Taxpayers’ £1.4bn bill for saving just £159m

Whitehall departments have spent £1.4bn over the past seven years in a bid to save £159m by sharing “back-office” functions such as personnel and procurement.

Private-sector firms typically slash a fifth off their annual spend within five years using similar methods, the National Audit Office (NAO) said.

But a combination of poor co-ordination, over-expensive IT systems, weak or non-existent sanctions and an insistence on highly-tailored services saw public-sector costs rise instead.

Detailed investigations by the NAO discovered the Department for Transport system had so far cost £129m more to set up and run than it had saved. One issue uncovered was that the Maritime and Coastguard Agency was blocked from joining the DfT scheme because it did not have security clearance.

Another unit, set up by Research Councils UK, has recorded a net cost to the taxpayer so far of £126m – though the NAO said a parallel scheme may help it break even by 2014.

Those sums could be just the start, however, as two of five schemes examined by the NAO – at the Department for Work and Pensions (DWP) and the Department for the Environment, Food and Rural Affairs (Defra) – have not kept track of whether or not the changes are saving money.

The other, run by the Ministry of Justice, was saving £33m a year and broke even ahead of schedule – at which point officials stopped monitoring performance.

Sharing back-office functions – also including finance and payroll – was a key recommendation of the 2004 Gershon Review into slashing Government costs.

In total, eight projects have been set up in various departments – with the five examined by the NAO costing £500m more than budgeted.

The NAO said one of the main problems was that the bodies that were supposed to be pooling their operations stuck rigidly to individual systems.

Officials also ordered expensive IT systems without even considering far cheaper versions.

It also blamed a “collaborative” culture of letting individual departments have freedom from central control for the failure to produce any of the hoped-for cross-Whitehall sharing.

Other factors were the need for organisations such as town halls to go through a full EU tendering process and the cost of VAT.

Robert Oxley of the TaxPayers’ Alliance, said: “It defies belief that civil servants have wasted such incredible sums on an exercise that has failed so spectacularly to save any cash. This gross failure suggests an institutionally lax attitude with taxpayers’ money that cannot be allowed to continue unchallenged. Hard-pressed taxpayers can’t afford to keep handing Whitehall a blank cheque only to see it frittered away with nothing to show for it.”