Source · Select Committees · Public Accounts Committee
Recommendation 9
9
Accepted in Part
Most charged services missed cost-recovery targets, resulting in significant financial shortfalls.
Recommendation
The NAO reported that of the seven services examined, six aimed to achieve 100% cost-recovery, but these six averaged only 88% recovery in 2023-24, leading to a shortfall of £340 million.16 The Treasury acknowledged that it has perhaps been too passive, relying primarily on accounting officers. Treasury accepted that it now needs to adopt a more systematic approach to monitoring, assessing and supporting departments in setting fees and charges. The Treasury told us it plans to improve regular assessment, transparency, efficiency and sharing best practice.17
Government Response Summary
The government disagrees with the specific recommendation. However, the Treasury will update the Financial Reporting Manual (FReM) to align to 6.11 of Managing Public Money (MPM) to include clearer reporting guidance for fee-charging public bodies and will embed oversight through the Spending Review (SR) returns to ensure departments consider the appropriate subsidies and fees which will now occur every two years.
Government Response
Accepted in Part
HM Government
Accepted in Part
2. PAC conclusion: 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. 2. PAC recommendation: To ensure sufficient scrutiny over charged services and to support bodies to achieve their cost-recovery targets, the Treasury should: • 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. • 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. 2.1 The government disagrees with the Committees recommendation. 2.2 However, the government agrees with the principles behind the Committee’s recommendation that cost recovery should be a conscious and transparent choice but considers improvements can be better achieved by other means. The Treasury will update the Financial Reporting Manual (FReM) to align to 6.11 of Managing Public Money (MPM) to include clearer reporting guidance for fee-charging public bodies to ensure more effective Parliamentary scrutiny and rather than an annual cycle will embed oversight through the Spending Review (SR) returns to ensure departments consider the appropriate subsidies and fees which will now occur every two years.