WIREDGOV

HM Treasury’s passive approach to how fees and charges are set for public services has resulted in large and unfair surpluses and deficits for the taxpayer.

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

In a new report on how government generates income for itself, the Public Accounts Committee (PAC) finds that not enough is being done to support departments in how they charge for services, resulting in inconsistencies and poor practice across government.

The report finds that significant imbalances between fees and costs pose risks to the financial resilience of public services. For instance, passports and family court fees have repeatedly missed cost-recovery targets by more than 10% for five consecutive years.

If departments don't recover costs through their fees, costs must then either be absorbed within existing budgets, or funded through general taxation. This is unfair to taxpayers when they subsidise services that should be funded by those who use them. 

The Treasury accepted to the PAC’s inquiry that its approach to overseeing cost recovery by departments has been too passive. To ensure sufficient scrutiny over charged services, the report recommends it introduce an annual review cycle for all charged services within a year.

The PAC further finds that public scrutiny is being held back by the failure to publish adequate or consistent information on fees and charges by public bodies.

Users are not given sufficient information by departments to understand what they are being charged for, and the aims of charges are often unclear.

The report identifies ambiguity in Treasury’s directions on what bodies need to report and at what level of detail. Partly as a result, none of the bodies examined as part of the inquiry fully met Treasury's disclosure requirements in 2023-24.

The PAC is calling for these reporting requirements to be standardised to facilitate effective public and Parliamentary scrutiny.

A positive case study in the Committee’s report is found in the Driver and Vehicle Licensing Agency (DVLA), which has held fees at 2014 levels by absorbing inflation through digitisation of its services, while also improving service quality.

The report urges Treasury to lay out explicit incentives to reward departments that improve productivity and modernise services for users. The report finds government’s current approach to be largely reactive, relying on bodies meeting efficiency targets set during spending reviews.

Chair comment

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

“Recent weeks have rightly seen loud debate on decisions of great import made by government in how money will be raised to fund services.

Our Committee of course looks at the other side of the coin, with our remit more focused on how well taxpayers’ money is spent, rather than how it is raised. However, with this report we find that the Treasury could be doing far more to ensure that government services raise money for themselves effectively at the local level.

At present, central government is too prone to sitting back and watching as departments take an inconsistent and too-opaque approach to setting fees and charges.

“When services fail to wash their own faces by under-recovering costs, this means that the money to provide them must come from somewhere – either from existing budgets, or from the pockets of taxpayers who will effectively end up paying twice. This is deeply unfair. The process for changing fees is also too slow.

"The parliamentary process could be simplified here, in order that secondary legislation would not be required for the vast majority of fee changes, as it is at present. Importantly, this report is not calling for any kind of crackdown from the Treasury.

"We make clear that central government taking a front-footed approach can mean just as much carrot as stick, in incentivising departments that get this right.

"We look forward to seeing the improved system government proposes as part of its response to this report, which we hope will lay the groundwork for a fees and charges landscape that delivers better value for money for the taxpayer.”