Councils and RSLs will be ordered to save hundreds of millions in July's spending review
The Treasury and ODPM are to set a target for efficiency savings that councils and housing associations will be ordered to meet as part of the comprehensive spending review in July.

The figure, now being debated by the two departments, is expected to be several hundred million pounds.

The savings will be ploughed into the government objectives of building more homes and meeting the decent homes standard.

A Whitehall source said: "The savings that will be required will be substantial. The Treasury and ODPM will set out a figure that should be saved and then reinvested in priority areas."

The source added that the figure would be based on the ODPM's submission to Sir Peter Gershon's review of government efficiency, but that it would be on top of the 2.5% efficiency improvements required of ODPM-funded bodies from 1 April.

The ODPM is working on three key areas to submit to the Gershon review: procurement, repairs and maintenance and the "system thinking" management model used by the Northern Housing Consortium (HT 21 May, page 10).

There is no clear idea of the total amount that could be shaved from existing costs in these three areas.

The Treasury will reveal the savings target in Gershon's review, which will be published alongside the spending review this summer.

Jim Coulter, chief executive of the National Housing Federation, said: "It is likely that the government would look to continue the savings made through the corporation's new partnering programme, which has made efficiency gains of 8%.

"A further 7.5% would be achievable for associations.

"But the question is, how deliverable would any target the Treasury comes up with really be?

"It's not as if everyone has been sitting around being inefficient."

However, Ross Fraser, chief executive of performance improvement body HouseMark, said: "Any efficiency savings have to be looked at in the context of rising prices. Of particular concern are rising repair and maintenance costs as a result of increases in the cost of steel and oil."

David Thompson, programme manager at the Local Government Association, said: "The appetite of civil servants in the Treasury and ODPM for greater gains in new building and programmes like Supporting People is huge.

"In Supporting People, there is enormous potential for savings – particularly in the funding of ex-offenders' accommodation.

"Right now, the funding is split between many different councils rather than just those who have prisons and hence ex-offenders' accommodation.

"What councils are doing now is scouring all their contracts to see where savings can be made."