At least £480bn of the government's operating revenues and £210bn of non-staff expenditure, such as pensions and other entitlements, were reliant on legacy ICT systems in 2011-12, according to a National Audit Office (NAO) report.
"Legacy systems are a fact of life for most significant ICT users. The challenge is how intelligently they are managed, whether they are being retained, updated, replaced or phased out," said Amyas Morse, head of the NAO.
"The aim is to balance the costs of these options against the limitations and risks to ICT capability they can present, in a way that makes sense for the user and secures best public value," he suggested.
Morse added that public sector performance in managing legacy ICT systems is "patchy".
In its report "Managing the risks of legacy ICT to public service delivery", the NAO examines four different departments that use legacy ICT systems.
It found that in 2011-12, the Department of Work and Pensions' (DWP) legacy ICT system paid out £84.3bn of state pension and associated benefits, and HM Revenue & Customs' (HMRC) systems administered £99.6bn of VAT receipts (net of repayments).
"This makes them of considerable significance and their failure would potentially endanger the payment of pensions and benefits and the collection of revenues," the report states.
However, it goes on to highlight that both DWP and HMRC had applied an "enhance and maintain" strategy to keep up with their departments' needs, including the introduction of digital channels for users of their pension payment and VAT collection services.
This has meant that while the legacy ICT remains intact, interfaces for new ICT systems have been built to provide additional functionality, resulting in the systems being well-managed, stable and with availability that is above target. The systems also encountered very few technical issues.
The additional functionality has also meant that the DWP has been able to reduce the cost per customer of its pension payment service by 30 per cent between 2008-9 and 2011-12.
It did this by implementing a new customer account management system that draws together data from multiple legacy ICT systems to simplify the processing of pension cases.
In contrast, the Office of Fair Trading (OFT) has a consumer credit ICT system that has had a number of faults since it was implemented and has not been able to adapt to changing business needs.
As the OFT's credit licensing service will be replaced by the new Financial Conduct Authority's (FCA) authorisation service, there is uncertainty about the services that OFT will provide and consequently it has not invested in any changes to its legacy ICT.
This has impeded organisational efficiency, according to the report, with the cost of the credit licensing service on a per customer transaction basis rising by an average of 10 per cent per annum between 2008-9 and 2011-12.
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