58th Report - Government services: Identifying costs

Key findings

• Departments are neither required nor sufficiently incentivised to collect detailed costing information at service level; current accountability focuses only on broad value-for-money goals rather than productivity improvements.
• Legacy IT systems comprise one-third of government's technology estate but represent almost half of its costs; they impede data collection and analysis, requiring manual workarounds and preventing effective benchmarking.
• Without Single Service Owners holding accountability for end-to-end services, departments focus on individual components rather than whole processes, limiting visibility of total service costs and incentives to reduce them.
• The Government Finance Function acknowledges need for significant upskilling and is developing co-produced guidance, but forums for sharing best practice risk becoming 'talking shops' without demonstrable results.
• Resource constraints and uncompetitive pay in digital and board-level roles—even after digital pay framework revalorisation—hinder recruitment of senior specialists needed to lead transformation and exploit AI opportunities.

Recommendations

• HM Treasury and Cabinet Office should set out steps to hold Permanent Secretaries accountable for identifying costs at a level enabling focus on service-level productivity and efficiency improvements, potentially including explicit requirements in a 'Dear Accounting Officer' letter.
• HM Treasury and Government Finance Function should set out concrete ways departments must identify and record service costs within six months, including practical guidance on improvements needed.
• DSIT should provide a baselined list of legacy systems identified and the services they support alongside the Treasury Minute response, and within six months indicate which legacy systems should be prioritised for investigation into additional people and process costs.
• Cabinet Office should within six months require Permanent Secretaries to appoint Senior Single Service Owners for all remaining services without one in place, and set a deadline for completion of identification and appointment for all remaining services.
• DSIT should set out how it will lead on systemic data and systems improvement across government to exploit new technologies such as AI, and what further steps it will take to secure and retain board-level CDIOs and senior specialists given inability to match industry pay rates in all areas.

Key actors

Public Accounts Committee, HM Treasury, Cabinet Office, Department for Science, Innovation and Technology (DSIT), Government Finance Function, Permanent Secretaries, Cat Little (Permanent Secretary, Cabinet Office), Conrad Smewing (Director General, Public Spending, HM Treasury)