The Public Accounts Committee (PAC) has labelled government attempts to cut costs by sharing back office functions a failure and suggests the strategy is actually costing the taxpayer millions of pounds.

In a report by the Committee investigated the government’s shared services strategy begun in 2004 and refreshed in mid-2011.

It found that setting up centres to share back office functions had cost £500m more than the original £1.4bn budgeted.

The report examined five of the eight government shared service centres, which were expected to have saved £159m by the end of 2011.

While three made savings, one of the centres broke-even. Two others did not track savings and two reporting £225m costs.

Chair of the Committee, Margaret Hodge MP said: “Government could save significant sums of money if it pooled back office functions such as finance, HR and procurement. Securing efficiency savings is essential to protect public services from further cuts that could otherwise have been avoided.”

“However, shared service centres have failed to deliver the savings they should have…and in some cases have actually cost the taxpayer more than they have saved.” 

Hodge challenged the Cabinet Office needs to show “much stronger leadership” to departments that have been using shared service centres that have been allowed to stick to their own ways of working, undermining the scope for savings,rather than using a single system across departments.

The committee also accused the Cabinet Office of ignoring shared services advice given in past reports.

Hodge said: “It is extremely frustrating that the Cabinet Office has ignored recommendations made by this committee in our previous reports. We expect it to engage constructively this time around.”

PAC viewed the Cabinet Office’s current timetable to deliver on its shared service plan and establish two new independent centres by December 2014 as ambitious and possibly unrealistic.

It stated in the report: “Previous government attempts at implementing shared service centres on a similar timescale have failed.”

The Cabinet Office should put pressure departments to join shared service centres, according to the PAC report.

However, Rama Saleh, senior consultant at management consultant firm Hudson & Yorke, advised against such an approach.

Saleh said: “Forcing departments to take part is unlikely to work, and the current situation whereby departments have transferred to the shared service centres while keeping their old processes seems to demonstrate a lack of engagement.”

“Clearly a half-hearted approach is not going to deliver the required savings. The government must convince key stakeholders that this approach will provide real benefits for them to secure their buy-in. Clear communication is key, particularly with departments which have handled a number of functions for many years without any changes."

Saleh's conclusions on the report were optmistic. She added: “This report is critical but it isn’t a disaster. The bottom line is that shared services can offer very real benefits, and there is still ample opportunity for the government to deliver the required savings in future. But in order to do this it will need to deliver stronger commitment from more departments, plus proper governance of all shared service arrangements.”

A similar report released by the National Audit Office in March this year found “despite significant cost and effort, the planned benefits of the initiative have not been achieved.”