Source · Select Committees · Public Accounts Committee
58th Report - Government services: Identifying costs
Public Accounts Committee
HC 1421
Published 12 December 2025
Recommendations
2
Accepted
Require HM Treasury and GFF to provide departments with practical guidance for identifying and recording service costs.
Recommendation
Most departments lack a sufficient understanding of their service costs and departments need help from HM Treasury and the Government Finance Function on the practical steps they can take to improve and upskill. While standards for service costing and financial …
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Government Response Summary
The government agrees with the recommendation and will produce new costing guidance with departments to set a consistent standard for identifying and recording service costs. This includes defining scope, data sets, benchmarking, and integrating risk, supported by new systems and capability development, with departments piloting the standard.
HM Treasury
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3
Accepted in Part
Require DSIT to provide a baselined list of legacy systems and prioritise those for cost investigation.
Recommendation
Legacy IT systems are a significant contributory factor in the cost of government services and an impediment to being able to gather better data to bring about improvements. Departments face major challenges in collecting and analysing cost data due to …
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Government Response Summary
The government accepts part of the recommendation, agreeing to share available legacy system data with the Committee chair by March 2026 (privately). However, it rejects the second part, stating it will not prioritize identifying specific systems for further cost investigation within six months, as it needs to establish an improved baseline through its Legacy IT Action Plan, due later in 2026.
HM Treasury
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4
Accepted
Require Cabinet Office to mandate Permanent Secretaries to appoint Senior Single Service Owners for all services.
Recommendation
The lack of Single Service Owners with accountability for all aspects of an end-to-end service inhibits departments’ ability to identify the visibility of a service’s end-to-end cost and the incentive to reduce it. The absence of Single Service Owners (SSOs) …
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Government Response Summary
The government agrees with the recommendation and will issue a letter requiring Permanent Secretaries to complete an assessment of Single Service Owner gaps within six months and appoint SSOs within twelve months, with potential for acceleration.
HM Treasury
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5
Accepted
Require DSIT to lead systemic data and systems improvement and detail specialist retention plans.
Recommendation
There is a lack of urgency and clear leadership for resolving the legacy systems and poor data issues that inhibit the realisation of benefits through greater productivity and efficiency that departments will reap from new technology such as AI. Government …
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Government Response Summary
The government accepts the recommendation, stating GDS will develop a long-term plan for public data governance to exploit new technologies like AI. To secure and retain talent, they will mandate digital leaders on executive committees and digital non-executive directors on boards by 2026, refine pay frameworks, and develop talent pipelines through various initiatives.
HM Treasury
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7
Accepted
Incentivise departments to collect detailed service cost data and clarify Permanent Secretaries' responsibilities.
Recommendation
However, current obligations are focused on wider overall value for money and there are no specific objectives or accountability for Permanent Secretaries or senior leaders to collect detailed data on costs at the service level.8 Although the Cabinet Office and …
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Government Response Summary
The Treasury will issue an updated Dear Accounting Officer letter that explicitly sets expectations for Accounting Officers and senior leaders to improve service-level cost information, and compliance will be monitored through end-year finance assessments; systemic issues will have remediation plans and timelines agreed, with progress reviewed.
HM Treasury
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8
Accepted
Political sponsorship and senior leadership are essential for identifying service costs effectively.
Recommendation
The Cabinet Office told us that political sponsorship and support is considered essential as well as that of senior leaders within departments.13 This aligns with government’s goal of creating a more “productive and agile state”.14 Introducing targets for getting processes …
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Government Response Summary
The Treasury will issue an updated Dear Accounting Officer letter by July 2026 that explicitly sets expectations for Accounting Officers and senior leaders to identify, use and continuously improve service‑level cost information.
HM Treasury
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9
Accepted
Existing service costing standards lack sophistication and are applied inconsistently across departments.
Recommendation
Some standards for service costing and financial management exist.16 However, we repeatedly heard that they lack the necessary sophistication and are applied inconsistently across departments.17 We heard examples of where costing activities were taking place at a more granular level, …
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Government Response Summary
The government will implement practical costing guidance by July 2026, sitting alongside Managing Public Money and Value for Money and providing a common approach to service costing, and set a consistent standard for service costing.
HM Treasury
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13
Accepted in Part
Legacy systems significantly increase costs and hinder data gathering across government.
Recommendation
Legacy systems are problematic for two main reasons. Firstly, they are a significant driver of cost, comprising around one-third of government’s technology estate but representing almost half of its costs.30 This may not include the excess costs that arise from …
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Government Response Summary
DSIT will share the available data with the chair of the Committee by March 2026, however, the department does not agree that this recommendation should be an immediate priority of the next 6 months.
HM Treasury
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16
Accepted
Departments lack insight into staff time costs due to optional time tracking.
Recommendation
Departments do not generally have a good view of the additional time and people costs associated with specific business processes or different stages of the customer journey.38 We were therefore surprised to learn that there is no standard policy in …
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Government Response Summary
HM Treasury and the Government Finance Function are co-ordinating practical costing guidance on service costing, including activity-based techniques, overhead apportionment, staff-time capture options, and linking costs to outcomes.
HM Treasury
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18
Accepted in Part
Require Permanent Secretaries to appoint Single Service Owners with appropriate authority for every service.
Recommendation
The SSO role is not well understood across departments compared to other senior roles in departments. Both Cabinet Office and DSIT told us that more can and should be done to raise its profile and ensure that an SSO is …
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Government Response Summary
The Government Digital Service and the Cabinet Office will issue a letter encouraging Permanent Secretaries to complete an assessment of all SSO gaps within 6 months, and to appoint SSOs within 12 months, but the implementation target is March 2027, which is longer than the committee recommendation of six months.
HM Treasury
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19
Accepted
Legacy systems and poor data quality hinder government's adoption of new technologies.
Recommendation
Government transformation and efficiency efforts are increasingly reliant on newer technologies such as artificial intelligence (AI).47 Legacy systems and poor-quality data remain a major barrier to reaping the full benefits.48 We heard that addressing data and legacy issues requires sustained …
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Government Response Summary
DSIT will publish a strategic data roadmap for public sector data in Spring 2026. The Government Digital Service will set out a long-term plan for how public data should be treated as a strategic asset across government. They will also set targets for boards to appoint digital non-executive directors by 2026, refine the Government Digital and Data Pay Framework and Capability Framework, develop talent pipelines, and encourage cross-sector skills exchange.
HM Treasury
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20
Accepted
Government pay rates remain insufficient to recruit and retain skilled transformation leaders.
Recommendation
Resource constraints at the centre of government mean that less support is available to departments compared to what was available under previous initiatives like the Top 75 programme.50 We have often observed on this committee that government pay rates cannot …
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Government Response Summary
DSIT will publish a strategic data roadmap for public sector data in Spring 2026 and GDS will set out a long-term plan for public data leaders and for boards to appoint digital non-executive directors by 2026; further action will be taken to attract, retain, and develop digital and data talent through the refinement of the Government Digital and Data Pay Framework and Capability Framework.
HM Treasury
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21
Deferred
Establish clear milestones and prioritise efforts to address government's long-standing legacy and data issues.
Recommendation
Progress must be focused and purposeful. We accept that trying to solve everything at once risks losing momentum, and that having a roadmap is helpful. Nevertheless, prioritisation and having clear milestones to aim for are key to avoiding drift in …
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Government Response Summary
DSIT will publish a strategic data roadmap for public sector data in Spring 2026 and Government Digital Service will set out a long-term plan for how public data should be managed. Further action to attract, retain, and develop digital and data talent is being taken and the impact of these initiatives will be monitored and evaluated.
HM Treasury
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Conclusions (8)
1
Conclusion
Acknowledged
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Cabinet Office, HM Treasury and the Department for Science, Innovation and Technology on improving government’s productivity through better information on the costs of services.1
Government Response Summary
The government acknowledges the committee's work and outlines plans to enhance government productivity by setting expectations for Accounting Officers to improve service-level cost information, issuing new guidance, monitoring compliance via finance assessments, and fostering best practices through cross-government forums.
6
Conclusion
Not Addressed
Responsibility for holding departments to account for improving their cost information is joint between the Cabinet Office and HM Treasury. The Cabinet Office sets the overall performance management framework expectations, including financial minimum standards.6 However, it does not systematically enforce compliance, relying instead on departments and internal auditors. HM Treasury’s …
Government Response Summary
The government repeats the response from ID 2039, which does not address the specific observation of the committee.
10
Conclusion
Acknowledged
We found that there is limited practical guidance and systematic support for people in departments who own the services and are responsible for identifying their costs.20 Forums such as the Finance Foundations Group aim to share best practice.21 While we heard a good description of the theory of sharing best …
Government Response Summary
Treasury will use cross‑government forums (including the Finance Foundations Group) to share best practice, address barriers, and support departments to embed cost ownership in service governance, aligned to the Government Finance Function Strategy.
11
Conclusion
Acknowledged
We were pleased to hear that the Government Finance Function (GFF) recognises the need for a significant shift.23 It told us that it has conducted an internal skills assessment and will recruit additional experts to help 13 Qq 147, 148 14 Qq 123, 146 15 Q 140 16 Q 85 …
Government Response Summary
Capability will be strengthened through the Government Finance Academy and peer support via the Finance Foundations Group, with departments piloting the standard and sharing lessons learned.
12
Conclusion
Accepted
GFF is seeking to co-produce guidance with departments demonstrating good practice.27 Both Cabinet Office and GFF said that departments are receptive to this push, especially given the efficiency targets they are expected to meet as set out in the 2025 Spending Review.28 To support this, GFF told us that it …
Government Response Summary
HM Treasury and the Government Finance Function are co-ordinating practical costing guidance, produced with departments and informed by NAO advice, to provide a common, proportionate approach to service costing.
14
Conclusion
Acknowledged
“Quick wins” can be valuable. However, we are concerned that they often mask deeper and more persistent issues like poor data quality and entrenched cultural barriers. As the Cabinet Office has itself identified, these will need ongoing tenacity and effort if substantial progress is to be made in addressing them.34 …
Government Response Summary
The government agrees with the Committee’s recommendation. They will implement practical costing guidance by July 2026, which will sit alongside Managing Public Money and Value for Money.
15
Conclusion
Acknowledged
The lack of common data standards across government further complicates benchmarking and granular cost analysis because it makes data more difficult to analyse and interpret.35 GFF told us that the introduction of new Enterprise Resource Planning systems and new data standards for back-office processes such as finance and human resources …
Government Response Summary
The government states that consistency will be supported by the NOVA reference model, rollout of common ERP solutions, and a common chart of accounts.
17
Conclusion
Not Addressed
It is difficult for departments to gain a full view of the end-to-end costs of a service where there is no Single Service Owner (SSO) with overall mandate and responsibility for the service concerned.41 This also weakens the incentives to identify and reduce costs overall, because the focus is on …
Government Response Summary
The government repeats the response from ID 2050, which does not address the specific observation of the committee.