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The government has been told it must adopt a "much more intelligent" approach towards its use of consultants.

In 2005/06 £2.8 billion was paid out by the public sector on outsourced advice, an increase of one third from the previous year.

And the House of Commons public accounts committee (PAC) today said that of the £1.8 billion central government spent on consultants during the same period, £500 million could have been saved.

MPs note that although consultants can provide "valuable expertise" in certain situations, departments are "often on the phone to consultants" without first finding out if in-house staff have the desired skills.

They claim that since neither departments nor the Office of Government Commerce (OGC) can put a precise figure on the total fees paid to consultants, the government can have "no idea whether the benefits are justified by the cost".

In response to the report, a spokesman for the OGC said it was "misleading to suggest" that the government was not achieving good value for money in its use of consultants.

Committee chairman Edward Leigh says in the report that consultancy firms are "truly on to a good thing", with the government typically arranging contracts on the basis of time worked and not what has been achieved.

"Vast sums of money are being spent by government on external consultants," the PAC chairman explained.

"Central government alone is paying out nearly £2 billion a year. It is impossible to believe that the public are receiving anything like full value for money from this expenditure. In fact, a good proportion of it looks like sheer profligacy."

But a spokesman for the OGC went on to say: "The fact is that there are a great many examples where consultancies have helped government deliver projects very successfully.

"Consultants are used for time-defined roles, requiring specific skills and expertise, as opposed to appointing permanent roles which would have been filled by civil servants," he continued.

"This is also at a time when the government is leading a major reform of the public sector so it is only right that external expertise is brought in on a case by case basis, making valuable improvements to our essential services. And overall, thanks to the efficiency programmes launched a few years the government is now making an annual efficiency saving of over £15 billion with a target of £21 billion per annum by next year."