Supplementary memorandum submitted by
1. At the hearing of the Public Accounts
Committee on Monday 13 May 2002, the Treasury undertook to provide
a note on the information it is collecting from Departments on
the benefits derived from investment in e-government projects.
2. The Treasury does not scrutinise Departments'
plans for investment in all e-government projects. Expenditure
on many projects falls within the delegated limits agreed by the
Treasury for Departments and so does not require Treasury approval.
Consequently, the Treasury is not in a position to construct an
aggregate estimate of the expected costs or benefits generated
3. The main source of information to the
Treasury relates to programmes or projects that are supported
by additional funding provided through funding allocations made:
in Spending Reviews; or
from the Capital Modernisation Fund
or the Invest to Save Budget.
4. In both cases, the Treasury requires
evidence that Departments have sought to identify and quantify
the benefits that will be generated. Such benefits can consist
of reduced processing costs, staff savings or higher quality service
to users, or a combination of these.
5. In the 2000 Spending Review (SR2000),
a total of £1bn was allocated to Departments over three years
(2001-04) to invest in e-government programmes. These allocations
were mostly targeted on services that involve a high volume of
transactions between Government and citizens/businesses. These
services included tax returns, services to drivers, VAT returns
and payments to farmers.
6. In most cases, Departments' plans for
electronically enabling these services, and realising the benefits
of the investment, were at an early stage when the allocations
were made. Consequently, the allocations were subject to a "dual
key" arrangement whereby Departments were required to seek
the agreement of the Chief Secretary to the Treasury, advised
by the e-Envoy, before allocated funds could be committed. Agreement
is conditional on Departments submitting:
proposals for promoting take up of the
a comparative analysis of current transaction
costs and electronic transaction costs
for the service;
details of any short term costs arising
from dual running of traditional and electronic channels;
the scale of planned efficiency gains
and their timing;
(where relevant) quantification of the
benefits of increased customer compliance;
details of the benefits to customers,
eg improved accuracy, quicker turn-round.
7. Applications for the release of funds
are coming forward as and when Departments are in a position to
satisfy the criteria.
8. The guidance issued to Departments in
the 2002 Spending Review (SR2002) stated that any increases
sought for putting services on-line should be supported by:
details of plans for promoting the take
up of the service;
an assessment of the benefits to users;
a quantification of the efficiency savings
which the online service will generate
Decisions on allocations made by Ministers in
SR2002 will be announced in due course.
9. The Capital Modernisation Fund (CMF)
provides capital resources to fund innovative methods of public
service delivery, including through electronic channels. The Fund
is allocated on a competitive basis and against criteria that
include an assessment of the impact of the project on the efficiency
and effectiveness of the service.
10. To date, around £900m has been
allocated to IT projects many of which involve the electronic
delivery of services to the public or businesses. For example,
£68 million has been provided to develop a sophisticated
IT and call centre system to match job seekers to employers online.
11. The Invest to Save Budget (ISB) provides
(mostly current) funding for innovative public service projects
delivered by two or more public bodies. To secure funding, bidders
have to provide evidence that the project will deliver benefits
in the form of better services to users and/or future savings
in public expenditure. Due to the emphasis on innovation, the
ISB has supported a range of e-government projects. Over half
of the £335m allocated by the ISB to date has gone to such
projects. One example is a pilot project enabling drivers to make
an application via the Internet to renew their vehicle tax disc.
12. Each project supported by the CMF or
ISB will be evaluated when the funding comes to an end. These
evaluations will identify whether the benefits projected in the
original business case have been achieved.
13. Additional funding for electronic service
delivery projects is conditional on Departments demonstrating
that the project will deliver efficiency savings and/or improved
services to the public. The processes described above provide
a means of scrutinising proposals in this respect. However, the
Treasury recognises that there is scope to improve further the
rigour of these processes and so will work with the Office of
e-Envoy to develop a cost methodology to assess the operational
efficiency and customer benefits achievable through IT-enabled
business change, as recommended by the Comptroller and Auditor
General in his report.
27 June 2002