HMRC has saved £1m a year after overhauling a contractor arrangement that had supported critical Borders and Trade digital services for more than three decades.
The tax authority worked with British technology firm Tecknuovo to replace more than 100 contractors with a service-based model covering eight digital services used in the movement of goods into and out of the UK.
The transition was completed in three weeks, with no disruption to live services and no transition cost incurred during the switchover.
The programme delivered an 18 per cent reduction in operating costs, while onboarding times fell by 86 per cent across the affected services.
All eight services achieved green status for documentation, meaning critical knowledge was captured within HMRC rather than left with individual contractors who could depart at short notice.
The savings come as Labour faces pressure to find £14bn in efficiency savings across Whitehall, a target that has grown more urgent following the latest public finance figures.
The Office for National Statistics reported that the current budget deficit reached £34.5bn in the first two months of the financial year, some £7bn higher than the same period last year and £6bn above the Office for Budget Responsibility’s forecast.
The Public Accounts Committee has also warned that government cannot accurately account for its consultancy spending, with estimates ranging from £1.36bn to £2.23bn a year.
Katie Carruthers, managing director of Tecknuovo, told City AM that lasting savings require departments to be left in a stronger position after transformation programmes conclude.
“If ministers want lasting savings, transformation programmes need to leave departments genuinely stronger than they find them and not dependent on buying in contractors again for whatever the next project may be,” Carruthers said.
She was clear that the problem is not external suppliers themselves, but the structural reliance that can develop when departments repeatedly buy in expertise rather than building it internally.
“The issue isn’t external contractors or suppliers. There is of course a place for partnership. The issue is dependency,” she said.
Carruthers warned that departments lacking internal digital capability risk becoming poor clients when procuring technology, increasing the chance that services are not bought in the most effective way.
“When the knowledge leaves when the contractor ends, departments will find themselves paying to solve that same problem again,” she added.
Tecknuovo describes its approach as “zero dependency”, making the transfer of skills and knowledge ownership a contractual requirement rather than an afterthought at handover.
“We think transformation should be measured by what’s left behind,” said Carruthers. “Knowledge transfer should be a requirement, not an end-of-contract activity.”
Under HMRC’s previous model, many of the more than 100 contractors supporting Borders and Trade services were able to leave at short notice, creating what Carruthers described as “a significant and recognised risk” to operations.
“What we built now with HMRC belongs to them,” she said. “Their internal teams are able to operate those services independently and use suppliers where it makes sense to bring in additional capacity.”
Carruthers also cautioned that government enthusiasm for artificial intelligence could create new dependency risks if departments adopt AI tools without first building the internal skills and data infrastructure to use them effectively.
“There is huge potential for AI to help government deliver better services at a lower cost,” she said. “But that’s only half the challenge. You need the skills, the capability and ultimately the foundational data to make that enablement a success.”
On the £14bn savings target, Carruthers said it was achievable through consistent, incremental progress across individual programmes rather than a single sweeping intervention.
“It’s a large number — many numbers add up to a large number. But project by project, programme by programme, lowering costs, increasing productivity and building longer-term capability starts to move towards that number,” she said.