The government’s ambition to generate significant savings by sharing back office functions is failing and is ultimately costing the taxpayer millions of pounds.
In a report by the Public Accounts Committee (PAC), where it investigated the government’s shared services strategy, which began in 2004 but was refreshed in mid-2011, it found that setting up centres to share back office functions had cost £1.4 billion, some £500 million more than expected.
Margaret Hodge MP, chair of the Committee of Public Accounts, said: “Government could save significant sums of money if it pooled back office functions such as finance, HR and procurement. Securing efficiency savings is essential to protect public services from further cuts that could otherwise have been avoided.”
“However, shared service centres have failed to deliver the savings they should have…and in some cases have actually cost the taxpayer more than they have saved.”
Hodge asserted that the Cabinet Office needs to show “much stronger leadership”, as departments that have been using shared service centres have been allowed to stick to their own ways of working, rather than using a single system across departments, which has undermined the scope for savings.
The committee also accused the Cabinet Office of ignoring shared services advice given in past reports.
Hodge said: “It is extremely frustrating that the Cabinet Office has ignored recommendations made by this committee in our previous reports. We expect it to engage constructively this time around.”
The report examined five of the eight government shared service centres, which were expected to have saved £159 million by the end of 2010-11. However, one of the centres broke-even; two others did not track savings, with the final two reporting a net cost of £225 million.
PAC also suggests that the Cabinet Office’s current timetable to deliver on its shared service plan and establish two new independent centres by December 2014 is ‘ambitious’ and possibly ‘unrealistic’.
It stated in the report: “Previous government attempts at implementing shared service centres on a similar timescale have failed.”
The Cabinet Office should also mandate departments to join shared service centres, according to the PAC report. However, Rama Saleh, senior consultant at management consultant firm Hudson & Yorke, believes that this isn’t the correct approach.
Saleh said: “Forcing departments to take part is unlikely to work, and the current situation whereby departments have transferred to the shared service centres while keeping their old processes seems to demonstrate a lack of engagement.”
“Clearly a half-hearted approach is not going to deliver the required savings. The government must convince key stakeholders that this approach will provide real benefits for them to secure their buy-in. Clear communication is key, particularly with departments which have handled a number of functions for many years without any changes."
She added: “This report is critical but it isn’t a disaster. The bottom line is that shared services can offer very real benefits, and there is still ample opportunity for the government to deliver the required savings in future. But in order to do this it will need to deliver stronger commitment from more departments, plus proper governance of all shared service arrangements.”
This news follows a similar report released by the National Audit Office in March this year, which stated that “despite significant cost and effort, the planned benefits of the initiative have not been achieved.”