Improving government’s productivity through better cost information

HM Treasury and the Government Finance Function should: a work with leading-practice sponsor departments to produce a new guidance document for departments, setting out how the principles of process and activity costing could and should be applied to government services, including specific, practical examples of what can work, providing a greater level of detail than just high-level principles.

Permanent secretaries and departmental senior leaders should: b create incentives for those involved in business processing and service delivery to underpin and ensure compliance with the new guidance, such as new performance objectives.

Departments should: c define the scope and boundaries for all major services and designate a senior responsible service owner at a high level of seniority for each, with sufficient accountability for the end-to-end service and understanding, managing and improving service costs at the operational level; d embed ownership at the service level to help ensure consistent ways to provide evidence-based conclusions that can guide decisions such as where to cut costs, invest more, redesign services or improve efficiency; and e establish governance arrangements such as oversight boards or assurance processes to monitor progress, validate cost data usage, track system benefit realisation and provide accountability to senior leadership and relevant stakeholders.

Departmental finance functions should: f use the techniques suggested in this report to understand the organisation?s cost drivers, and where to target cost savings, including where simple ?quick wins? could deliver results and maintain impetus; g work with service owners and responsible directors to monitor and manage service costs towards relevant and agreed productivity targets; and h identify where targeted capability building would help ensure that finance teams and service owners are equipped to deliver on these expectations

HM Treasury and the Government Finance Function should agree with Cabinet Office the accountabilities and responsibilities for taking forward the following recommendations.