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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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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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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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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Conclusions (1)
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.