Multibillion-pound government back-office savings programme set to fail without change - PAC
|
Capita's involvement in Government Shared Services questioned as
government unable to articulate value for money case of strategy
planned to deliver £4.3bn in benefits HM Treasury refuses to commit
to Cabinet Office plans to reduce back-office costs The government
continues not to have a grip on managing the strategy to pool
back-office functions between Departments. In a new report on the
Government Shared Services strategy, the Public Accounts Committee
(PAC)...Request free trial
The government continues not to have a grip on managing the strategy to pool back-office functions between Departments. In a new report on the Government Shared Services strategy, the Public Accounts Committee (PAC) highlights a string of issues with the scheme including unexplained delays and a lack of oversight, and warns that government must now urgently revisit all aspects of its strategy to avoid it becoming a costly failure. The Cabinet Office claims that government's Shared Services strategy, aimed at sharing corporate services across Departments including HR, finance, procurement and payroll, will deliver likely benefits of £4.3bn. This was scheduled to begin this month, but has been delayed for five months without explanation. Other inconsistencies are highlighted in the report, such as a dashboard bringing together departmental delivery data which Cabinet Office cannot force Departments to use properly, limiting its usefulness; and a lack of formal commitment from HM Treasury and the Department for Education, undermining the strategy. The PAC was further astounded that the Cabinet Office appears unable to clearly articulate the value for money case for its strategy the £4.3bn figure cited in benefits does not reflect costs, with £1.15bn already committed to the project. In its current form, the PAC is concerned that the strategy will fail. Problems with the strategy's delivery highlighted in the report include:
The Committee also questions professional services company Capita's involvement with the strategy. The Cabinet Office has split all Departments into five clusters. One of these clusters (containing the DWP, the Home Office, the MoJ, Defra and their associated arms'-length bodies), the largest of them and accounting for almost half the civil service, has outsourced the provision of its back-office functions to Capita. The value-for-money case of doing this, relative to other in-house models in other clusters, has not been quantified by government. Capita has performed poorly on a range of government contracts, including with the MoD for handling recruitment, with NHS England for supporting primary care services, and its ongoing poor performance managing the Civil Service Pension Scheme. The Committee's report calls for additional details about the contract that was awarded to Capita, including confirmation of whether the contract was awarded at 40% below the model of what it should have cost, and details on what has been done to provide assurance that Capita will deliver fully on its contract commitments under the Shared Services strategy.
Sir Geoffrey Clifton-Brown MP, Chair of the Public Accounts Committee, said: The idea behind the Shared Services strategy is sound, and one that this Committee celebrates. It has long been evident that government departments, often islands unto themselves cut off from each other, need to work more effectively together in short, to learn to share. Pooling back-office functions should be an easy win, and one which the Cabinet Office insists to our inquiry could save the taxpayer multiple billions. Unfortunately, there is no plan or timeline for achieving this, and little explanation of how government have arrived at the figures for the predicted savings. Unfortunately, our report shows this strategy plagued by the same exact problems it is trying to solve division between departments, a lack of overall leadership, and overcomplicated systems. Capita's involvement in the strategy, given their well-established poor record elsewhere, also does not give this Committee confidence in its successful delivery. In its current form, it seems set to fail, and Cabinet Office must provide us reassurance that this is something they understand and tackle, with the help of this report's recommendations. The government should now carry out a realistic, hard-hitting review establishing whether this project is going to succeed, or whether it should be abandoned. PAC report conclusions and recommendations In its current form, we are concerned that the Shared Services Strategy will fail. The Cabinet Office has made several attempts to introduce government shared services since 2004. Its 2018 Shared Services Strategy was refreshed in 2021, and is its most ambitious yet. The previous Public Accounts Committee warned in 2023 that the Cabinet Office's failure to produce a strategy-level business case from the outset would impair its understanding of benefits, costs and risks. The Cabinet Office continued with the strategy regardless and HM Treasury has committed at least £1.15 billion so far. Departments were scheduled to begin moving their back-office functions to the new cluster services in July 2026, but this date has since been delayed by five months without explanation and there are still numerous problems with delivery. The Cabinet Office cannot give assurances that it will overcome these critical challenges. Overly complicated governance, no clear ownership, inconsistent departmental buy-in, delays in readying data, and poor interdependency management risk another failed major government initiative. The Office for National Statistics claimed its Integrated Data Service transformation programme would deliver similar cross-government data sharing benefits through a cloud platform, but it failed to deliver on the benefits and the programme was closed in March 2026. Recommendation 1. The Cabinet Office and the Civil Service Transformation Board should urgently conduct a comprehensive review of the Shared Services Strategy, including an assessment of whether delivery remains viable and should proceed. Upon completion, this review should be shared with the Committee. We are astounded that the Cabinet Office appears unable to clearly articulate the value for money case of its Shared Services Strategy. The Cabinet Office claims that the Shared Services Strategy is now set to deliver £4.3 billion in benefits. But this figure does not reflect costs, and the department was initially unable to quantify what these costs are or how they relate to the costs of continuing with individual services for each department. The Cabinet Office has developed a dashboard bringing together clusters' delivery data, including data on benefits, costs, and milestones. But the Cabinet Office cannot enforce timely, accurate and good quality returns, limiting the dashboard's usefulness. The Cabinet Office has granted clusters discretion over key delivery decisions, notably outsourcing. It has not quantified the value-for-money case of the Synergy cluster outsourcing to Capita relative to the Unity cluster's in-house service model. This Committee's predecessors have criticised Capita's poor performance on a range of government contracts, including those with the Ministry of Defence for handling recruitment and with NHS England for supporting primary care services. More recently, Capita's poor performance administering the Civil Servie Pension Scheme is a matter of ongoing concern for this Committee. Correspondence we received from the Cabinet Office after our evidence session - on benefits, costs and cluster outsourcing - is inconsistent with the National Audit Office's findings, and lacks sufficient rigour to establish shared services' value for money. Recommendation 2. The Cabinet Office should urgently publish a case for change outlining how its Shared Services Strategy will deliver value for money, including:
In addition, the Cabinet Office should provide:
The Cabinet Office does not have the mandate to deliver its strategy successfully. In 2025 the Cabinet Office introduced a two-tier board setup to bring together the clusters and the Cabinet Office central team, but this setup is still dependent on other boards and teams to enable delivery. The Cabinet Office acknowledges that numerous decisions that are crucial to delivery of the strategy, such as managing interdependencies or securing departments' continued buy-in, are not managed effectively. In the case of the failed Applicant Tracking System (ATS), decisions were taken at an 'ATS Board' which sits outside the Shared Services Strategy's governance structures and was unable to effectively manage the interdependencies that led to the programme being abandoned. Within the Strategy, key responsibilities for delivering shared services are spread across clusters, government central functions and departments, with no single person being in charge of co-ordinating and implementing the strategy. Recommendation 3. The Cabinet Office should appoint a single person to be in charge of delivering government shared services, with accountability and the required mandate for doing so. This appointee will be required to update the Committee annually on progress against delivery of the strategy. HM Treasury and the Department for Education are not formally committed to onboarding to their assigned shared services cluster, thereby undermining the strategy. The Cabinet Office has assigned HM Treasury and the Department for Education to the Matrix cluster, with onboarding scheduled for November 2027. The Cabinet Office understands these departments to have unconditionally bought into joining shared services at the outset, and maintains that their participation in shared services is not optional. Both departments have already received funding and invested in modern, cloud-based back-office systems. HM Treasury now claims that it has the right to unilaterally decide whether to proceed with joining its assigned shared services cluster or not, subject to its Accounting Officer's assessment of further information from the Matrix cluster. Clusters' delivery has been delayed by the Cabinet Office's ineffective management of interdependencies with other government digital programmes. According to HM Treasury, delays in Matrix mean the department now expects to receive most of this information in the summer of 2026, before making a decision in December 2026. The Department for Education's formal commitment is also subject to further information on feasibility and value for money. Accounting Officers report to the Transformation Board on the status of their department's commitments. For a strategy whose ambition rests on government acting as 'One Civil Service', a case-by-case approach sets very a dangerous precedent, rendering the strategy optional and therefore potentially unworkable. Recommendation 4. The Cabinet Office should urgently clarify:
In the Treasury Minute Response, we expect confirmation of HM Treasury and the Department for Education's position on onboarding to Matrix, including the rationale behind this. The Cabinet Office is failing to manage effectively the interdependencies with other government change programmes. At least 25 other digital change programmes across government must work with the shared services systems. Mismanaged interdependencies have resulted in avoidable costs, delays and pose a weak point for clusters' delivery of the strategy. The failure of one interdependent programme, the Cabinet Office's Applicant Tracking System (ATS) programme, is alone estimated to cost between £26 million and £38 million. In January 2025, concerns about interdependency management led the National Infrastructure and Service Transformation Authority to urgently recommend the creation of a central design authority, capable of holding to account change programmes and the shared services clusters. In its response, the Cabinet Office failed to fully address the concerns raised by NISTA. Despite its 2025 refresh of governance, the Cabinet Office has not found a way to manage these interdependencies effectively. Recommendation 5. The Cabinet Office should:
Implementation of the strategy is being delayed by the lack of reliable, consistent government HR and commercial data. In 2023, the Government Finance Function began leading 'NOVA'. NOVA is the guidance and standards that functions should follow when setting up all their processes like hiring an employee or paying a grant. If followed, these standards, should allow all departments to map processes in the same way, improving the quality of data and making bringing data together a lot easier. We have regularly commented on the connection between data quality and efficiency in government. The Cabinet Office itself recognises that NOVA is a key element of how it intends to sve money for the taxpayer. While the Finance and Grants Functions have followed these standards and converged their data across government, the Government People Function's adoption of converged HR data and processes was delayed. The Cabinet Office cannot provide a precise timeline for the Government People Function to implement required changes to its HR data and processes, only that it expects the data and processes to align before departments join their assigned shared services cluster. The Government Commercial Function opted out of NOVA from the beginning. Recommendation 6.
|