The head of the National Audit Office has warned that unrealistic planning by departments risks “public money being wasted on a grand scale” as government prepares for the forthcoming Spending Review.
In a report examining the effectiveness of the Treasury and Cabinet Office in improving long-term planning and spending decisions across government, auditors found that business planning had improved since the last examination in 2016.
The Treasury is effectively controlling public spending and the Cabinet Office, with support from expanded cross-government functions such as finance, has helped improve business planning in government departments, according to the report.
But despite the creation Single Departmental Plans from 2015, which require departments to set out how they will implement their objectives to deliver services and track performance, the NAO found government still needs a more integrated planning and spending framework to ensure its plans are deliverable and affordable.
In particular, the report said SDPs should be beefed up to help better inform business planning and spending decisions. Auditors found that as yet, the plans are not central to decision-making in all departments, as they do not match what departmental plans to available resources and are weak on measures of success. This creates a risk of unachievable commitments being made and departments failing to see when they are off-track.
In a stark warning as departments prepare for the 2019 Spending Review, auditor general Amyas Morse said there is a risk that the cycle of over optimism, short-termism and silo decision-making will continue.
“Unrealistic planning based on wishful thinking risks public money being wasted on a grand scale,” he said. “HM Treasury and the Cabinet Office need to work together to deliver integrated and realistic short, medium and long-term planning. For this we are dependent on HM Treasury spending teams that are just as focused on policing quality planning and capturing public value as they have always been on controlling spending.”
The report highlighted that the Treasury has begun to focus more on the longer-term, with some areas such as defence and the NHS being given longer-term spending plans, as well as committed funding for housing, infrastructure, and research and development beyond spending review cycles. However, this longer-term approach is yet to be applied to monitoring the performance of individual departments.
The Treasury's 20 spending teams, who make up around one-fifth of the department's staff, scrutinise the value for money of new proposals for projects and programmes with support from project management and commercial experts, but this is not yet supported by a good understanding of the long-term value for money being delivered, according ot the report. However, the NAO says this is recognised by the Treasury, which is developing a new approach to understanding value, based on Sir Michael Barber’s proposals for a public value framework . This work - which is at an early stage - will need to be supported by new success measures for HM Treasury itself, balancing spending control and long-term value, and by enhanced skills and capacity, according to the NAO
The report confirmed the Treasury is considering how best to allow for cross-departmental bids in the next Spending Review, but concluded perm secs and other accounting officers are not adequately incentivised to make realistic business plans.
Responding to the report, Public Accounts Committee chair Meg Hillier said the report matched the committee’s experience that government “makes hasty decisions, using sticking-plaster funding and ‘cost shunting’ between departments, rather than focusing on long-term solutions”.
She added: “The NAO’s report finds that departments are planning in silos and lack incentives to think long-term or tackle over-optimism. This has costly consequences for taxpayers, who deserve better.”