Summary
Improved efficiency is critical to government’s plans for affordable public services. Central government departments spent an estimated £450 billion on the day-to-day current running costs of public services, grants and administration in 2024–25. Having a detailed understanding of costs is an important foundation for identifying where productivity can be improved; however, the existing arrangements in departments are high-level and focused on overall spending control rather than a more detailed understanding of individual services.
Departments lack both the obligation and incentives to collect the detailed cost data needed to improve service-level productivity, with current accountability for Permanent Secretaries focused only on broad value-for-money goals. More needs to be done to get departments to identify their costs at the right level to drive efficiency improvements at service level.
Departments need practical support from HM Treasury and the Government Finance Function to improve skills. This fits with the Government Finance Function’s new strategy to better understand cost drivers and upskill to provide insights to improve productivity and efficiency. However, guidance will need to be sufficiently practical to show departments how to do what is needed of them, and forums for sharing best practice will need to demonstrate results rather than just being ‘talking shops’.
Government’s legacy systems are a major source of cost and a barrier to more effective data collection and analysis. The Department for Science, Innovation and Technology (DSIT) has identified and baselined legacy systems across government. But it needs to go further and identify which should be addressed as a priority to significantly reduce the costs of the operational services they support.
The lack of senior Single Service Owners (SSOs) with full visibility and authority over end-to-end services limits departments’ ability to understand and reduce total service costs. Without SSOs, focus remains on individual components rather than the whole end-to-end process, delaying larger benefits that require service re-engineering and deeper insight.
We are concerned that there is a lack of clear urgency for addressing government’s long-standing legacy and data issues, and that departments will not be able to reap the full benefits of productivity-enhancing technologies such as artificial intelligence. We are also concerned that government has not fully addressed the challenges of uncompetitive pay in being able to recruit senior specialists of the right calibre especially in scarce skills like digital and leaders at board level to drive transformation.
Conclusions and recommendations
1. Departments are neither required nor sufficiently incentivised to identify and use detailed costing information at a level that is needed to drive improvements in productivity and efficiency at individual service level. Responsibility for cost information is shared across the Treasury, Cabinet Office, and departments. While the Cabinet Office sets performance management frameworks for the SCS which include adherence to financial management frameworks set by HM Treasury, it does not systematically enforce compliance, relying instead on departments and internal auditors. There is no specific accountability for permanent secretaries or senior leaders to collect detailed cost data; current obligations focus on ensuring overall value for money. Although the Cabinet Office and HM Treasury expect permanent secretaries to understand their cost drivers and how they change over time, the level of sophistication to which this is done is often insufficient and standards need improvement. Political sponsorship is considered essential, aligning with the government’s goal of creating a more productive and agile state. Departments could be better incentivised through clearer accountability, follow-up, and visibility into their maturity levels. Introducing targets for getting processes and systems in place to identify the costs of services would sharpen focus but would require a significant cultural shift across the civil service where there are exceptional examples. Individuals should be praised and encouraged to provide incentives to others. The Treasury plans to clarify expectations for permanent secretaries in an upcoming ‘Dear Accounting Officer’ letter.
recommendation
As part of the Treasury Minute response to this report, HM Treasury and the Cabinet Office should set out what steps they will take to hold Permanent Secretaries and other senior leaders in departments to account for taking ownership of the identification of costs at a level that enables them to focus on where productivity and efficiency in individual services can be improved. This could entail including a specific and explicit requirement in a ‘Dear Accounting Officer’ letter.
2. Most departments lack a sufficient understanding of their service costs and departments need help from HM Treasury and the Government Finance Function on the practical steps they can take to improve and upskill. While standards for service costing and financial management exist, they lack the necessary sophistication and are applied inconsistently across departments. There is limited practical guidance and systematic support, with some progress in granular costing seen in local frontline services like schools and hospitals, which are easier to benchmark than unique central government services. Forums such as the Finance Foundations Group aim to share best practice. The Government Finance Function (GFF) is conducting a skills assessment and working to improve its understanding of cost drivers. It recognises the need for a significant shift, aligning with its new strategy that prioritises better use of data to enhance value for money. Departments are receptive to this push, especially given the efficiency targets set in the 2025 Spending Review. GFF acknowledges it does not have all the answers and is seeking to co-produce guidance with departments demonstrating good practice. To support this, GFF will work through the Finance Foundations Group to explore what can be done in more detail.
recommendation
HM Treasury and the Government Finance Function should set out concrete ways in which departments must start to identify and record service costs within six months. This should include setting out what needs to be improved and practical guidance on how to make improvements.
3. Legacy IT systems are a significant contributory factor in the cost of government services and an impediment to being able to gather better data to bring about improvements. Departments face major challenges in collecting and analysing cost data due to legacy IT systems and siloed data structures. These outdated systems are a significant cost driver, requiring additional people and processes to work around system limitations, and hinder consistent data gathering. The Cabinet Office recognises the need for Permanent Secretaries to understand their legacy estate, while DSIT has baselined government legacy systems and reviewed departmental bids for funding in the 2025 Spending Review. However, quick wins often mask deeper issues like poor data quality and entrenched cultural barriers. The lack of common data standards across government complicates benchmarking and granular cost analysis. The Shared Services strategy offers potential for improved consistency in the future, but technical solutions alone are insufficient–cultural and process reforms will be constantly needed. There is no standard policy on time recording in the civil service, and despite ERP systems offering this capability, its use remains optional. The desired levels of productivity improvements will not be achieved without effective use of time for every civil servant as would be the norm in the private sector. A shift in mindset is needed to better understand how time is spent and to make use of data for meaningful insights.
recommendation
a. DSIT should provide the Committee with a baselined list of legacy systems identified and the services they support alongside the Treasury Minute response to this report.
b. In addition, DSIT should,within six months from the publication of this report, indicate which legacy systems should be targeted as a priority for further investigation into how far their limitations result in additional people and process costs in the operational business areas they support which, if addressed, would significantly reduce the costs of those services.
4. The lack of Single Service Owners with accountability for all aspects of an end-to-end service inhibits departments’ ability to identify the visibility of a service’s end-to-end cost and the incentive to reduce it. The absence of Single Service Owners (SSOs) with the right mandate and visibility prevents a full view of end-to-end service costs and weakens incentives to reduce them, as focus remains on individual components rather than the whole process. Achieving larger benefits requires deeper service understanding and, in some cases, re-engineering of those services. The SSO role is not well understood across departments compared to other senior roles, and more can be done to raise its profile. There is an opportunity to build on the existing community of Service Owners and the methodology from the Top 75 programme, which included industry benchmarks for segmented digital services. Permanent Secretaries should be responsible for appointing SSOs with appropriate skills and talent, though the Cabinet Office has not set a timeframe for this.
recommendation
a. The Cabinet Office should, within the next six months, require Permanent Secretaries to appoint Senior Single Service Owners for all remaining services identified by the Cabinet Office and the Government Digital Service which do not yet have one in place.
b. The Cabinet Office should set out a deadline by which Permanent Secretaries must complete the identification and appointment of SSOs for their remaining services.
5. There is a lack of urgency and clear leadership for resolving the legacy systems and poor data issues that inhibit the realisation of benefits through greater productivity and efficiency that departments will reap from new technology such as AI. Government transformation and efficiency efforts increasingly rely on artificial intelligence (AI), but legacy systems remain a major barrier, limiting access to the data needed for effective implementation. Despite this, departments are already experimenting with AI. Resource constraints at the centre of government mean less support is available compared to previous initiatives like the Top 75 programme. Although the digital pay framework has been revalorised, it still falls short of industry rates in London and the South East, affecting recruitment and retention. Addressing data and legacy issues requires sustained effort and resilience. AI offers potential to connect disparate data sources, but progress must be focused and purposeful–trying to solve everything at once risks losing momentum. Prioritisation and clear milestones are key to avoiding drift and ensuring that artificial intelligence delivers meaningful value.
recommendation
As part of its response to this report, DSIT should set out how it will take the lead on systemic data and systems improvement across government in order to exploit new technologies such as AI. At the same time, the department should set out what further steps it will take to ensure it can both secure and retain board level CDIOs and senior specialists of the right calibre given it cannot match industry pay rates in all areas of the country.
1 Accountability, support and guidance
Introduction
1. On the basis of a report by the Comptroller and Auditor General, we took evidence from the Cabinet Office, HM Treasury and the Department for Science, Innovation and Technology on improving government’s productivity through better information on the costs of services.1
2. In 2024–25, central government departments spent an estimated £450 billion on the day-to-day ‘current’ running costs of public services, grants and administration. This is approximately 35% of public spending. By service we mean the people and underlying operations and activities to provide an outcome for a user. Examples include applying for an entitlement or submitting information required by regulations.2
3. Departmental services underpinned by inefficient legacy systems and processes are expensive to run and become increasingly costly as changes are layered on top. Despite bold ambitions, government’s own analysis of transformational efforts over the past decade or so has found that it has prioritised simpler, online citizen-facing transactions for transformation. More complex and costly services have been left behind.3
4. The ‘Top 75’ programme led by the Central Digital & Data Office (now Government Digital Service) under the digital and data roadmap 2022–2025 aimed to identify the costs in the 75 most used government services. A lack of sponsorship to improve data in departments and other public bodies limited its progress and the programme closed with only 29 of the top 75 services being assessed as ‘great’. This highlights a recurring challenge: that without sustained effort, government will find it difficult to identify the basic data needed to understand what drives the cost of services and where money is being wasted so as to improve efficiency and productivity.4
5. Improved efficiency is critical to government’s plans for affordable public services. Simple cost reduction, through imposing headline budget reductions, does not address the underlying reasons for inefficiency of services or delivery processes in organisations, nor how effectively inputs and outputs deliver the right outcomes. Improving overall organisational efficiency requires better information to understand where the inefficiencies lie within thousands of public service delivery processes.5
Holding departments to account for providing cost information
6. Responsibility for holding departments to account for improving their cost information is joint between the Cabinet Office and HM Treasury. The Cabinet Office sets the overall performance management framework expectations, including financial minimum standards.6 However, it does not systematically enforce compliance, relying instead on departments and internal auditors. HM Treasury’s role is to make sure departments and accounting officers have the guidance they require and, through the Government Finance Function, arrange and conduct end of year performance reviews.7
7. However, current obligations are focused on wider overall value for money and there are no specific objectives or accountability for Permanent Secretaries or senior leaders to collect detailed data on costs at the service level.8 Although the Cabinet Office and HM Treasury expect permanent secretaries to understand their cost drivers and how they evolve, the level of sophistication is often insufficient.9 Departments should be better incentivised to collect the information that is currently lacking. HM Treasury told us this could be done through clarifying accounting officers’ responsibilities for understanding their detailed costs and following this up through end of year financial assessments.10 The Treasury plans to clarify expectations for permanent secretaries in an upcoming “Dear Accounting Officer” letter.11 Providing central visibility of departments’ maturity levels would also help by shining a light on what others are doing across government.12
8. The Cabinet Office told us that political sponsorship and support is considered essential as well as that of senior leaders within departments.13 This aligns with government’s goal of creating a more “productive and agile state”.14 Introducing targets for getting processes and systems in place to identify the costs of services would sharpen focus; while this would require a significant cultural shift, we were told that this would be “pushing at an open door”.15
Helping departments with the practical steps they can take
9. Some standards for service costing and financial management exist.16 However, we repeatedly heard that they lack the necessary sophistication and are applied inconsistently across departments.17 We heard examples of where costing activities were taking place at a more granular level, but these mostly related to front line health and education services delivered locally.18 Such services are replicated across many organisations and largely similar in nature. They are therefore intrinsically easier to benchmark for cost of delivery compared to services delivered once by a single central government department.19
10. We found that there is limited practical guidance and systematic support for people in departments who own the services and are responsible for identifying their costs.20 Forums such as the Finance Foundations Group aim to share best practice.21 While we heard a good description of the theory of sharing best practice, we were less convinced that the arrangements as described to us have led to tangible improvements, raising concerns that these forums may be little more than “talking shops” and not as effective as they ought to be.22
11. We were pleased to hear that the Government Finance Function (GFF) recognises the need for a significant shift.23 It told us that it has conducted an internal skills assessment and will recruit additional experts to help upskill the finance function.24 This aligns with the GFF’s new strategy that prioritises better use of data to enhance value for money.25 GFF told us this upskilling will include working to improve the understanding of cost drivers and spending more time on this as an area of focus.26
12. GFF is seeking to co-produce guidance with departments demonstrating good practice.27 Both Cabinet Office and GFF said that departments are receptive to this push, especially given the efficiency targets they are expected to meet as set out in the 2025 Spending Review.28 To support this, GFF told us that it will work through the Finance Foundations Group to explore what can be done in more detail.29
2 Legacy systems, single service owners and overall leadership
Addressing the barriers posed by legacy systems
13. Legacy systems are problematic for two main reasons. Firstly, they are a significant driver of cost, comprising around one-third of government’s technology estate but representing almost half of its costs.30 This may not include the excess costs that arise from people having to work manually around cumbersome, old systems and poor-quality data from fragmented data sources.31 Secondly, legacy systems are an impediment to being able to gather better cost data as data extraction often requires manual effort as repeated point-in-time exercises.32 The Cabinet Office recognises the need for Permanent Secretaries to have a good understanding of their legacy systems. The Department for Science, Innovation and Technology (DSIT) has baselined government legacy systems and reviewed departmental bids for funding in the 2025 Spending Review to mitigate the risks such systems pose. It told us that although there has been a step-change in how senior leaders are thinking about their legacy systems, there were not as many bids for funding as expected.33
14. “Quick wins” can be valuable. However, we are concerned that they often mask deeper and more persistent issues like poor data quality and entrenched cultural barriers. As the Cabinet Office has itself identified, these will need ongoing tenacity and effort if substantial progress is to be made in addressing them.34
15. The lack of common data standards across government further complicates benchmarking and granular cost analysis because it makes data more difficult to analyse and interpret.35 GFF told us that the introduction of new Enterprise Resource Planning systems and new data standards for back-office processes such as finance and human resources offer the potential for improved consistency.36 However, this will not necessarily address the costs of services provided by operational departments to citizens and businesses. Furthermore, technical solutions alone are insufficient–we heard that cultural and process reforms are also needed.37
16. Departments do not generally have a good view of the additional time and people costs associated with specific business processes or different stages of the customer journey.38 We were therefore surprised to learn that there is no standard policy in the civil service on how staff time is tracked, and despite many systems offering time recording capability, its use remains optional.39 A shift in mindset is needed to better understand how time is spent and to use the data collected for meaningful insights on where the costs of services are high and potential efficiencies and productivity improvements can be made.40
Appointing Single Service Owners
17. It is difficult for departments to gain a full view of the end-to-end costs of a service where there is no Single Service Owner (SSO) with overall mandate and responsibility for the service concerned.41 This also weakens the incentives to identify and reduce costs overall, because the focus is on the individual component parts of a service rather than how they fit together as an overall whole.42 While we heard “quick wins” can give a sense of progress, more substantial benefits require a deeper understanding of a service and in some case, re-engineering of the service.43 There is an opportunity to learn from the methodology used by the Top 75 programme, which included industry benchmarks for segmented digital services.44
18. The SSO role is not well understood across departments compared to other senior roles in departments. Both Cabinet Office and DSIT told us that more can and should be done to raise its profile and ensure that an SSO is appointed for “every single service”.45 It is important to ensure that SSOs have the appropriate authority as well as the right skills for the role. The Cabinet Office told us that it has already identified where an SSO is necessary, but ultimately Permanent Secretaries should be responsible for their appointment. The Cabinet Office does not yet have a timeframe for this but has committed to set one out in response to this report.46
Pace and leadership to enable benefits from new technologies
19. Government transformation and efficiency efforts are increasingly reliant on newer technologies such as artificial intelligence (AI).47 Legacy systems and poor-quality data remain a major barrier to reaping the full benefits.48 We heard that addressing data and legacy issues requires sustained effort and resilience and remain concerned that the pace of addressing the challenge is not keeping up with what is needed in today’s world and that despite this, departments are already experimenting with AI.49
20. Resource constraints at the centre of government mean that less support is available to departments compared to what was available under previous initiatives like the Top 75 programme.50 We have often observed on this committee that government pay rates cannot match what highly skilled people could earn in the private sector. Government has attempted to address this through the digital pay framework, which DSIT told us has recently been uplifted to market rates.51 However, we are concerned that it still falls short of industry rates in London and the South East, and this will affect the recruitment and retention of people with sufficient seniority and calibre to lead the transformation required.52
21. Progress must be focused and purposeful. We accept that trying to solve everything at once risks losing momentum, and that having a roadmap is helpful. Nevertheless, prioritisation and having clear milestones to aim for are key to avoiding drift in addressing government’s long-standing legacy and data issues, so that are in a better position to reap the full benefits of productivity-enhancing technologies such as artificial intelligence.53
Formal minutes
Thursday 4 December 2025
Members present
Sir Geoffrey Clifton-Brown
Mr Clive Betts
Anna Dixon
Rachel Gilmour
Sarah Green
Lloyd Hatton
Rupert Lowe
Sarah Olney
Tristan Osborne
Government services: Identifying Costs
Draft Report (Government services: Identifying costs), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 21 read and agreed to.
Summary agreed to.
Conclusions and recommendations agreed to.
Resolved, That the Report be the Fifty-eighth Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available (Standing Order No. 134).
Adjournment
Adjourned till Monday 8 December at 3.00 p.m.
Witnesses
The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.
Monday 20 October 2025
Cat Little CB, Permanent Secretary, Cabinet Office; Conrad Smewing, Director General, Public Spending at HMT and Joint-Head of the Government Finance Function, HM Treasury; Andrew Cartner, Deputy Head of the Government Finance Function, HM Treasury; Bonnie Wang, Director of Strategy and Assurance, DSITQ77-158
Published written evidence
The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.
GFC numbers are generated by the evidence processing system and so may not be complete.
1 Amnesty International UK; and Migrant VoiceGFC0001
2 Buziuk, Mr Hleb (Independent policy researcher and human-rights advocate, FairGo CIC)GFC0004
3 Project for the Registration of Children as British Citizens (PRCBC); and Amnesty International UKGFC0002
List of Reports from the Committee during the current Parliament
All publications from the Committee are available on the publications page of the Committee’s website.
Session 2024–26
|
Number |
Title |
Reference |
|
57th |
Government services: Generating income |
HC 890 |
|
56th |
BBC Accounts and Trust Statement 2024–25 |
HC 1230 |
|
55th |
Reducing NHS waiting times for elective care |
HC 820 |
|
54th |
Afghanistan Response Route |
HC 1391 |
|
53rd |
Cost of maintaining the FCDO’s overseas estate |
HC 884 |
|
52nd |
Resilience to threats from animal disease |
HC 885 |
|
51st |
The UK’s F-35 stealth fighter capability |
HC 1232 |
|
50th |
Local bus services in England |
HC 892 |
|
49th |
Administration of the Civil Service Pension Scheme |
HC 888 |
|
48th |
Smarter delivery of public services |
HC 889 |
|
47th |
First Annual Report of the Chair of the Committee of Public Accounts |
HC 1300 |
|
46th |
Improving local areas through developer funding |
HC 886 |
|
45th |
Improving family court services for children |
HC 883 |
|
44th |
Governance and decision-making on major projects |
HC 642 |
|
43rd |
MoD’s oversight of Reserve Forces’ and Cadets’ Associations |
HC 893 |
|
42nd |
Water sector regulation |
HC 824 |
|
41st |
UK Research and Innovation |
HC 826 |
|
40th |
Collecting the right tax from wealthy individuals |
HC 827 |
|
39th |
Government’s use of private finance for infrastructure |
HC 821 |
|
38th |
Increasing teacher numbers: Secondary and further education |
HC 825 |
|
37th |
Immigration: Skilled worker visas |
HC 819 |
|
36th |
Jobcentres |
HC 823 |
|
35th |
Introducing T Levels |
HC 822 |
|
34th |
Department for Business and Trade Annual Report and Accounts 2023-24 |
HC 818 |
|
33rd |
Supporting the UK’s priority industry sectors |
HC 1070 |
|
32nd |
The Future of the Equipment Plan |
HC 716 |
|
31st |
Local Government Financial Sustainability |
HC 647 |
|
30th |
Antimicrobial resistance: addressing the risks |
HC 646 |
|
29th |
Condition of Government property |
HC 641 |
|
28th |
Decommissioning Sellafield |
HC 363 |
|
27th |
Government’s relationship with digital technology suppliers |
HC 640 |
|
26th |
Tackling Violence against Women and Girls |
HC 644 |
|
25th |
DHSC Annual Report and Accounts 2023-24 |
HC 639 |
|
24th |
Government cyber resilience |
HC 643 |
|
23rd |
The cost of the tax system |
HC 645 |
|
22nd |
Government’s support for biomass |
HC 715 |
|
21st |
Fixing NHS Dentistry |
HC 648 |
|
20th |
DCMS management of COVID-19 loans |
HC 364 |
|
19th |
Energy Bills Support |
HC 511 |
|
18th |
Use of AI in Government |
HC 356 |
|
17th |
The Remediation of Dangerous Cladding |
HC 362 |
|
16th |
Whole of Government Accounts 2022-23 |
HC 367 |
|
15th |
Prison estate capacity |
HC 366 |
|
14th |
Public charge points for electric vehicles |
HC 512 |
|
13th |
Improving educational outcomes for disadvantaged children |
HC 365 |
|
12th |
Crown Court backlogs |
HC 348 |
|
11th |
Excess votes 2023-24 |
HC 719 |
|
10th |
HS2: Update following the Northern leg cancellation |
HC 357 |
|
9th |
Tax evasion in the retail sector |
HC 355 |
|
8th |
Carbon Capture, Usage and Storage |
HC 351 |
|
7th |
Asylum accommodation: Home Office acquisition of former HMP Northeye |
HC 361 |
|
6th |
DWP Customer Service and Accounts 2023-24 |
HC 354 |
|
5th |
NHS financial sustainability |
HC 350 |
|
4th |
Tackling homelessness |
HC 352 |
|
3rd |
HMRC Customer Service and Accounts |
HC 347 |
|
2nd |
Condition and maintenance of Local Roads in England |
HC 349 |
|
1st |
Support for children and young people with special educational needs |
HC 353 |
Footnotes
1 C&AG’s Report, Improving government’s productivity through better cost information, 15 September 2025
2 C&AG’s Report, paras 1, 4
3 C&AG’s Report, para 1.3
4 C&AG’s Report, para 6
5 C&AG’s Report, para 1.4
6 Qq 84, 106
7 Q 84
8 Qq 105, 106
9 Qq 86, 89, 90, 94, 106
10 Q 107
11 Q 93
12 Q 110
13 Qq 147, 148
14 Qq 123, 146
15 Q 140
16 Q 85
17 Qq 86, 89, 90, 94, 106
18 Q 88
19 Qq 95, 96
20 Qq 91, 107
21 Q 91
22 Qq 92, 93
23 Q 139
24 Qq 126, 127, 128
25 Qq 93, 141
26 Qq 93, 139
27 Q 157
28 Qq 105, 110, 113, 141
29 Qq 98, 109, 158
30 Q 115
31 C&AG’s Report, para 4
32 Qq 139, 149
33 Qq 114, 115
34 Qq 111, 125, 150
35 Q 149
36 Q 140
37 Qq 140, 150
38 C&AG’s Report, paras 1.6, 1.7
39 Qq 135, 136
40 Qq 137, 138
41 Q 143
42 Q 144
43 Q 111
44 Qq 87, 108
45 Qq 132, 144
46 Q 133
47 Q 137
48 Q 115
49 Qq 115, 145, 153
50 Qq 122, 145
51 Q 128
52 Qq 131, 134
53 Q 154