IT supplier Capgemini’s new contract with HM Revenue & Customs has cut annual IT costs by as much as half to £700 million.

The new contract with Capgemini will see multiple management systems standardized as one system in order to reduce IT costs while improving the level of service. Phil Pavitt, chief information officer at HMRC, said: "In three years we've cut our annual IT costs from £1.4 billion to £700 million, and soon it'll be £600 million."

These changes reflect a 25 percent budget cut in line with government savings. Pavitt points to IT service levels of 99.93 percent to demonstrate the savings from the Capgemini contract are sustainable. The renegotiated contract is set to run until 2017 and is predicted to further reduce costs over the coming 5 years.