Recommendation 2

The Treasury has been too passive in its oversight of fees and charges resulting in large surpluses and deficits which unfairly impacts taxpayers and potentially future service users. The Treasury’s current oversight of fees and charges is through its spending teams and during Spending Reviews. This arrangement is ineffective, as over the five-year period from 2019–20 to 2023–24, none of the seven services 3 we looked at consistently charged the correct amount to reflect actual service costs. Notably, passports and family court fees have repeatedly missed cost-recovery targets by more than 10% for five consecutive years. Persistent imbalances between fees and costs creates risks for the resilience of public services and place a burden on taxpayers, who may need to subsidise under-recovering services. Those paying fees can be unfairly charged. For example, current users may be overcharged, or future users can face higher fees to cover accumulated deficits due to past undercharging. For instance, HM Passport Office had a significant shortfall of £223 million in 2023–24, contributing to a total deficit of £916 million over five years. The Treasury accepts that its approach has been too passive, and engagement with charging bodies is reactive rather than proactive in overseeing cost recovery. recommendation To ensure sufficient scrutiny over charged services and to support bodies to achieve their cost-recovery targets, the Treasury should: a. Introduce an annual review cycle within 12 months for all charged services covering service design, consent status and implications for fairness to taxpayers and current and future service users and fee payers. b. Conduct targeted and proportionate deep-dives with bodies that have missed their cost recovery targets by more than 10% in two consecutive years and publish a time-bound recovery plan with clear milestones.