HM Revenue & Customs has halved annual IT costs to £700 million, as it dramatically improved service levels.
The news comes as the department said that it had slashed a further £200 million from its outsourcing costs, after negotiations with supplier Capgemini on a deal running until 2017.
Phil Pavitt, chief information officer at HMRC, told delegates at the Public Sector Efficiency Expo in London that the department was slashing applications, improving processes and data, and overhauling its infrastructure.
"In three years we've cut our annual IT costs from £1.4 billion to £700 million, and soon it'll be £600 million," he said. The last figure is understood to include annual benefits from the new savings with Capgemini.
"All of the changes are sustainable and have been made on live infrastructure, while we improve our quality of service," he added.
HMRC is rationalising its portfolio of applications, which once totalled 900 in number. Its 31 customer relationship management systems are rapidly being standardised on one system.
The changes have been important, Pavitt said, because "like all other government departments we've had a 25 percent budget cut, with 33 percent coming out of the back office including IT". HMRC is also determined to improve systems to help it close a £22 billion tax gap.
HMRC is currently introducing 25,000 new PCs to its offices, and Pavitt said its IT service levels were at 99.93 percent, "our best ever".
Vast cuts in staff numbers also play a major part in HMRC's change programme, and it is moving from 106,000 employees to 56,000.
Pavitt said: "We have cut our IT costs, transformed IT and made it sustainable, stabilised our services and reorganised our business processes. We have some way to go still, but we are delivering sustainable change."