- While government departments know the total costs of managing
and running departmental services, some lack a detailed
understanding of where costs are high because of cumbersome
processes needed to work around inflexible systems and
poor-quality data
- Without detailed cost insights, government cannot prioritise
interventions in the most expensive or inefficient areas
- Previous efforts to develop cost estimates have often lacked
consistency or momentum, limiting their impact, but there are a
range of things departments can do build a clearer picture of
what lies behind high costs
With public bodies facing financial pressures and ambitious
efficiency targets, a new report from the National Audit Office
finds that government departments often lack insight into what
drives the cost in individual activities that collectively make
up an overall end-to-end service.
Private companies and most other organisations will have
processes to identify their running costs. This information helps
organisations to prioritise resources, identify poorly performing
services and inefficiencies, and assess the opportunities for
innovation and digital transformation.
Government expects to spend £450bn annually on its operations and
yet some departments and arms-length bodies, or ALBs, do not know
the detailed costs associated with different stages of the
processes or the customer journey for individual services.
The report finds poor or outdated technology, lack of clear
ownership for complete services, weak incentives and the absence
of clear and practical guidance to improve the situation as some
of the reasons behind the issue.
The 2025 Spending Review recently set ambitious targets for
productivity and efficiency across government. And previous work
from the NAO1 has highlighted how poor data has often
left departments unaware of the potential for improvements from
better processes, data and technology.
The new NAO report makes a number of recommendations, including
some ‘quick wins' as a way for Departments to achieve greater
insight into these costs:
- Defining the scope and boundaries for all major services and
designating a senior responsible service owner to understand,
manage and improve costs at the operational level
- Developing practical guidance to help departments understand
and apply cost analysis techniques to their services, using real
examples - not just broad principles
- Taking advantage of simpler solutions as a starting point to
understand staff time spent on activities
- Identifying where targeted capability building would help
ensure that finance teams and service owners are equipped to
deliver on these expectations
, head of the NAO,
said:
“Simple budget reductions will not achieve the efficiency or
productivity gains that government wants in order to improve
value for taxpayers and service users. A better and more detailed
understanding of the cost of individual components of service
delivery is needed to help managers improve performance.”
