With many of government’s services that charge fees falling well short of the target to recover all costs, an influential committee of MPs has urged the Treasury to do more
HM Treasury does not provide departments with sufficient incentives to pursue digital transformation and must be more “proactive” in doing so, a committee of MPs has warned.
The Public Accounts Committee has published a report on income-generating government services, including the likes of passport and driving licence applications, and some courts services. These services are designed so that the applicable “fees should recover full costs, unless the Treasury and parliament agree otherwise”, the PAC report says.
In 2023/24 the average recovery rate was 88%, meaning “either the taxpayer is subsidising the service… or the user is being overcharged”.
Whitehall’s finance department holds responsibility for overseeing the implementation and these fees – but, according to the report’s introductory summary, “the Treasury’s oversight is too passive”.
“Departments have inconsistent fee-setting practices and poor cost-recovery performance due to insufficient support from Treasury, resulting in unfair outcomes for both service users and taxpayers,” the intro adds.
One of the key problems identified by MPs is a lack of encouragement and reward for departments to improve service delivery – and reduce costs – by deploying technology. The financial centre of government ought to do much more to provide compelling reasons for agencies to invest in digital reform, MPs conclude.
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“The Treasury recognises the potential benefits of emerging technologies, such as artificial intelligence, to modernise legacy systems and reduce administrative overheads; however, departments need clear incentives and realistic plans to adopt such technology,” the report says. “The Treasury’s current approach is largely reactive, relying on accounting officers to meet efficiency targets set during the spending review and the only incentive for bodies is they can reinvest the efficiency savings made. The Treasury needs to take a more proactive approach to encourage departments to pursue transformation and improve productivity within services. Revised guidance alone is unlikely to effect change unless departments are also incentivised to invest in productivity improvements to reduce costs and improve service delivery for users.”
Among the recommendations made by the committee is that, by March of next year, the Treasury should set out a clear plan for how “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,” the recommendation says.
Other recommendations made to the Treasury include a request to write to MPs with a “a comprehensive time-bound plan… [which] should include issuing operational guidance on areas such as setting fees and making trade-offs; and establishing a mechanism to share good practice” across government.
The finance department should also implement an annual review for all fee-charging services. This assessment should cover “service design, consent status and implications for fairness to taxpayers and current and future service users and fee payers”.
Agencies that have repeatedly missed the 100% recovery target by more than 10 percentage points should be subject to “targeted and proportionate deep-dives”, according to PAC.
