Shared services centres undershoot savings
By Richard Johnstone | 9 July 2012
Whitehall’s shared services initiative has ‘failed to deliver the savings it should have’ despite significant scope for cost reductions, the Public Accounts Committee said today.
In a report examining the sharing of functions such as finance, human resources and procurement across five shared service centres, MPs also found setting up the hubs had cost more than anticipated.
The committee has reiterated conclusions made by the National Audit Office earlier this year that the centres had cost £1.4bn to build and operate – around £500m more than expected.
Across the sites, covering eight central government departments and associated agencies, savings of £159m were expected by 2010/11.
However, two schemes – the Department of Work and Pensions sharing with the Cabinet Office and the Department for Education, and the Department for Environment, Food and Rural Affairs – did not track any savings. Two that did – covering the Department for Transport and its agencies, and the hub shared by the UK research councils – have so far reported total net costs of £255m. The Ministry of Justice centre, sharing with the Home Office, has been able to break even.
The PAC welcomed a ‘renewed focus’ being placed on improving shared services by the Cabinet Office. A new shared services strategy will be published shortly, and the MPs said they want to see ‘real progress this time round’.
The report called for the Cabinet Office to play a greater role after finding it has so far been left to individual departments and their arm’s length bodies ‘to decide whether they use shared service centres’. This has led to low take-up of the shared functions, with the hubs then unable to achieve the economies of scale needed to deliver savings.
Committee chair Margaret Hodge said that securing efficiency savings ‘is essential to protect public services from further cuts that could otherwise have been avoided’.
She added: ‘However, sharedservice centres have failed to deliver the savings they should have. They cost £1.4bn to set up, £500m more than expected, and in some cases have actually cost the taxpayer more than they have saved.’
She urged the Cabinet Office to ‘learn from the past’ to avoid repeating some mistakes.
‘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 sharedservice 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.’
A Cabinet Office spokeswoman welcomed the report, saying ‘ministers and permanent secretaries in the Cabinet Office are determined to accelerate progress in sharing services across Whitehall’.
She added: ‘The civil service reform plan published last month includes commitments to share transactional services as well as other services and expertise, including legal services, internal audit, programme and project management resources and commercial contracting procurement skills.
‘And we will shortly publish our shared services strategy which will set out in detail our implementation plan for the next two and a half years.’