Opinion: Let’s abolish the spending review

Further reform of the way the government manages resources to achieve its goals is vital, says the former government lead non-executive director Sir Ian Cheshire
HM Treasury.Photo: PA

By Ian Cheshire

12 Apr 2021

When the Commission for Smart Government divvied up its work and gave me the topic of finance, I thought I had drawn the short straw. What could we say of any interest about spreadsheets and financial reports?

In fact, as the work has gone on, it has become clear to all of us on the Commission that finance is actually central to our work. It is not so much a case that money makes the world go round, as money turns the government’s aspirations into results, if it is managed well. Succeeding as a government and persuading the public that their money isn’t being wasted depends on excellent financial management. With the public finances under intense pressure for the foreseeable future, government needs to make the maximum impact from every penny spent.

Readers of Civil Service World will, of course, know that it is no accident that the Treasury wields so much power in government. It controls the purse strings, and has often pioneered financial management reforms, at least back to the 17th century, when George Downing came up with the idea of managing all government spending in one place (and on the side engaged in some speculative property development off Whitehall). In the more recent past, the UK has been the origin of government financial management innovations, notably planning spending at a high level over a number of years. The UK has a strong record of keeping spending within planned totals.

As I know from my business career, effective financial control – not spending money you haven’t got – is vital. However, it is only one part of the picture. The other dimension is value: making sure planned spending is on the right things, and making sure plans get put into action as intended. Despite some phases of innovation, the financial management initiative under Margaret Thatcher, and political focus on delivery under Tony Blair, UK government’s track record on that has been rather patchier. The ratings agencies are beginning to mutter about whether the UK’s traditional reputation for excellent financial governance is beginning to be a bit tarnished.

From 2017, the Treasury has shown signs that it recognises the need to pursue value alongside strong control. Drawing on his Blair-era experience, Michael Barber has helped the Treasury develop its Public Value Framework. Despite the strains of the last couple of years on the government machine, the Treasury has stuck at it, and last autumn’s spending review signals a stronger focus on value, data, evidence, and good systems and people.

The Commission’s new report offers some encouragement and advice to the Treasury about how to build on its progress so far, drawing on corporate and international comparisons. We suggest significant reforms.

Chief among them, and at the risk of being provocative, is a call to abolish the spending review. We don’t mean by that, of course, that the government doesn’t need to come up with a set of medium-term financial plans. But it is important to see them as a means to an end, and not an end in themselves, as they are seen in the well-run businesses I know, and in governments like Singapore and New Zealand. Instead, we need a new approach to planning money and activity. It consists of four key elements.

First, a new plan for government, working out across how money and activity can make things happen in line with the government’s intentions, not department by department, but across the whole. That needs to start by setting a limited number of top-level goals, with some definition of where it wants to get by the end of the Parliament, on such challenges as levelling up, net zero and Global Britain.

Second, learning from the George W Bush administration in the US, there needs to be rigour and transparency about the financial management capability of departments and public bodies. There should be a common rating system applied to departments and major public bodies, with the results published, to drive improvement in capability and performance.

Third, government needs to be more open about what it is spending and what it is achieving. This is partly about publishing plans which are currently kept secret. But the more important point is to make it accessible to the non-expert. A lot of information is there, if you know where to find it. But the government should follow the example of Canada and publish information for the whole of government, through a single user-friendly web portal, so citizens can see what government is achieving with their money.

Fourth, and underpinning the first three, the government needs excellent data and financial management systems, and a workforce with the right professional background and skills. This is especially true in the Treasury. To be effective on ensuring value as well as control, it needs people with excellent finance professional skills, but also wider backgrounds in central government, the wider public sector, and business.

Our proposals are not just important. We believe they are vital for the success of the government, as it leads the recovery from the pandemic and puts in place its ambitions for the country.

Sir Ian Cheshire is the chairman of Barclays UK plc, and a member of the Commission for Smarter Government. He was formerly the government’s lead non-executive director from 2015 to 2020.

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