Source · Select Committees · Public Accounts Committee
Recommendation 22
22
Rejected
Cost-recovery models offer little incentive for departments to achieve efficiencies or innovate.
Recommendation
Most services are designed to recover their costs, meaning any efficiencies achieved would be passed onto fee-payers rather than retained by the department. Conversely rising costs can simply be transferred to users without challenge.45 The NAO highlighted the challenges of digital 38 Q 29 39 C&AG’s Report, para 2.27 40 Qq 45, 68 41 Qq 36-40 42 GFC0001; GFC0002 43 C&AG’s Report, para 2.27 44 Qq 41, 45 45 Qq 70, 73 14 transformation which can require an upfront investment in time, money and skills. The risk of which is also borne by the charging body, and can lead to service disruption, especially if the programme is not handled well.46 This offers little incentive for departments to innovate, improve productivity or reduce operating costs. Of the seven services examined by the NAO, only one had reduced its fees in nominal terms over the past decade as a result of efficiency savings.47
Government Response Summary
The government disagrees with the recommendation but states that the Government Efficiency Framework (GEF) already provides extensive guidance for efficiency in the fee-setting framework. They state that departments are incentivised to drive efficiencies in their fee-funded services as this will count towards their bespoke technical efficiency targets agreed at the 2025 Spending Review.
Government Response
Rejected
HM Government
Rejected
5.1 The government disagrees with the Committee’s recommendation. 5.2 The government agrees that incentives on departments for cost reduction and productivity improvements should apply as equally to all services regardless of the funding mechanism. 5.3 The Government Efficiency Framework (GEF) already provides extensive guidance for efficiency in the fee-setting framework and endorses public sector organisations to use the framework as a guiding set of principles on how they progress and track efficiencies. Where the costs of delivering a fee or charge service have been reduced through a technical efficiency and the fees/charges have been reduced (in line with 6.2.2. of Managing Public Money) and this can be clearly evidenced; this can be included as a monetisable non cashable efficiency. 5.4 Departments are therefore incentivised to drive efficiencies in their fee-funded services as this will count towards their bespoke technical efficiency targets agreed at the 2025 Spending Review. All government departments identified at least 5% savings and efficiencies by 2028-29, delivering technical efficiencies of almost £14 billion a year by 2028-29, with funding repurposed towards core priorities. The government is committed to continuous improvement and will repeat the technical efficiencies process at the next Spending Review. 5.5 Treasury, Parliament and the public will be able to both track and hold public bodies to account on how they are achieving efficiency savings to both the taxpayer and the fee payer as part of their overall publicly reported steps towards meeting their efficiency targets. This will also be assessed as part of departments’ annual financial performance evaluations.