Source · Select Committees · Public Accounts Committee
Recommendation 11
11
Acknowledged
Significant fee-cost imbalances risk public service financial resilience and create unfair taxpayer burden.
Conclusion
Significant imbalances between fees and costs pose risks to the financial resilience of public services and create unfairness for the public. The NAO reported that the passport service has been underrecovering since 2017-18 without explicit approval from Home Office Ministers or HM Treasury. This has led to a deficit of £223 million in 2023-24 and a total deficit of £916 million over the five-year period from 2019-20. However, Home Office is yet to agree a strategy or timeline with the Treasury to address their ongoing deficit.20 We asked the Treasury about the consequences of unplanned surpluses and deficits. The Treasury informed us that if departments don’t recover costs through their fees, departments need to absorb the unfunded costs within its existing budget, otherwise the cost of a particular government service will come from general taxation.21 This is unfair to taxpayers when they subsidise services that should be funded by users receiving the service.
Government Response Summary
The Treasury acknowledged the challenge of potential inequities for users when government bodies under or overcharge for services and hopes to address this through stronger incentives for departments to encourage lower costs through efficiencies.
Government Response
Acknowledged
HM Government
Acknowledged
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.