Select Committee on Public Accounts Minutes of Evidence


Supplementary memorandum submitted by HM Treasury


  1.  At the hearing of the Public Accounts Committee on Monday 13 May 2002, the Treasury undertook to provide a note on the information it is collecting from Departments on the benefits derived from investment in e-government projects.


  2.  The Treasury does not scrutinise Departments' plans for investment in all e-government projects. Expenditure on many projects falls within the delegated limits agreed by the Treasury for Departments and so does not require Treasury approval. Consequently, the Treasury is not in a position to construct an aggregate estimate of the expected costs or benefits generated by e-government.

  3.  The main source of information to the Treasury relates to programmes or projects that are supported by additional funding provided through funding allocations made:

    —  in Spending Reviews; or

    —  from the Capital Modernisation Fund or the Invest to Save Budget.

  4.  In both cases, the Treasury requires evidence that Departments have sought to identify and quantify the benefits that will be generated. Such benefits can consist of reduced processing costs, staff savings or higher quality service to users, or a combination of these.


  5.  In the 2000 Spending Review (SR2000), a total of £1bn was allocated to Departments over three years (2001-04) to invest in e-government programmes. These allocations were mostly targeted on services that involve a high volume of transactions between Government and citizens/businesses. These services included tax returns, services to drivers, VAT returns and payments to farmers.

  6.  In most cases, Departments' plans for electronically enabling these services, and realising the benefits of the investment, were at an early stage when the allocations were made. Consequently, the allocations were subject to a "dual key" arrangement whereby Departments were required to seek the agreement of the Chief Secretary to the Treasury, advised by the e-Envoy, before allocated funds could be committed. Agreement is conditional on Departments submitting:

    —proposals for promoting take up of the service

    —a comparative analysis of current transaction costs and electronic transaction costs

 for the service;

    —details of any short term costs arising from dual running of traditional and electronic channels;

    —the scale of planned efficiency gains and their timing;

    —(where relevant) quantification of the benefits of increased customer compliance;


    —details of the benefits to customers, eg improved accuracy, quicker turn-round.

  7.  Applications for the release of funds are coming forward as and when Departments are in a position to satisfy the criteria.

  8.  The guidance issued to Departments in the 2002 Spending Review (SR2002) stated that any increases sought for putting services on-line should be supported by:

    —details of plans for promoting the take up of the service;

    —an assessment of the benefits to users; and

    —a quantification of the efficiency savings which the online service will generate

  Decisions on allocations made by Ministers in SR2002 will be announced in due course.


  9.  The Capital Modernisation Fund (CMF) provides capital resources to fund innovative methods of public service delivery, including through electronic channels. The Fund is allocated on a competitive basis and against criteria that include an assessment of the impact of the project on the efficiency and effectiveness of the service.

  10.  To date, around £900m has been allocated to IT projects many of which involve the electronic delivery of services to the public or businesses. For example, £68 million has been provided to develop a sophisticated IT and call centre system to match job seekers to employers online.

  11.  The Invest to Save Budget (ISB) provides (mostly current) funding for innovative public service projects delivered by two or more public bodies. To secure funding, bidders have to provide evidence that the project will deliver benefits in the form of better services to users and/or future savings in public expenditure. Due to the emphasis on innovation, the ISB has supported a range of e-government projects. Over half of the £335m allocated by the ISB to date has gone to such projects. One example is a pilot project enabling drivers to make an application via the Internet to renew their vehicle tax disc.

  12.  Each project supported by the CMF or ISB will be evaluated when the funding comes to an end. These evaluations will identify whether the benefits projected in the original business case have been achieved.


  13.  Additional funding for electronic service delivery projects is conditional on Departments demonstrating that the project will deliver efficiency savings and/or improved services to the public. The processes described above provide a means of scrutinising proposals in this respect. However, the Treasury recognises that there is scope to improve further the rigour of these processes and so will work with the Office of e-Envoy to develop a cost methodology to assess the operational efficiency and customer benefits achievable through IT-enabled business change, as recommended by the Comptroller and Auditor General in his report.

HM Treasury

27 June 2002

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Prepared 28 August 2002