57th Report - Government services: Generating income

Key findings

• Treasury oversight of fees and charges is too passive; six of seven case study services averaged only 88% cost recovery in 2023–24 against 100% targets, with HM Passport Office recording a £916 million deficit over five years (2019–20 to 2023–24).
• Fee-amendment processes are slow and complex, taking an average of 63 weeks; multiple approval layers and inconsistent data requirements delay implementation and prevent fees from reflecting current costs.
• Departmental reporting on fees is inconsistent and incomplete; none of seven case study services fully met Treasury disclosure requirements in 2023–24, limiting public, parliamentary, and Treasury scrutiny.
• The fee-setting system discourages cost reductions and innovation; departments absorb investment risk while savings pass to users, removing incentives for digital transformation and efficiency—except DVLA, which held fees at 2014 levels through digitisation.
• Treasury accepts its approach has been too passive and acknowledges the need for systematic support, better guidance, sharing of good practice, and more proactive oversight through annual review cycles and deep-dives for persistent underperformers.

Recommendations

• Treasury should write to the Committee with a comprehensive, time-bound plan to support fee-charging bodies systematically, including operational guidance on fee-setting and trade-offs, and a mechanism to share good practice.
• Treasury should introduce an annual review cycle within 12 months for all charged services, covering service design, consent status, and fairness implications; conduct targeted deep-dives with bodies missing cost-recovery targets by more than 10% for two consecutive years and publish time-bound recovery plans.
• Treasury should write to the Committee within six months with a detailed plan to reduce time and complexity in fee amendments, including standardised templates, risk-based consultation principles, and a legislative review to enable deregulation of routine adjustments and scope consolidating legislation for annual parliamentary approval.
• Treasury should set proportionate and standardised reporting requirements by March 2026 requiring bodies to publish: how fees are calculated, cost-recovery targets and actual performance with variance explanations, and cost breakdowns identifying cross-subsidies.
• Treasury should publish by March 2026 a plan to embed efficiency incentives in the fee-setting framework, including explicit incentives to reward departments improving productivity and modernising services through digital transformation and innovation.

Government position

The Treasury partially accepts the committee's findings. It acknowledges that its oversight has been too passive and that it relies too heavily on individual accounting officers; accepts the need for more systematic support, better operational guidance, and mechanisms for sharing good practice; and agrees the fee-amendment process is time-consuming and disproportionate for routine adjustments. It has established a working group to facilitate best-practice sharing, plans to strengthen MPM guidance, and intends to introduce a standardised template for departmental submissions. The Treasury also recognises opportunities from emerging technologies like AI and states it will adopt a more proactive approach to efficiency incentives. However, on legislative consolidation and full deregulation, the Treasury indicates these are options to explore rather than committed actions.

Key actors

HM Treasury, Sir Geoffrey Clifton-Brown, HM Passport Office, Ministry of Justice, Driver and Vehicle Licensing Agency, James Bowler CB, Tim Moss CBE, Comptroller and Auditor General