Source · Select Committees · Public Accounts Committee
57th Report - Government services: Generating income
Public Accounts Committee
HC 890
Published 10 December 2025
Recommendations
2
Rejected
Introduce an annual review cycle and targeted deep-dives for charged services missing cost recovery targets.
Recommendation
The Treasury has been too passive in its oversight of fees and charges resulting in large surpluses and deficits which unfairly impacts taxpayers and potentially future service users. The Treasury’s current oversight of fees and charges is through its spending …
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Government Response Summary
The government disagrees with the recommendation, rejecting an annual review cycle and targeted deep-dives. Instead, it will update the Financial Reporting Manual (FReM) with clearer guidance and embed oversight through bi-annual Spending Review returns.
HM Treasury
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3
Accepted
Publish a detailed plan to reduce time and complexity in amending public service fees.
Recommendation
The Treasury and Department processes for changing fees are too slow and complex, which makes it harder for bodies to manage effectively their service costs and fee revenues. The case study services took an average of 63 weeks to change …
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Government Response Summary
The government accepts the recommendation and will implement new arrangements to reduce the time and complexity involved in amending fees.
HM Treasury
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4
Accepted in Part
Establish standardised reporting requirements for fee-charging public bodies to enable effective public and parliamentary scrutiny.
Recommendation
Charging bodies do not publish adequate or consistent information on their fees and charges to allow for effective public scrutiny and accountability. The Treasury sets out in both Managing Public Money (MPM) and the Financial Reporting Manual (FReM) the information …
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Government Response Summary
The government disagrees with the specific recommendation for standardised reporting but commits to updating the Financial Reporting Manual (FReM) by Spring 2026 with clearer reporting guidance for fee-charging public bodies. They will also consider if further reporting requirements are necessary.
HM Treasury
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5
Rejected
Publish a plan to embed efficiency incentives within the fee-setting framework to reward productivity improvements.
Recommendation
The Treasury’s system for fees and charges has failed to incentivise cost reduction or productivity improvements, leading to missed opportunities to improve services. Where charged services aim to recover all costs, any potential savings would be passed on to the …
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Government Response Summary
The government rejects the recommendation, stating its existing Government Efficiency Framework and Spending Review targets already provide adequate incentives for departments to drive efficiencies in fee-funded services and track performance.
HM Treasury
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6
Accepted
Treasury's reliance on departmental accounting officers creates inconsistency in fee monitoring.
Recommendation
The NAO reported that Treasury places primary reliance on individual department’s accounting officers to monitor their fees and charges. Accounting officers are responsible for maintaining effective governance and internal controls, including ensuring that fees are set appropriately and disclosed in-line …
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Government Response Summary
HM Treasury will create a cross departmental working group to set out a comprehensive time-bound plan to be more systematic in supporting fee-charging public bodies, which will be shared with the Committee. The working group will discuss issuing operational guidance to government bodies and establish a mechanism to share good practice.
HM Treasury
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7
Accepted
Government bodies require practical examples and clearer guidance for managing fee-setting challenges.
Recommendation
The NAO highlighted that government bodies would like practical examples of how to address common operational problems, such as forecasting user demand, or when and how to reflect inflationary pressures, so they can consider options on how best to handle …
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Government Response Summary
HM Treasury will create a cross departmental working group to set out a comprehensive time-bound plan to support fee-charging public bodies, to be shared with the Committee, which will discuss issuing operational guidance and establishing a mechanism to share good practice.
HM Treasury
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9
Accepted in Part
Most charged services missed cost-recovery targets, resulting in significant financial shortfalls.
Recommendation
The NAO reported that of the seven services examined, six aimed to achieve 100% cost-recovery, but these six averaged only 88% recovery in 2023-24, leading to a shortfall of £340 million.16 The Treasury acknowledged that it has perhaps been too …
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Government Response Summary
The government disagrees with the specific recommendation. However, 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 and 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.
HM Treasury
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14
Accepted
Fee amendment process is slow, complex, and lacks standardised data, undermining financial sustainability.
Recommendation
The process for amending fees across government is slow and complex as certain public bodies took an average of 63 weeks, with the longest case taking over two years. This undermines financial sustainability because it makes it harder to recover …
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Government Response Summary
The Treasury will write to the Committee by May 2026 to set out proposals indicating the new arrangements to reduce the time and complexity of amending fees.
HM Treasury
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15
Accepted
Slow fee amendment process prevents keeping pace with changing costs, especially during inflation.
Recommendation
The NAO reported that the current timing of the process can result in fees that fail to keep pace with changing costs, particularly during periods of high inflation.28 The Ministry of Justice (MoJ) informed us that its latest fee change …
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Government Response Summary
The Treasury will write to the Committee by May 2026 to set out proposals indicating the new arrangements to reduce the time and complexity of amending fees.
HM Treasury
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16
Accepted
Time-consuming fee adjustment process hinders routine, low-risk changes and consistent proposals.
Recommendation
The Treasury acknowledged that the decision-making process is time-consuming and disproportionate for low-risk, routine adjustments like inflation-linked increases. It told us it will introduce a standardised template, adopted from the Environment Agency’s approach, with the aim of improving completeness and …
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Government Response Summary
The Treasury will write to the Committee by May 2026 to set out proposals indicating the new arrangements to reduce the time and complexity of amending fees.
HM Treasury
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17
Accepted
Legislative scheduling for fee changes adds uncertainty and delays, competing for Parliamentary time.
Recommendation
The Treasury highlighted that the legislative scheduling adds uncertainty, particularly where secondary legislation must compete for Parliamentary time. We asked if the process could be simplified without diminishing parliamentary scrutiny, such as through consolidation of primary legislation to remove the …
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Government Response Summary
The Treasury will write to the Committee by May 2026 to set out proposals indicating the new arrangements to reduce the time and complexity of amending fees.
HM Treasury
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18
Accepted in Part
Inconsistencies between MPM and FReM create ambiguity in fee disclosure requirements for departments.
Recommendation
The Treasury requires departments to disclose information on their fees and charges in their annual reports and accounts, as set out in MPM and the Financial Reporting Manual (FreM). However, the Treasury noted there are inconsistencies between these documents. This …
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Government Response Summary
The Treasury will update the Financial Reporting Manual (FReM) to align to 6.11 of Managing Public Money (MPM) by Spring 2026 to include clearer reporting guidance for fee-charging public bodies. They will also keep this under review and consider if this will be sufficient or whether additional reporting requirements are necessary.
HM Treasury
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19
Accepted in Part
Incomplete and inconsistent fee disclosures hinder parliamentary and Treasury oversight of departments.
Recommendation
Poor reporting limits the Treasury and Parliament’s ability to monitor fees and hold departments to account. The NAO found that none of the seven services it examined complied fully with all of the Treasury’s disclosure requirements in their respective 2023-24 …
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Government Response Summary
The Treasury will update the Financial Reporting Manual (FReM) to align to 6.11 of Managing Public Money (MPM) by Spring 2026 to include clearer reporting guidance for fee-charging public bodies. They will also keep this under review and consider if this will be sufficient or whether additional reporting requirements are necessary.
HM Treasury
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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 …
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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.
HM Treasury
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23
Rejected
Departments struggle to identify efficiencies due to inconsistent cost-modelling and insufficient data.
Recommendation
Departments and arm’s-length bodies struggle to identify opportunities to improve efficiency and value for money as they do not maintain detailed cost information. The NAO found charging bodies use different methods to calculate costs including a range of cost models …
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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.
HM Treasury
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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 …
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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.
HM Treasury
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Conclusions (9)
1
Conclusion
Not Addressed
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury (the Treasury), the Driver and Vehicle Licensing Agency (DVLA), and Ministry of Justice (MoJ) on the financial management of fees and charges across government.1
Government Response Summary
The government's response discusses a plan to support fee-charging public bodies and a working group to issue operational guidance, which does not address the actual text of this introductory conclusion.
8
Conclusion
Accepted
We heard charging bodies would value more signposting of where to go for expert advice and support and to learn from others’ experience. DVLA told us that more can be done to share good practice and that it is important to get those responsible for fees together to talk about …
Government Response Summary
HM Treasury will create a cross departmental working group to set out a comprehensive time-bound plan to be more systematic in supporting fee-charging public bodies, which will be shared with the Committee. The working group will discuss issuing operational guidance to government bodies and establish a mechanism to share good practice.
10
Conclusion
Acknowledged
Over the five-year period from 2019-20 to 2023-24, none of the seven government services reviewed consistently met their cost-recovery targets. Poor cost-recovery persisting over time results in a build-up of surplus and deficits in some services. Both passports and family court fees have repeatedly missed their cost-recovery targets by more …
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.
11
Conclusion
Acknowledged
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 …
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.
12
Conclusion
Acknowledged
The NAO report highlighted that persistent imbalances can also create potential inequities for users. When government bodies undercharge for services, cumulative losses are often recouped through higher fees for future users. Conversely, when services over-recover, current users end up overpaying.22 We were interested to hear how the Treasury make sure …
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.
13
Conclusion
Accepted in Part
The Treasury told us it manages its fees and charges through periodic spending reviews (typically every two years) and expects accounting officers to follow its guidance. The Treasury described the spending review as a mechanism for departments to assess their cost base and funding needs, including their approach to fees …
Government Response Summary
The government disagrees with the recommendation but will update the Financial Reporting Manual (FReM) to align to Managing Public Money (MPM) to include clearer reporting guidance for fee-charging public bodies and embed oversight through the Spending Review returns every two years.
20
Conclusion
Acknowledged
The NAO reported the charged services it examined did not fully fulfil their disclosure requirements on areas such as unit costs, the cost-recovery targets, objectives, the extent and explanation for over or under-recovery.39 The lack of transparency affects public confidence and understanding of what they are paying for. The Treasury …
Government Response Summary
The Treasury will update the Financial Reporting Manual (FReM) to align to 6.11 of Managing Public Money (MPM) by Spring 2026 to include clearer reporting guidance for fee-charging public bodies to ensure more effective Parliamentary scrutiny and will continue to keep this under review including considering as part of a wider review of Central Government financial reporting.
21
Conclusion
Acknowledged
The NAO report highlighted the importance of proportionate financial reporting requirements, particularly for smaller bodies.43 We asked how the Treasury will make sure its disclosure requirements are proportionate. The Treasury told us that it is mindful of the administrative burden, and it intends to do more to help departments improve …
Government Response Summary
The Treasury will update the Financial Reporting Manual (FReM) to align to 6.11 of Managing Public Money (MPM) by Spring 2026 to include clearer reporting guidance for fee-charging public bodies to ensure more effective Parliamentary scrutiny and will continue to keep this under review including considering as part of a wider review of Central Government financial reporting.
24
Conclusion
Rejected
We heard evidence that some organisations have demonstrated how efficiencies can be achieved. The DVLA told us it has held its fees at 2014 levels by absorbing inflation through digitisation and process redesign, while improving customer service.52 It operates under a 5% efficiency target during current spending review period and …
Government Response Summary
The government disagrees with the recommendation but states that the Government Efficiency Framework (GEF) already provides guidance for efficiency and that departments are incentivized to drive efficiencies in their fee-funded services, which will count towards their technical efficiency targets.