The Federal Government is now spending as much on information technology projects in the public service as it is on its major social welfare program, the Newstart Allowance.

Key points: Cost of Government IT jumps to nearly $10 billion, rivalling the amount spent on Newstart Allowance

Cost of Government IT jumps to nearly $10 billion, rivalling the amount spent on Newstart Allowance Labor is leading a Senate inquiry following several IT bungles

Labor is leading a Senate inquiry following several IT bungles The Government will be forced to cut some of its largest contracts

While welfare programs are being consolidated and plans to drug test recipients are announced, the cost of Government IT has jumped to nearly $10 billion.

The spiralling costs — up from $5.9 billion in 2012-13 — have not always resulted in better outcomes for the public with the tax office and the Australian Bureau of Statistics facing embarrassing IT bungles.

That has prompted a Labor-led Senate inquiry into mismanagement and waste, data leaks, privacy breaches and a series of website outages.

A new report by the Digital Transformation Agency — once seen as Prime Minister Malcolm Turnbull's pet project — has released a scathing review of the bureaucrats managing the projects.

It found public servants were too afraid to make major changes to IT procurement and were not talking with other departments to avoid duplication.

"A fear of external scrutiny of decisions — such as through Senate estimates and audits — leads to a low-risk appetite and a culture where it is 'not OK to fail'," the report said.

"This means that old and familiar ICT solutions are preferred to newer and more innovative, but perceivably riskier, solutions."

The Government committed to spend $9 billion on IT in 2015-16 — including software and customer service websites — and another $1.4 billion on staff.

It expects to spend $9.6 billion on the Newstart Allowance this financial year.

Value of Government ICT Procurement

To save money and boost competition, Assistant Minister for Digital Transformation Angus Taylor has capped the cost of future IT contracts at $100 million, or three-year terms.

That means the Government will not be able to continue some of its largest contracts, such as the $484 million paid to IBM by the Department of Human Services (DHS) over four years.

By capping the contracts, the Government hopes it may be able to secure better value for money from smaller companies, which may provide better outcomes.

Three major companies — Boeing, IBM and Telstra — were awarded 24 per cent of the overall IT budget in 2015-16, with many contracts exceeding $100 million.

Mr Taylor said the culture of the public service needs to change to reward "entrepreneurial spirit".

He said there were "substantial cuts" to IT budgets before the Coalition was elected, which were increased to "get our systems back going again".

"We don't need to keep them at the level they've been in the last year or two, we know that there's potential to bring those down," Mr Taylor said.

"And a lot of this is actually through using smaller service providers, mostly local, to be able to do that."

'A symptom of a broader problem'

Shadow minister for the digital economy Ed Husic said the Government was trying to blame public servants for the increasing costs, rather than taking leadership.

Mr Husic, who led Labor's calls for the Senate inquiry, said the Government did not have enough "digital literacy" to turn the problem around.

"You can see the scale of this when you measure the cost of the digital spending against what is being spent on Newstart payments," he told the ABC.

"The ATO website has been crashing repeatedly over the course of the last six to eight months, and no senior minister has thought it important to step forward and explain what has gone wrong.

"This is a symptom of a broader problem in Government."