Public Accounts Committee finds some shared services centres cost more than they were expected to save
The Public Accounts Committee (PAC) has found that five government shared services centres cost a total of £1.4bn to set up, £500m more than expected and in some cases cost more than the expected saving.
In its report on efficiency and reform through shared services, the PAC says that the five centres were expected to have saved £159m by the end of 2010-11. It found, however, that the Ministry of Justice centre broke-even, and the Department of Work and Pensions and the Department for Environment, Food and Rural Affairs centres did not track their total savings.
The two centres that did track savings – the Department for Transport and Research Councils UK – reported a net cost of £255m.
Central government has been using sharing back-office functions with the intention of reducing the cost of administering finance, HR and procurement since 2004. The document is the latest PAC report to say that government has not yet realised the potential of shared services.
According to the committee, the government’s shared services strategy will only be effective if the Cabinet Office demonstrates strong leadership to deliver greater value for money and gets buy-in from departments.
A key recommendation is that the Cabinet Office should appoint a “suitably empowered senior responsible owner” with the authority to ensure all departments and their arm’s length bodies use shared services and stop providing their own back-office functions.
“If this does not happen, the strategy will again fail to deliver the expected savings,” the report warns.
The committee calls on the Cabinet Office to build on analysis by the National Audit Office to set benchmarks to measure the success of its shared services strategy. It also wants the Cabinet Office to consider a simple “one-step implementation plan”, as opposed to the current two-step plan of joining and merging centres, which the committee says is too complex.
It also wants the Cabinet Office to develop a long-term strategy to extend the principle of shared services beyond central government.
The watchdog says it fears that funding constrains are acting as a barrier to long-term investment and that current shared services centres are unable to retain the savings they generate, nor offset the cost of investment against future savings.
It urges the Treasury and the Cabinet Office to review funding arrangements and consider how they “could be conducive to effective long-term investment and long-term savings”.
Margaret Hodge, chair of the PAC, said: “Government could save significant sums of money if it pooled back office functions such as finance, HR and procurement. Securing efficiency savings is essential to protect public services from further cuts that could otherwise have been avoided. I welcome the Cabinet Office’s ambitious new strategy for improving shared services, but unless it learns from the past it will end up making the same mistakes again.”
She added: “It is extremely frustrating that the Cabinet Office has ignored recommendations made by this committee in our previous reports. We expect it to engage constructively this time around.”