Spending Review 2020: Do outcomes for departments point to a new way of measuring performance?

New frameworks and metrics to judge how well departments work could form the building blocks of a reformed approach to managing public spending, but more detail is needed, says Martin Wheatley
HM Treasury. Photo: PA

By Martin Wheatley

27 Nov 2020

Most political and media attention about this week’s Spending Review has, understandably, about the extraordinary increase in spending caused by the coronavirus pandemic, the fiscal hangover which that will leave, and where the chancellor is increasing or cutting spending. I will leave comment on all that to those better qualified.

Buried away in the Treasury’s detailed document (pages 46-50) is some interesting material on the mechanics of public expenditure planning and management.  This continues the reawakening of Treasury interest in what it gets out of public spending, as opposed to what it puts in, which started with the publication of Sir Michael Barber’s report on public value in 2017. It also suggests that the Treasury is alive to the lines of criticism put forward by the Institute for Government and National Audit Office, and in the Commission for Smart Government’s recent report What’s Wrong with Whitehall. There we in the commission suggested that the government is unable “to develop credible strategic financial and performance plans, aligned with each other.”  We argued that the management of spending and performance – what the government gets for its money – need to be better aligned. We also challenged the way planning and management is based on departmental boundaries, rather than the government’s priorities.

This may seem like arid stuff, but is actually vitally important for a government which is at the same time facing quite extraordinary pressures on the public finances and has a very ambitious programme for investment in ‘levelling up’ and in better public services. It is set to fail if it cannot link spending credibly with its intentions, and drive remorselessly for getting best value out of every pound.

There are four main points of interest.

First, the Treasury has put in place an outcome framework alongside its spending allocation. Each department has three or four ‘priority outcomes’, and there are some cross-cutting outcomes. Outcomes will be quantified by published metrics. Those old enough to remember New Labour’s Public Service Agreement targets may spot the resemblance. There are also parallels with the way the Canadian government sets performance and outcome goals for ministers, on which the Commission for Smart Government will be publishing a case study shortly. It is clearly a step in the right direction to link spending to a limited number of outcomes for each department, associated with published objective measures. However, it would have more strength and credibility if the definition of the priorities were more specific.  “Reduce crime”, for example, does not really give much away about how the Home Office is expected to make a difference.

Second, the Treasury says it is putting in place a “reformed planning and performance framework.”  There isn’t any detail in the document about how this will work, but there does appear to be an emphasis on ministers having sight of and using performance information. Approaches of this kind have, again, a long lineage and international parallels, back to Michael Heseltine’s MINIS system in the early 1980s, and the active involvement of politicians in managing performance exemplified by Tony Blair’s delivery processes, and similar subsequent initiatives in the US State of Maryland, and Malaysia.  The concept is right, and we look forward with interest to learning more about how it works.

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Third, the Treasury stresses the importance of evidence and evaluation. On the latter, it is setting up a new Evaluation Taskforce.  If it can bring about more of a commitment by politicians and officials to paying attention to evidence and learning from the successes and failures of programmes, it will be doing well.

Finally, the document talks about ‘breaking down silos.’ It gives some examples of joint programmes and announces more funding for pilot schemes to support joint working by departments.  We support the intention, but would suggest that more radical thinking is needed to overcome the very strong default towards departmentalism in the way British government works.  In particular, the government might look at the reforms and legislation which the New Zealand government has put in place, with bipartisan support, to establish legal structures which make joint working a normal part of government rather than an exception to the rule.  We have described these changes in a recent case study, and former PM Sir Bill English talks about them interestingly in our recent evidence session.

There are some interesting first steps in yesterday’s document to realise a radically reformed approach to managing public spending and performance that is a vital part of a world class, smart, government.

Martin Wheatley is a former senior civil servant and local government professional. An independent adviser and researcher since 2011, his published work on government reform includes reports on the centre of government and localism for GovernUp, and on government financial and performance management for the Institute for Government. A version of this article first appeared on the Commission for Smart Government website.

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