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The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today 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. They cost £1.4 billion to set up, £500 million more than expected, and in some cases have actually cost the taxpayer more than they have saved.

I welcome the Cabinet Office's ambitious new strategy for improving shared services. But unless it learns from the past it will end up making the same mistakes again.

In particular the Cabinet Office must show much stronger leadership. In the past it has left it up to individual departments to decide whether they use shared services. Departments which do use shared service centres have been allowed to stick to their own ways of working rather than using a single system suitable for all, undermining the scope for efficiency savings.

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."

Margaret Hodge was speaking as the Committee published its 3rd Report of this Session which, on the basis of evidence from the Cabinet Office, Department for Education and the Department for Work and Pensions, examined the provision of shared service centres in central government.

Sharing services offers the public sector the chance to secure significant efficiency savings and improvements in the quality of administrative functions.  Since 2004, central government has sought to reduce the cost of administering finance, human resources and procurement services through sharing back-office functions. In previous examinations we found that the Government had not yet realised the potential to save taxpayers’ money. 

We welcome the renewed focus on improving shared services provided by the Cabinet Office's ambitious new strategy. The strategy contains risks, and has a particularly challenging timetable for implementation, but we look forward to seeing real progress this time round. The recommendations we make in this report are designed to help the Cabinet Office succeed with its new strategy and learn from the mistakes of the past. We expect the Cabinet Office to engage constructively with our recommendations and not, as happened following our 2008 report, to ignore recommendations which, if implemented, would have left them much better placed today.

In this examination we considered five of the eight shared service centres established for central government. Whilst performing adequately, they had cost £1.4 billion to build and operate compared to an expected cost at the start of the project in 2004 of £0.9 billion. These five centres were also expected to have saved £159 million by the end of 2010-11.  In the event, the Ministry of Justice centre broke-even, the Department of Work and Pensions and the Department for Environment, Food and Rural Affairs centres did not track their total savings, and the two centres that are tracking savings, the Department for Transport and Research Councils UK, have reported a net cost to date of £255 million.

The current strategy will only be effective if the Cabinet Office demonstrates strong leadership to deliver greater value for money and gets buy-in from departments.   So far it has been left up to individual departments and their arm’s length bodies to decide whether they use shared service centres. This has led to low take-up and so the centres are unable to achieve the economies of scale necessary to deliver savings and value for money. Those bodies which have become customers of shared service centres have retained their own processes rather than adopt those of the centre, resulting in over-complicated systems which also undermine the scope for efficiency.

The Cabinet Office must drive cultural change to secure the intended savings. The Cabinet Office should also develop comparable data on the cost and quality of services provided by the shared services centres, which should allow it to establish a baseline for current performance and set benchmarks for improvement.  It should consider whether it can extend its shared services strategy to include other common functions needed by central government departments.

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