Scheme to save £159 million cost UK government £255 million

7 March 2012

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7 March 2012 | Adam Leach

A seven-year project to save UK public funds by setting up shared service centres failed to deliver £159 million expected savings and has, in fact, increased operating costs by £255 million.

On top of higher than expected operating costs, the government spent £1.4 billion on establishing five shared service centres despite budgeting only £900 million.

The figures were revealed today by the National Audit Office (NAO) in its report Efficiency and reform in government corporate functions through shared service centres.

The report said the lack of a mandate forcing departments to use these centres, thereby enabling it to drive efficiency savings through sheer scale, has resulted in four making a loss and just one breaking even. It also found that despite the intention to use the shared services strategy to standardise systems and processes, government departments had been overly specific in their requirements, limiting the ability to leverage buying power.

Launching the report, NAO head Amyas Morse, said: “The initiative for government departments to share back-office functions has suffered from an approach which made participation voluntary and tailored services to meet the differing needs of individual departments. The result was over complexity.”

Margaret Hodge, chairwoman of the House of Common’s Committee of Public Accounts, said: “Departments lost sight of their overall objective to save money. They ordered tailor-made systems which have cost the taxpayer too much.”

While critical of progress on the project between 2004 and 2011, the NAO accepted that a new strategy from the Cabinet Office for shared services addressed many of the issues in the report.

It did, however, make a series of recommendations to the Cabinet Office, including asking for the power to force government departments to implement the shared services strategy. It also recommended considering extending the overall timescale of the project to establish more framework agreements, improve benchmarking and taking better account of the trade off between cost and value

A Cabinet Office spokeman, said: “A Major Projects Authority, which reports directly to the Prime Minister, was created in 2010 and introduced tough new controls for major projects to manage risk. The new approach to shared services will be overseen by this authority to ensure it delivers for taxpayers.”

 

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