1. Corporate services are vital in delivering effective and efficient public services that meet citizens' needs. The most common services include finance and accounting, human resources, procurement, information technology, facilities management and estates management. Mechanisms to improve the efficiency and effectiveness of these services include measures like more streamlined processes, better performance data and outsourcing, as well as the sharing of services.

2. Shared services involve combining activities across organisations, or across different parts of the same organisation, to give better and more efficient service. In the private sector, many FTSE 100 companies transferred their corporate functions to shared services during the late 1980s and early 1990s. In July 2005, the Cabinet Office established a Shared Services Team to help the development of shared services across government.

3. Government has little information available about how much it spends on corporate services.[2] The Cabinet Office cannot provide an accurate figure for total corporate services spend across government because departments operate outdated systems and have poor management information.[3] This is despite past government developments such as the Financial Management Initiative in the 1980s and the creation of Next Steps Agencies, which were intended to improve management information and reporting.[4]

4. By extrapolating the quantified information it was able to collect from nine departments and other public bodies, the Cabinet Office estimates the cost of finance and human resources functions across government at £7 billion a year.[5] At the time of our hearing, it had lost the calculations and underlying data involved in its estimate,[6] but has since outlined its main assumptions and approximations.[7] The broadest assumption relates to the cost of finance services, which was estimated at 90% of the cost of human resources services, based only on high level data collected by police bodies.

5. The Cabinet Office Shared Services Team estimated that government could save £1.4 billion in the cost of corporate functions through shared services.[8] The figure represents 20% savings on the estimated total spend of £7 billion, which is in line with what other organisations, mainly in the private sector, have already achieved. The Cabinet Office does not have a timeline for realising these savings.[9]

6. To improve corporate functions, public bodies need to establish baselines of current costs and performance,[10] but many do not have this basic information.[11] The Cabinet Office claimed that a lack of common definition for corporate functions makes it difficult for it to collect information on costs,[12] but public bodies like the Home Office's former Immigration and Nationality Directorate have been able to supply it.[13] Public bodies have access to substantial advice and assistance on how to benchmark their corporate services, including a set of value for money metrics published by the public sector audit agencies.[14]

7. Public bodies need to keep their administrative processes under constant review regardless of whether they are considering a move to shared services. Unless they undertake careful analysis of whether all the steps in their processes are really adding value, public bodies cannot know whether they are receiving value for money from their corporate functions.[15]

3   Qq 3, 82, 104-105; C&AG's Report, para 4.12 Back

4   Q 79 Back

5   Qq 69-72, 74; C&AG's Report, para 1.1 Back

6   Qq 75-78, 84-85 Back

7   Ev 14 Back

8   Q 4; C&AG's Report, paras 1.1, 4.11 Back

9   Q 103 Back

10   Q 81  Back

11   Q 79 Back

12   Qq 79-80 Back

13   Qq 4, 80. The former Immigration and Nationality Directorate was renamed the Border and Immigration Agency and is now part of the UK Border Agency. Back

14   Value for Money in public sector corporate services, a joint project by the UK Public Sector Audit Agencies, 2007, www.public-audit-forum.gov.uk Back

15   C&AG's Report, recommendation 1 and para 1.12 Back