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A significant cultural shift across the civil service is required to better identify the costs of public services.

• Read the report
• Read the report (PDF)
• Inquiry: Government Services: Identifying costs and generating income
• Public Accounts Committee

In a new report on how government can achieve this, the Public Accounts Committee today calls for the Treasury and Cabinet Office to lay out the steps they will take to hold Permanent Secretaries of government departments to account for taking ownership of the identification of costs at a level that enables them to focus on where productivity and efficiency in individual services can be improved.

Central government departments spent around £450bn on the day-to-day running costs of services in 2024-25, but most departments lack a sufficient granular understanding of the cost of their services, the report finds.

Departments are neither required nor incentivised enough to identify and use detailed costing information to drive productivity and efficiency. Standards for this information do exist, but are applied inconsistently across departments.

The report calls for concrete ways to be set out in which Departments will start to identify and record service costs.

Outdated IT systems and a lack of common data standards are also identified by the PAC’s report as a major challenge to understanding service costs, posing an obstacle to pulling together better data to bring about improvements.

However, the report identifies a lack of urgency and clear leadership for resolving poor data issues and legacy systems. While the digital pay framework has recently been uplifted to market rates per past recommendations, the PAC remains concerned that it still falls short of industry rates in London and the South East.

This will affect the recruitment and retention of people with sufficient seniority and calibre to lead the transformation required. 

As part of the PAC’s continuing scrutiny of government’s use of artificial intelligence (AI), the report warns that legacy systems remain a major barrier to its use, limiting access to the data needed for effective implementation.

They also pose a risk to government’s cyber resilience, as established in the PAC’s May 2025 report on the subject. Despite this, departments are already experimenting with AI.

The technology offers potential to connect disparate data sources, but the PAC calls on government to recognise that progress must be focused and purposeful - trying to solve everything at once risks losing momentum. Prioritisation and clear milestones are key to avoiding drift and ensuring that AI delivers meaningful value.

The PAC further warns that a shift in mindset in the civil service is needed to better understand how time is spent and to make use of data for meaningful insights.

There is no standard policy on time recording in the civil service; despite systems offering this capability, using them to do so remains optional. Desired levels of productivity improvements will not be achieved without effectively using every civil servant’s time, as would be the norm in the private sector.

Chair comment

Sir Geoffrey Clifton-Brown MP, Chair of the Public Accounts Committee said:

“Billions upon billions of pounds of taxpayers’ money are spent every year on delivering public services. I have no doubt that it would surprise those same taxpayers to know that government has only the haziest of views on specifically how their pound is being spent.

"It is a matter of pure common sense that government’s plans for more affordable public services will not manifest without a far more detailed picture of how much they are in fact costing.

“We welcome the beginnings of a change in thinking, which our Committee has previously called for, in the uprating of digital experts’ salaries to improve recruitment and retention.

"These changes must now go further to match market rates in London and the South-East. We also identify other cultural shifts that will be required in the civil service to implement the change required – on the setting of targets for cost-identification, and on the proper recording of how civil servants are spending their time with an eye to improving productivity. This report may be viewed as a guide for central government to begin to achieve the change required.”