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MPs say shared service sums 'don't add up'

Cabinet Office's claim 'flimsy'

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MPs say that the Cabinet Office's claim that government could save £1.4bn a year through sharing corporate services is a "flimsy estimate at best".

A key problem is the lack of centrally agreed benchmarks against which to measure the performance of shared functions, including the impact of two of the established shared service centres in the NHS and the Prison Service, according to members of the Commons Public Accounts Committee.

Furthermore, the Cabinet Office does not have a timetable for achieving this level of saving on the £7bn government spends annually on finance and human resources, according to a report issued on 8 May 2008.

"Whether or not public bodies move to shared services, they must know whether they are receiving value for money from their corporate functions. Without that knowledge, there can be no driving out waste and freeing up money to improve services to citizens," said Edward Leigh MP, chair of the committee.

The report reveals that NHS Shared Services, a joint venture between the Department of Health and Xansa to sell procurement, finance and accounting services to 89 NHS organisations, is not yet making a profit and has paid no dividend to either the department or Xansa.

It needs to attract a further 22 customers to break even, and approximately 180 more customers to deliver its forecast savings to the taxpayer of £250m by 2014-15, according to the MPs.

The report says that when HM Prison Service implemented a shared services centre to provide finance, procurement and human resources services to all 128 prison establishments, plus a single site in Newport, it expected this to be challenging.

A major technology failure in the last quarter of 2006 led to a return to manual invoice processing, but the Prison Service told the committee that the system is now working well and it is in the process of agreeing a Memorandum of Understanding to provide corporate services to the Home Office.

However, the Prison Service is unable to prove that introducing shared services has allowed it to cut staff numbers. Although it has seen a reduction in prison operating budgets and has taken these as evidence of savings, the MPs say this is not proof that savings have come as a result of shared services, rather than through other changes.

The report calls on departments to publish an overview of their corporate services performance in their annual reports, including an analysis of how shared services are being used to improve value for money.

In their conclusions, the MPs say that the Cabinet Office does not have sufficient grip on the cost of promoting shared services. The team set up to promote shared services did not know how much money it had spent or how it was allocated.

"To improve performance and operational efficiency, the team should routinely record and analyse all its expenditure and assess the cost effectiveness of different interventions," they say.

This article was originally published at Kablenet.

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