Source · Select Committees · Public Accounts Committee
Recommendation 25
25
Accepted
Treasury acknowledges reactive efficiency system and plans a more proactive, strategic approach.
Recommendation
The Treasury acknowledged that its system is largely reactive rather than strategic, relying on accounting officers’ general duty in respect of value for money, and periodic spending review targets to drive efficiency. It recognised the potential of emerging technologies, such as Artificial Intelligence, to reduce administrative costs and improve service delivery. The Treasury told us that departments are driven by both incentives and ongoing obligations to encourage them to adopt efficiency measures. Therefore, the Treasury stated that they intend to adopt a more proactive approach to embedding efficiency incentives across government.54 53 Qq 72-73 54 Qq 70, 74 16
Government Response Summary
The government claims that 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 efficiency.
Government Response
Accepted
HM Government
Accepted
5. PAC conclusion: The Treasury’s system for fees and charges has failed to incentivise cost reduction or productivity improvements, leading to missed opportunities to improve services. 5. PAC recommendation: The Treasury should, by March 2026, publish a plan to embed incentives for efficiency in the fee-setting framework. This plan must include explicit incentives to reward departments that improve productivity and modernise services for users through digital transformation and innovation. 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.