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A scheme to cut Government spending by outsourcing back office functions has cost taxpayers more money than it saved, MPs revealed today.

Whitehall bean counters hoped the programme would save up to £400 million a year.

Former Tory Cabinet Office minister Francis Maude pushed for Government to farm functions out to the private sector.

Launching the scheme, he declared: "Sharing services simply makes sense.

"There is absolutely no need for departments and arms-length bodies to have their own back-office functions, and duplicate efforts, when they can be delivered more efficiently by sharing services and expertise. Plus it will save the taxpayer half a billion pounds a year."

But after two and a half years, the scheme has saved just £94 million - less than the total investment cost of £94 million.

The Commons Public Accounts Committee (PAC) warned ministers they must act to improve leadership and governance to prevent any more money being wasted.

(Image: PA)

The government planned to cut costs by using two shared service centres run by Arvato UK Ltd and Shared Services Connected Ltd (SSCL) to run admin functions for 26 different organisations.

Officials had hoped the centres and the introduction of a single operating platform would save £128 million a year, with further efficiencies allowing benefits to increase to between £300 million and £400 million.

But by April 2016 just two of the 26 organisations had signed up and officials now estimate the centres will deliver total savings of £484 million by 2023-24.

The PAC blamed a "failure of governance and leadership by the Cabinet Office" and "the lack of a realistic business case" for the debacle.

"The result is that the two shared service centres considered as part of this inquiry have only delivered £90 million of 'savings' in the first two-and-a-half years of operation but at a cost of £94 million and, therefore, a net cost to the taxpayer of £4 million.

"The Cabinet Office now estimates that the centres will deliver savings of around £484 million in total by 2023-24, which compares unfavourably with the anticipated £300 million to £400 million a year savings set out in the Next Generation Shared Services Strategy in 2012."

The report said the Cabinet Office had failed to have "effective governance" in place at the start of the project and had not managed to persuade Whitehall departments to "buy-in" to the scheme.

It had been too easy for ministries and agencies to back out, which meant the potential benefits of sharing services were jeopardised.

Some departments pulled out of the programme and sought other arrangements "to protect their own interests", or because the benefits would be "marginal", the PAC report said.

"They had not been persuaded by the argument that remaining in the programme would generate benefits for the whole of government."

The Government was also criticised for its handling of the relationship with the two private providers over the failure to move organisations on to the new systems.

"The Cabinet Office was ineffectual in managing this risk because of its inability to force departments to take crucial decisions and an unwillingness to hold the suppliers to account as delays arose," the MPs said.

The committee recommended that by the end of 2016 the Government should produce a "realistic and complete" business case for the centres.

PAC chairwoman Meg Hillier said: "The Government set out to save money with this programme but it launched with critical flaws Whitehall then failed to address.

"Each department was able to request multiple changes which led to big cost increases.

"The result has been a net cost to taxpayers and a significant scaling back of ambition for the savings likely to be achieved in the years ahead.

"If Government is serious about making a success of shared services, and indeed future projects running across departments, it must act on the serious concerns set out in our report before any more public money is wasted."

A Cabinet Office spokesman said officials had been working to address issues with the programme.

"In recent weeks we have established a cross-government delivery group and reset the business case to realise over £500 million of savings for the taxpayer," the spokesman said.

"Throughout 2016 we have driven improved performance by embedding new governance, expertise, and leadership to deliver cost-effective services and standardised processes for government, and to realise the reassessed benefits.

"We are addressing the challenges involved in cross-government business transformation and the programme has successfully delivered one of the biggest IT platforms for government in Europe with over 300,000 users.

"Shared service centres deliver business services at a significantly lower cost to the taxpayer and is forecast to make a further £504 million in savings for the Government and police by 2023/24."