The government has established firm leadership of its digital agenda and its strategy is based on sound evidence that a high proportion of people and small and medium-sized businesses have the access and skills to use online public services.  The NAO’s survey indicates that 83 per cent of people use the internet. Whether people live in a rural or an urban area appears to have little impact on their internet use but age, socio-economic group and disability do make a difference. Over 90 per cent of those surveyed who used the internet were experienced users who felt confident about completing online tasks without help. However, seven per cent of those online lack confidence and may need assistance.

The government in calculating potential savings has assumed that 82 per cent of transactions with public services will be carried out online, the proportion of the population currently online. Nevertheless, according to today’s report, online use of some services falls short of that level, despite the widespread access to the internet by the public and the ability by most people to carry out the kind of transactions required by online public services. For the 20 public services covered by the NAO research, the proportion of transactions carried out online by people surveyed ranged from less than 50 per cent for one service to over 80 per cent for a number of other services.

The research suggested three main reasons why people choose not to use more public services online. One is the preference by many for face-to-face contact, even where they are aware of the possibility of using the service online. The second is a general unwillingness to provide personal information online. And the third is low awareness of some online public services.

The government has set out plans to help people not on the internet to use digital services. Given the scale of ‘digital exclusion’, the government now needs to put these plans into action to avoid a ‘them and us’ problem. Of those surveyed, 17 per cent did not use the internet and, of those, 72 per cent do not intend to go online. Based on these numbers, departments need to plan for around four million people in England who are likely to need help in using online services.  However, of those not on the internet, 48 per cent receive help from friends and family with internet access, a fact not recognized in the government’s approach to assisted digital services.

The cost of cyber crime to the UK is currently estimated to be between £18 billion and £27 billion. Business, government and the public must therefore be constantly alert to the level of risk if they are to succeed in detecting and resisting the threat of cyber attack.

The UK Cyber Security Strategy, published in November 2011, set out how the Government planned to deliver the National Cyber Security Programme through to 2015, committing £650 million of additional funding. Building on ten years’ experience of seeking to protect government information, systems and networks, the strategy placed greater emphasis on the role of the public and industry in helping secure the UK against attacks and also the opportunities to UK business from a growing market in cyber security.

Among progress reported so far, the Serious Organised Crime Agency repatriated more than 2.3 million items of compromised card payment details to the financial sector in the UK and internationally since 2011, preventing a potential economic loss of more than £500 million. In the past year, moreover, the public reported to Action Fraud over 46,000 reports of cyber crime, amounting to £292 million worth of attempted fraud.

The NAO identifies six key challenges faced by the Government in implanting its cyber security strategy in a rapidly changing environment. These are the need to influence industry to protect and promote itself and UK plc; to address the UK’s current and future ICT and cyber security skills gap; to increase awareness so that people are not the weakest link; to tackle cyber crime and enforce the law; to get government to be more agile and joined-up; and to demonstrate value for money.

The NAO recognizes, in particular, that there are some challenges in establishing the value for money of the cyber security strategy. There is the conceptual problem that, if cyber attacks do not occur, it will be difficult to establish the extent to which that was down to the success of the strategy. There is also the challenge of determining the relative contribution to overall success or otherwise of different components of the strategy. And there is the challenge of assigning a value to the overall outcome, to set against the cost of the strategy. The Government has work underway to measure the benefits of the strategy.

The report is designed to set the scene in an area likely to be of continuing interest to the Committee of Public Accounts. Although the Committee has not specifically examined the issue of cyber security, it raised concerns about cyber security in relation to the government’s plans for smart meters, which will enable energy suppliers to collect meter readings over the internet, as well as pointing to a lack of detail on cyber security plans in the Government’s 2011 ICT strategy.

In addition, on performance to October 2012, government is likely to meet, if not exceed, the targets for savings that it set itself in October 2011. The government announced in October 2012 that, subject to audit, it had already saved £410 million from its savings initiatives in 2012-13 and expected to save a further £200 million by the end of March 2013.

The appointment by the Cabinet Office of commercial experts has helped departments to claw money back, renegotiate contracts before they expire and, overall, spend less on ICT than they otherwise would have done. However, weaknesses in data held by the Cabinet Office have meant that the National Audit Office was unable to validate the £348 million of savings reported by the Cabinet Office for 2011-12, resulting from its initiative to manage ICT suppliers as a single customer.

To date, moreover, the Cabinet Office has measured only cost savings and has not published measures of the wider impacts of its initiatives. The department is starting to take steps to consider risk and performance on a more holistic basis, which should provide it with more information on wider impact.

The impact of other initiatives to reduce the dominance of large ICT suppliers and increase the involvement of small and medium-sized businesses remains unknown at this stage. Work is underway to reduce government dependence on single large-scale contracts, and progress has been made by the Government Procurement Service in establishing more robust ICT spend data than it previously had. When complete, this has the potential to be an accurate baseline for a comparative analysis of spending across all ICT suppliers.

Views are mixed on the effect of reform on government’s relationship with ICT suppliers. Suppliers consulted by the NAO were frustrated at the slow pace of change and the focus on cost-cutting, rather than exploring innovative opportunities to redesign public service and put services online. There have also been comments from government on resistance by suppliers to change.

The National Audit Office has recommended that a reform programme aimed at improving the management of animal disease, despite being subject to some ICT difficulties and delay, has the potential to achieve value for money and should be carried through to completion.

Between 2005-06 and 2011-12, the Animal Health and Veterinary Laboratories Agency spent £103 million (from the agreed budget of £123 million) on reforming the way it delivers animal health and welfare service. The Business Reform Programme was designed to improve the quality of the Agency’s data, upgrade its ICT, standardize and automate its processes, and enable private vets to submit bovine tuberculosis tests online. It is now forecast that the Programme will be completed by 2013-14, although approved funding is not yet available beyond March 2013.

According to today’s report, the Programme has been strongly managed over the last few years and the Agency has made tangible progress in addressing some key challenges at the same time as achieving cost reductions, £4 million to date. In addition to reducing headcount by 119 full time members of staff, over halfway towards its final forecast of 214, new ICT is enabling staff to share data across offices, helping the Agency to generate better information on costs and performance and helping the Agency work more efficiently. Despite reducing the number of staff tracking the movement of cattle testing positive for bovine TB from 43 to 28, the number of tracings carried out in a year rose by 24 per cent.

However, there have been issues with the implementation of the new ICT, owing in part to necessary changes to its scope, and the Programme is currently two years behind schedule. The ICT supporting the Agency’s management of bovine TB went live three months late in October 2011, and the Agency immediately faced some issues. Only 11 of the 497 private veterinary practices signed up to submit test results online are currently doing so. These problems have also affected the Agency’s relationship with its customers.

The final stages of the reform programme are critical for securing the full benefits of the new ICT. These include a reduction in the Agency’s reliance on risky legacy ICT systems whose capability of recovering in an emergency is of concern.

October 2011

The Department for Environment, Food and Rural Affairs has delivered some value from the £39.3 million spent on its geographic information strategy and activities, the National Audit Office has reported today. However, the Department has not tracked the full cost of geographic information and systems to it or its arm’s length bodies, or systematically measured benefits. The Department has been able to identify savings of only approximately £9 million. The figures for costs and benefits are both likely to be underestimates. This lack of financial information means that the NAO cannot determine that value for money has been achieved.

Accurate and often real time geographic information is a vital resource used by the Department and its arm’s length bodies for a wide range of activities including policy making, decision making, day-to-day operations and keeping the public informed. The Department has recognised this and has had a geographical information strategy in place since 2002. However, neither the original strategy, nor the updated 2009 version, set business targets for cost reduction or quantified the benefits that could be achieved by collaboration or by sharing geographic information and systems.

The aim of the strategy is to share geographic information between the Department and its arm’s length bodies, as well as make best use of geographic information systems. It has focused on technology provision, building and operating a range of common geographic information services and negotiating licenses on behalf of arm’s length bodies that are willing to participate. The Department has had some success in delivering these services, but has not quantified the costs and benefits of geographic information and systems in all its arm’s length bodies. Although the Department has put in place appropriate technical governance, strategic governance arrangements could be strengthened.

The Department and its arm’s length bodies have a good level of specialist skills, but these skills could be better integrated into the business so that the benefits of geographic information are fully realised across the Department.

The National Audit Office has today published a review of how government uses Information and Communications Technology (ICT) to deliver public services. The review, the purpose of which is to inform the debate about government’s new use of ICT, gives an overview of existing uses, as well as initiatives and changes underway.

It details a number of big challenges the government faces in protecting and improving the value for money of ICT and in ensuring that ICT is deployed fully in the drive to secure sustainable cost reduction.

In response to such challenges and a worsening financial situation, the government has made a number of changes, prominent among which was the formation in June 2010 of the Efficiency and Reform Group that is taking a new approach to securing value for money from ICT. The Group has been responsible for a number of new initiatives, including the moratorium on central government’s signing new ICT contracts worth more than £1 million without agreement from the Minister for the Cabinet Office; a mandatory review of all ICT projects currently underway to identify waste; and a drive to renegotiate contracts with suppliers.

Most of the Group’s initiatives are at a very early stage and it is too early for the National Audit Office to evaluate their effect. The spending watchdog indicates, however, that today’s review will set the ground for future evaluations of these and other initiatives designed to achieve value for money from ICT spending.

The DMI is a technology transformation project designed to allow BBC staff to develop, create, share and manage video and audio content and programming on their desktop, and intended to improve production efficiency across the BBC. The estimated gross cost of delivery and implementation to the end of March 2017 is £133.6 million.

The NAO has concluded that the early stages of the Programme were not value for money, mainly as a result of a 21 month delay leading to £26 million of benefits not being achieved in the period 2009-10 to 2010-11.

The BBC appointed its existing IT contractor (Siemens) to develop the Programme. The contract with Siemens was terminated by mutual agreement in July 2009. The BBC then took responsibility for delivery of the project in-house and was able to offset its increased costs by a £27.5 million financial arrangement agreed with Siemens. In-house delivery of the system has started well, and, while there is a considerable way to go before the Programme is complete, users have been positive about the elements delivered thus far.

Key points from the report and the Trust’s response to them include:

1. The way in which the BBC appointed the contractor without a new competition and was then unable to intervene effectively in system development without undermining its transfer of financial risk to the contractor was not an effective way of approaching the delivery of a complex programme.

   The Trust notes that the BBC awarded the DMI contract to Siemens under a technology framework agreement intended to provide efficiencies, in part by reducing procurement costs. The Trust agrees that the decision to award the contract to Siemens did not lead to the planned outcome and the first phase of the project did not proceed according to plan. The Trust notes, however, that the BBC reached a financial arrangement with Siemens which allowed the BBC to allocate £27.5 million to meet the increased cost of completing the delayed programme.
   

2. Although once problems came to light it took the Programme technology development in-house, the BBC did not test whether that was the best option. It also did not test the value for money of this approach despite the Programme being in difficulty and behind schedule.

   The Trust closely monitored the status of the project, and was satisfied that the BBC Finance Committee (which includes the BBC Director-General, the BBC Chief Financial Officer and the BBC Chief Operating Officer) made an appropriate decision as to how to continue the DMI – given that the financial cost to the BBC was not increasing and the aims of the project remained as previously stated. However, the proposal to increase the scope of the project was rightly fully assessed and brought before the Trust in May and June 2010.
   

3. The financial benefits of the Programme were initially overstated. The original cost-benefit estimate in January 2008 was a projected net benefit of £17.9 million. The latest forecast is of a net cost to the BBC of £38.2 million by March 2017, partly offset by a £27.5 million financial package agreed with Siemens, leading to a final net cost of £10.7 million.

   The Trust noted that the financial benefits case was revised in the 2010 case, and fully agrees with the NAO’s recommendation that greater rigour should be applied than was evident in the 2008 business case. It is reassuring that the NAO noted significant improvements in the 2010 business case. However, the non-financial benefits of DMI are also significant, and the financial benefits of DMI, while important, are only part of the picture.

The amount of money being spent by government on external consultants has fallen slightly since 2006-07, according to a National Audit Office report published today. However, government is not getting value for money from its use of consultants because it often lacks the information, skills and strategies to manage them effectively.

Today’s report, which focuses on 17 central government departments, finds that in 2009-10, these departments spent over £1 billion on consultants and interim managers (temporary replacements for permanent staff). The departments spent approximately £904 million on consultants in 2006-07. Spending on consultants fell by £126 million in 2007-08, but since then has remained broadly constant, totaling £789 million in 2009-10. Some of the fall in spending up to 2009-10 is likely to be due to increased accuracy in the recording of costs rather than improved control by management, suggesting that some of that reduction in spending is not sustainable.

Limited and inconsistent progress has been made against recommendations made in previous NAO and Public Accounts Committee reports. The quality of departments’ management information on consultants and interims is poor. Few departments can provide information on their spending by type of consultancy, the number of interims employed, or interims’ roles and length of contracts.

Departments do not always follow best practice when buying and managing consultancy and interims. The price that departments pay is often based simply on time spent on a project, rather then being fixed in advance or related to the achievement of specific objectives. Most departments do not assess the performance of consultants or whether the work done was of benefit.

In May 2010, the government introduced changes to the approval process for consultants and restrictions on recruitment, including interims, and this has helped to challenge their use. However, this is a short term impact and as a longer term strategy it could lead to the displacement of costs elsewhere. It needs to be built upon to deliver a sustainable approach to structured cost reduction.

HM Revenue and Customs has taken significant steps to improve the efficiency of National Insurance administration. It has managed to reduce staff numbers substantially while avoiding any major operational failures. However, HMRC needs to demonstrate more clearly that it is providing value for money from the £350 million it spends each year and take advantage of opportunities to secure further savings.

Each of the main operational areas within HMRC has successfully reduced the number of staff employed on National Insurance work. Staffing levels fell by between 16 per cent and 31 per cent between 2006-07 and 2009-10. In the area of HMRC with responsibility for maintaining National Insurance records there were 1,200 staffing reductions. But HMRC does not have a clear picture of the total costs of the system and how these have changed.

During the period of change there have been no significant operating failures across the system of collecting and recording National Insurance contributions. Furthermore, there are examples of significant increases in productivity in processing information. However, HMRC has not achieved all of its National Insurance performance targets. In particular, while it has improved its accuracy in processing data, in 2009-10 the Department achieved 93 per cent accuracy against its target of 97 per cent.

There are a number of ways in which HMRC could improve how the system of National Insurance functions. On accuracy, HMRC needs to ensure standards of accuracy for National Insurance records are applied consistently across all operations and take account of the longer term costs and consequences of inaccuracies in processing. On efficiency, although some improvements would depend on the availability of funding for IT enhancements, considering the system in its entirety would help secure savings.