Background to the report

Government charges users for some services, including applying for a passport or a visa, as well as licences to operate in specific sectors, such as gambling or finance. Government usually sets fees and charges to recover the costs of providing a service. Cost recovery reduces the need for taxpayer funding and avoids cross-subsidies between services or over-charging users. Setting fees on this basis also improves transparency about the costs and efficiency of government services. In 2022-23, central government collected around £8.9 billion from charged services.

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Although government bodies are responsible for setting their own fees and charges, they must obtain permission before they introduce fees, or when they change them. Certain information about fees and charges must be disclosed in the public bodies’ annual report and accounts. It is the accounting officer’s duty to ensure these rules are followed.

Because fees and charges change relatively infrequently and cost can change each day, there will often be a slight under- or over-recovery of costs. HM Treasury expects government bodies to redress this imbalance within a reasonable time.

Persistent imbalance between fees and costs creates risks for the resilience of public services (if costs are not recovered), the taxpayer who may need to subsidise these services, and fairness – if users are over-charged. In setting fees and charges, government bodies must therefore demonstrate strong financial management, an accurate understanding of service costs, and effective processes for applying and updating fee levels.

Scope of the report

This report considers how effectively government bodies manage fees and charges for services including:

  • an explanation of fees and charges, roles and responsibilities, governance and oversight arrangements, and the key principles
  • the management of fees and charges, including performance in recovering costs
  • the challenges around, and opportunities to improve, financial management of fees and charges

In assessing government’s management of fees and charges, we have compared current practice against HM Treasury guidance and the principles of good financial management which we have set out in our series of good practice guides for government, covering enablers of success, strategic planning and budgeting, allocating resources, and monitoring and forecasting.

We selected seven case study examples to show how fees and charges work in practice, and to identify good practice examples where departments used innovative approaches. The case studies include a range of administrative activities, product types and industry regulation. Some bodies seek to recover only their costs, while others over- or under-recover costs depending on the approach agreed with ministers and HM Treasury.

Conclusions

Many government departments rely on charging fees to recover the costs of providing services to people and businesses. But none of the services we looked at recovered costs consistently, and the charges for the services may not accurately reflect the costs.

HM Treasury does not provide enough oversight, challenge and guidance on how to manage charged services effectively. As a result, charging bodies are left to figure out separately how best to handle common operational challenges, financial risks from over- or under-recovery, and difficult trade-offs.

The government is missing opportunities to deliver efficiencies and share good practice. This poses risks to the financial resilience of public services, the costs of which are likely to be borne by future fee payers. Without adequate guidance, support and incentives it is unlikely that the current arrangements for fees and charges will deliver value for money for customers, businesses and taxpayers.

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Publication details

Press release

View press release (20 Jun 2025)

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