The parliamentary spending watchdog has voiced concerns that government cuts will be made, not by greater efficiency, but by reducing front-line services.

A report into value for money savings in government by the Committee of PublicAccounts (PAC) found that a £35 billion efficiency target, set in 2007, represented savings of 3 per cent a year for each department’s expenditure.

However, by March 2010, two years into the three-year programme, departments and local authorities had reported only £15 billion of savings, less than half of the total needed to reach the £35 billion target, the PAC said.

Since the new government was elected it has pledged to cut spending by an average of 19 per cent outside health and international aid by 2014-15. However, it hopes to protect services as much as possible by making efficiency savings, including £400 million-a-year through better Whitehall procurement.

MP Margaret Hodge, chairwoman of the PAC, said: “Now that much more radical cost-cutting measures are required across government, my committee is gravely concerned about the ability of government to make efficiency improvements on the scale needed. There is a serious risk that, to reduce costs, departments will rely solely on cutting front-line services.

“This committee expects efficiency improvements to make a major contribution to the cost reductions now required across government. We also expect the Treasury and departments to learn the lessons from the 2007 value for money programme.”

Despite the importance placed on that programme at the top of government, departments could not even measure adequately what savings they had made, and the Treasury failed to create a framework for reliable reporting, the PAC found.

In the future the Treasury should take full responsibility for the delivery of efficiency savings across government as a whole and demonstrate a full grasp of the causes of underperformance in any department, intervening where it does not meet expectations.