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The Cabinet Office’s latest drive to streamline departments’ back-office functions is in danger of faltering like previous strategies unless focus on delivery and funding improves, MPs have warned.

Members of parliament’s Public Accounts Committee said the government’s Shared Services Strategy – which underwent a major refresh in 2021 – has been hampered by the Cabinet Office’s failure to produce a business case and missed out on the desired level of funding as a result.

In March, the Cabinet Office said the strategy was on course to save £1.8bn over the next 15 years through modernising back-office systems across departments, with measures such as moving to cloud-based technology and standardising processes and data. The cost of providing back-office services across major departments was £525m in 2020-21, PAC said.

In their latest report, the MPs acknowledged that the strategy’s 2021 refresh – which created five multi-department clusters for shared services – represented a “step change” in progress. But they said there is significant uncertainty about whether departments will get the resources needed to deliver their programmes in the timescales available.

In November last year a National Audit Office report on the Shared Services Strategy highlighted a shortfall of up to £103m between the money that the five shared-services clusters said they cumulatively needed to deliver their programmes over the current spending-review period and the £300m that the Treasury had provided.

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The clusters had forecast that they would need an additional £480m of investment after 2024-25 to deliver the full strategy, PAC said.

“There is clearly a risk to the delivery of this business-critical change programme since there is no guaranteed level of funding,” the committee said.

The Cabinet Office has no contingency plans to deal with any problems the current strategy encounters, the MPs added. They noted that the Department for Work and Pensions, which is leading the “synergy” cluster, has admitted that its only contingency plan for not receiving the required level of funding is to proceed more slowly with the rollout of the programme.

Committee members said this approach will “create even bigger risks arising from ageing systems that will soon become unsupported”.

‘Arguing with the Treasury’
Elsewhere, the report noted that, although the Cabinet Office has flagged large long-term benefits resulting from a cost of £900m to implement the strategy, it has not calculated figures itself and is relying on clusters developing cost-and-benefit figures as part of their own business cases.

MPs said the clusters have not calculated their figures on a consistent basis, making it difficult to come to a “clear financial picture” on the strategy as a whole. They added that the two clusters that have already begun implementing their plans have not provided an indication of potential benefits.

Committee chair Dame Meg Hillier said there are clearly outstanding issues surrounding the deliverability of the strategy and the longer it takes for the Cabinet Office to get on top of the situation, the greater the cost will be to taxpayers.

“If the government is looking for efficiency savings in this economic and cost-of-living crisis it should start right at its own door,” Hillier said. “Delivering back-office functions such as civil service HR, IT and payroll piecemeal are costing the taxpayer over £500m a year while departments argue with the Treasury over how much more money they need to improve them. This money is, in fact, desperately needed for essential public services, and for public services delivered well and efficiently, with value for the taxpayer the uppermost concern. If this latest strategy to rationalise is to be a success it needs to reduce costs while also freeing up resources from the back-office for our struggling frontline services.”

Among their recommendations, PAC members have asked the Cabinet Office to produce a contingency plan for the strategy within six months and revise its “case for change” document supporting the strategy into a proper business case.

The Shared Services Strategy clusters are: Defence, overseen by the Ministry of Defence; Matrix, a policy-focused grouping which brings together the Department for Business and Trade, the Attorney General’s Office, the Cabinet Office, the Department for Culture, Media and Sport, the Department for Education, the Department of Health and Social Care and Treasury; Overseas, which brings together the Foreign, Commonwealth and Development Office and other departments with an overseas presence; the Synergy cluster of delivery-centric departments, which brings together DWP, the Department for Environment, Food and Rural Affairs, the Home Office and the Ministry of Justice; and Unity, comprised of HM Revenue and Customs, the Department for Levelling Up, Housing and Communities, and the Department for Transport.

The Cabinet Office was contacted for response to the PAC report. The department had not provided one at the time of publication.