Many Whitehall departments are failing to use their accounting mechanisms to ensure the effective delivery of public services, MPs have warned.

A report from the Commons public accounts committee said that the use of "resource accounting" should be used to cut down on waste and improve productivity.

Departments and their agencies spend some £421bn a year, and are responsible for assets and liabilities of £334bn and £112bn respectively.

Commercial-style resource accounting was introduced by the Treasury in 1998 to help departments identify the full costs of their activities, rather than knowing simply what is paid out in cash.

"If used effectively the new arrangements provide departments with the information to determine the relative efficiency of different activities and to identify areas of waste or low productivity," said the MPs.

They called for departments to improve their understanding of resource accounting and budgeting.

And departmental managers should address unproductive activities where these are identified, added the committee.

Committee chairman Edward Leigh said: "Resource accounting and budgeting must not be a superficial change focusing only on end of year accounts; it must be embedded at the heart of how departments manage their business.

"Departments now have highly developed mechanisms to help them use their resources more productively.

"Many departments are not yet using them properly.

"If they did, they could identify areas of waste of low productivity. Just a small proportion of efficiency gain could save billions of pounds for the taxpayer."