going to be solved any time soon. For some projects – cost reduction initiatives, for example – it’s relatively easy to measure the value consultants deliver, but in many cases it’s just too tricky to pinpoint exactly which improvements can be attributed to the input of a consultant. In countries where expenditure is relatively low, that’s a problem they appear to be able to live with, but once expenditure climbs above a certain level (apparently around £500m, significantly less than the UK has spent in recent years) this difficulty in quantifying benefits becomes a ceiling off which expenditure is bound to bounce. Unless you can show exactly what you’ve got for your money, you can’t spend £1bn on consultants without attracting criticism.

However, perhaps the biggest factor in shaping countries’ current attitudes to consultants appears to be the extent to which they’re being used to provide support in programme management rather than more tangible, commercial skills. The most negative perceptions arise in countries where the levels of expenditure on programme management consulting are highest (the UK and the Netherlands). Why? Because it’s considered to be too generic a service. More often than not, consultants have been used to meet a vague need for help – or even to put bums on seats where there’s a staff or skills shortage. Such spending triggers virtually all of the concerns of those who scrutinise public sector consulting expenditure.

The lessons, then, are twofold: first, that consultants are best used where they bring in tangible private sector expertise, rather than as programme managers; and second, that – at least until there’s a way to demonstrate quantifiable results – there’s a limit to how far expenditure in any country can rise before public disapproval knocks it back down again. ?

Fiona Czerniawska is joint managing director of sourceforconsulting.com

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Written by Fiona Czerniawska