The Bank of England has committed publicly to contain costs and improve the effectiveness of the way it works and how it communicates. If it is to achieve this aim, the Bank will need to reduce the cost of its Central Services division and transform the way it operates, according to today’s report by the National Audit Office (NAO).

In 2017-18 the Bank capped its staff numbers at 4,281 and in 2018-19 committed to limiting controllable costs to £476 million a year. The Bank’s Central Services division – which is responsible for Human Resources (HR), technology, property, procurement, security, and financial management – has an important role in facilitating delivery of more flexible ways of working within the Bank and management of costs.

The Bank has recognised that it needs to transform its Central Services and has five initiatives underway, including cyber, data migration and security enhancement programmes1. The Bank is developing a new operating model to guide the development of its Central Services and the performance they should aim for. It has identified a range of issues, including manual processes, ageing systems and inflexible reporting, which have contributed to cost pressures. Some 44% of staff were frustrated by processes and procedures across the Bank, compared to 30% who regarded them positively.

The cost of Central Services increased in real terms from £174 million in 2014-15 to £188 million in 2017-18, but fell relative to total Bank spending which increased from £535 million to £647 million over the same period, as the responsibilities of the Bank expanded.

The proportion of Bank staff working in Central Services compares favourably with other central banks. However, the NAO has found that in some areas the Bank’s Central Services are relatively expensive compared to other bodies operating in central government. For example, its human resource services cost around 15% more; building operation costs are around 35% higher; and providing technology support to staff, excluding expenditure on supporting the national banking system, costs 34% more2. The Bank has 800 allocated but unoccupied desks a day at its Threadneedle Street offices.

Complex processes and traditional working practices may reduce the Bank’s effectiveness, and contribute to costs. For example, the Bank has over 700 job titles and processes have evolved to support that complexity, with associated costs. The Bank is seeking to re-design its processes around a smaller number of roles.

Improved compliance with procedures could also secure better value. The Bank recently identified 200 purchases above £25,000 made without Bank staff consulting the central procurement team, contrary to staff policy3. Prompted by the NAO’s study, the Bank identified that better value might have been achieved on purchases worth a total of £2 million and that this could have saved up to £200,000.

The Bank’s systems for managing costs are improving. The Bank had become used to its budget increasing each year as its responsibilities expanded. In 2017-18, the new finance director introduced more challenge around budgets and each business area needed to identify cost savings. However, the Bank needs to further strengthen its ability to monitor and manage performance and costs.

The Bank’s budget cap will quickly put pressure on it to make sustainable savings. The Bank expects to manage cost pressures of £11.5 million within Central Services in 2018-19. In the longer term, the Bank estimates that its five Central Service projects could achieve a sustainable reduction in its operating costs of £9 million a year in 2020-21 and £15 million a year from 2021-22. Further work is needed to estimate savings for all the Bank’s initiatives and to make adequate allowances for risks to the cost and speed of delivery.

The Bank is moving in the right direction to deliver value for money from its Central Services. Change will require investment, time, sustained leadership and support from across the Bank. The Bank will need to reduce existing costs as much as possible if it is to find the resources needed for investment and to live within the Bank’s self-imposed spending cap.

“The Bank of England has rightly recognised that its Central Services need reform and has started to take action. However, the Bank should not underestimate the scale of change required. Improvements will only be possible if staff across the Bank are encouraged to embrace a more cost-conscious culture.”

Amyas Morse, head of the NAO

Read the full report

Managing the Bank of England’s Central Services

Notes for editors

Key facts £647m the Bank of England’s total expenditure in 2017-18 £188m the cost of the Bank’s Central Services in 2017-18 £11.5m cost reductions that Central Services are committed to deliver in 2018-19 £476 million the Bank's cap on annual expenditure excluding pensions and production of banknotes, set in October 2017 4,281 self-imposed limit on number of staff the Bank can employ 13% growth in Bank of England staff numbers between 2014-15 and 2017-18 15% additional cost of the Bank’s HR function per full-time equivalent compared with central government bodies 800 estimated number of unoccupied desks in the Bank’s London headquarters on any given day 5 number of initiatives to transform the Bank's Central Services and reduce costs   1.     The five projects are: One Bank Services Transformation; Procurement 2020; The Data Centre Migration programme; The Cyber 2020 programme; The Security Enhancements programme. See paragraphs 2.4 to 2.6. 2.     These figures compare the Bank’s Central Services to the median for central government bodies. 3.     The internal audit and the procurement team identified up to 200 purchases above £25,000 made by bank staff between December 2016 and December 2017 without the consulting procurement, despite there being a policy that staff should do so. We could find no evidence to suggest that individual staff were required to explain why they had not complied with the policy. 4.     Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website. 5.     The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 785 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services. Our work led to audited savings of £741 million in 2017.

Latest press releases