Officials at the Home Office have confirmed cutting staff and closing offices will it allow them to reduce the cost of a standard passport by £5.
Financial savings of £40 million over the past year mean the cost of renewing a passport will fall from £77.50 to £72.50 from the autumn.
However, one in ten staff and more than 22 passport interview offices have been lost in a drive to boost efficiency.
One application processing centre has also been closed.
The new £72.50 fee will be in place for two years, it has also been confirmed.
Immigration minister Damien Green explained: “The Identity and Passport Service has worked hard to provide value for money in the vital service it provides, and it is right that these savings are passed on to customers and fee-payers.
“Not only has IPS made the efficiency savings to make this possible, but it has done so whilst continuing to provide a very high standard of service to customers.
“The fact that IPS is able to deliver this price reduction is testament to the hard work of staff to deliver excellent customer service in ever more efficient ways.”
The cost of a child’s standard passport will also be cut, down £3 from £49 to £46, and the cost of an adult’s fast-track passport, which can be processed in seven days, will fall £9.50 from £112.50 to £103.
IPS produced 5.4 million passports last year and ensured more than 99 per cent of renewal applications in the UK were processed within two weeks.