HMRC will slash running costs in IT by £235m over the next four years, according to a National Audit Office report.
The move is part of the department's target of reducing running costs by £1.6bn over the next four years.
In a recent interview with Computer Weekly, HMRC CIO Phil Pavitt described the department's IT cost reduction plan as the largest job in government IT. "In fact, it is one of the largest compared with the private sector as well," he said.
HMRC's Aurora programme aims to save £161m per year in IT costs, by switching off, resizing and moving IT systems. In a further bid to drive down costs, Pavitt said the department has also done a deal with suppliers to get 25,000 new desktops and 5,000 printers for free.
The report praised HMRC's understanding of IT spend and corporate services. In assessing potential cost reductions, HMRC has established a clear vision and specified operational priorities and revenue targets, it said. But the department has not yet sufficiently defined the business performance and customer service it intends to achieve by 2015, it added.
Amyas Morse, head of the National Audit Office, said: "Reducing running costs by £1.6bn over four years is a big challenge for HMRC. It is making progress, but there is no contingency in its plans. To achieve value for money, it needs to better define the service it is aiming for, improve its understanding of costs, and develop its implementation plan."
HMRC has reported savings of some £1.4bn since 2005. To achieve its cost reductions it plans to implement 24 change projects and other measures including savings in the provision of IT services, improvements in productivity, reduced sickness absence and headcount reductions. The department is also reducing staff numbers by 10,000 and scaling back on its number of offices.