Government credit cards to be cancelled as part of major crackdown on wasteful spending, with thousands of cards set to be frozen or cancelled.
The government has announced plans to crack down on ‘wasteful’ spending by cancelling thousands of taxpayer-funded credit cards. This move aims to redirect essential spending into more appropriate procurement routes, delivering better value for money.
Government agencies issue credit cards to employees for official business, such as travel and procurement.
According to a 2020 report, the US government had over 1 million active credit cards, with an average balance of $10,000 per card.
The 'Government Accountability Office' (GAO) found that agencies often lack adequate controls, leading to misuse and waste.
In response, Congress has implemented reforms to improve oversight and reduce costs.
Government procurement cards were designed as a convenient way to make low-value, one-off purchases. However, the government said spending on the cards had quadrupled in the past four years without enough scrutiny. The Cabinet Office will order departments to freeze almost all of the around 20,000 cards in circulation this week, with a strict new application process aiming to cut the number by 50%.
Only cardholders who can justify their need for a card will be allowed to continue using them. Those who fail to do so will see their cards cancelled by the end of the month. A small number of cards, used for specific purposes such as by diplomatic staff working in unstable environments, will be exempt from the freeze.
The maximum spend for hospitality-related purchases, often used by officials working in trade or diplomatic roles, will be cut from £2,500 to £500. Any spending over this amount would require the approval of a senior civil servant. Last year, central departments and core agencies spent over £675m on the cards, up from £155m in 2020/21.
Examples of ‘inappropriate’ spending identified by departments will be subject to disciplinary action. The move is part of a wider effort to cut spending and waste across government, as Chancellor Rachel Reeves prepares to deliver her Spring Statement next week, which is expected to include billions of pounds worth of spending cuts.
Government spending cuts refer to reductions in government expenditure, often implemented to address budget deficits or balance the national budget.
These cuts can affect various sectors, including healthcare, education, and defense.
In recent years, several countries have implemented spending cuts to manage their finances effectively.
According to a study by the International Monetary Fund (IMF), governments worldwide reduced their spending by an average of 2% between 2010 and 2015.
The effects of government spending cuts can be far-reaching, impacting not only government services but also the overall economy.
The government has faced criticism from both sides for its handling of procurement cards. Labour accused the Conservative government of overseeing ‘lavish spending’ on hotels and hospitality during its time in office. However, a recent report revealed that thousands of pounds had been spent through the cards on luxury items such as meals at private members’ clubs and crystal glasses under the new Labour government.
The Conservative Party has responded to these criticisms by saying it will always support cutting waste across government and measures to stop frivolous spending of taxpayer money. Despite this, the party’s own record on procurement card transparency and spending cuts is being questioned.
