• While government departments know the total costs of managing and running departmental services, some lack a detailed understanding of where costs are high because of cumbersome processes needed to work around inflexible systems and poor-quality data  
  • Without detailed cost insights, government cannot prioritise interventions in the most expensive or inefficient areas
  • Previous efforts to develop cost estimates have often lacked consistency or momentum, limiting their impact, but there are a range of things departments can do build a clearer picture of what lies behind high costs

With public bodies facing financial pressures and ambitious efficiency targets, a new report from the National Audit Office finds that government departments often lack insight into what drives the cost in individual activities that collectively make up an overall end-to-end service.

Private companies and most other organisations will have processes to identify their running costs. This information helps organisations to prioritise resources, identify poorly performing services and inefficiencies, and assess the opportunities for innovation and digital transformation.

Government expects to spend £450bn annually on its operations and yet some departments and arms-length bodies, or ALBs, do not know the detailed costs associated with different stages of the processes or the customer journey for individual services.

The report finds poor or outdated technology, lack of clear ownership for complete services, weak incentives and the absence of clear and practical guidance to improve the situation as some of the reasons behind the issue.

The 2025 Spending Review recently set ambitious targets for productivity and efficiency across government. And previous work from the NAO1 has highlighted how poor data has often left departments unaware of the potential for improvements from better processes, data and technology.

The new NAO report makes a number of recommendations, including some ‘quick wins’ as a way for Departments to achieve greater insight into these costs:

  • Defining the scope and boundaries for all major services and designating a senior responsible service owner to understand, manage and improve costs at the operational level
  • Developing practical guidance to help departments understand and apply cost analysis techniques to their services, using real examples – not just broad principles
  • Taking advantage of simpler solutions as a starting point to understand staff time spent on activities

Identifying where targeted capability building would help ensure that finance teams and service owners are equipped to deliver on these expectations

“Simple budget reductions will not achieve the efficiency or productivity gains that government wants in order to improve value for taxpayers and service users. A better and more detailed understanding of the cost of individual components of service delivery is needed to help managers improve performance.”

Gareth Davies, head of the NAO

Read the full report

Improving government’s productivity through better cost information

Notes for editors

  1. Relevant past reports from the NAO on this subject include:

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