Corporate services provide vital support to the delivery of effective and efficient public services. They include activities such as finance and accounting, human resources, procurement, information technology, facilities management and estates management. Shared services are designed to improve efficiency and service quality by combining such activities across different parts of an organisation, or across separate organisations. When adopting a shared services approach, public bodies need to secure support from their customers and maintain tight data security arrangements. They also need to manage the risk of damage to staff morale, for example, where changes in the work lead to reduced customer contact.

The Cabinet Office has estimated the cost of finance and human resources functions across government as £7 billion a year. It believes there is scope to save in the order of £1.4 billion annually through the use of shared services. The Cabinet Office does not have a timeline for realising these savings, and many public bodies do not have baselines of current costs and performance, which will make it very difficult to make accurate assessments of progress. The Cabinet Office wants smaller departments to buy corporate services from larger departments, but only the Cabinet Office and the Department for Children, Schools and Families have so far committed to buying services this way.

The Cabinet Office has a Shared Services Team to help develop shared services across government but was unable, at the time of our hearing, to explain how the Team had spent its budget for 2005-06 and 2006-07. At the Committee's request the National Audit Office reviewed the spending and provided a detailed breakdown by delivery area. This analysis showed that the largest area of spending was in working with government users of corporate services to develop strategies for sharing.

NHS Shared Business Services is a joint venture between the Department of Health and Xansa PLC selling procurement, finance and accounting services to 89 NHS organisations out of a total of 416 potentially eligible NHS bodies. It is not yet making a profit and has paid no dividend to either the Department of Health or Xansa. It needs to attract a further 22 customers simply to break even, and approximately 180 more customers to deliver its forecast savings to the taxpayer of £250 million by 2014-15.

HM Prison Service's Shared Services Centre provides finance, procurement and human resources services to all 128 Prison establishments. A major technology failure in the last quarter of 2006 led to a return to manual invoice processing. HM Prison Service believes the system is now working well and is in the process of agreeing a Memorandum of Understanding to provide corporate services to the Home Office.

On the basis of a report by the Comptroller and Auditor General,[1] we examined the Cabinet Office's efforts to improve corporate functions using shared services, as well as the impact of two of the more established public sector shared services in the NHS and the Prison Service.