O’Donnell calls for five-year spending plans, and raises concerns over pension reforms

The government should introduce five-year spending plans and independent assessments of its infrastructure plans, former cabinet secretary Lord O’Donnell told an audience at the Royal Statistical Society last month. 


By Matt Ross

07 Nov 2014

Concluding a speech on evidence-based policymaking, O’Donnell set out three ideas for improving the operation of government. “Parliament has decided we’ll have five-year fixed-term Parliaments, but everything else has remained the same,” he said. “Why can’t we move to a point where we start to plan over five years?”

These five-year plans should include infrastructure strategies setting out the details of spending on major projects, he said – and such plans should be assessed before delivery by an independent body such as the Office for Budget Responsibility or a new “Office of Taxpayer Responsibility”. These audits would assess whether a policy or project can be delivered within the allotted time and resources, and an ongoing monitoring regime would ensure that projects remain on track. “We have an accountability system which is simply an ex-post blame game,” said O’Donnell. “We’re doing it now with Universal Credit. That’s too late.”

The former cabinet secretary also called for action to improve cross-departmental working, pointing out the lack of mechanisms to encourage departments to invest in work that benefits other parts of government. “Many, many successful policies involve investment by one department but the gains are spread to others,” he said. O’Donnell raised the prospect of introducing a new form of ‘public service agreements’ – the Labour government’s way of attaching Treasury budget allocations to cross-departmental policy outcomes – but he acknowledged the huge difficulties of introducing such a system. “I’ve got a theoretical answer, which is that you have budgets, objectives and outcomes – like PSAs, but they come with budgets,” he said. “Practically, how you do that – it’s a mess!”

O’Donnell gave examples of good evidence-based policymaking, including pensions auto-enrolment – which he called “a really dramatic example of using theory and evidence supplied by psychologists about how people make decisions, working with statisticians and economists.”

However, he raised concerns over the chancellor’s recent pensions announcements, in which George Osborne promised to let pensioners take much of their pension pot in cash rather than having to purchase an annuity. It is a highly libertarian policy, he said, commenting: “Will people use this freedom well? Actually, all the evidence we have is that they won’t. Therefore we need a little bit of paternalism, and actually the Treasury has agreed with that and there’s a debate going on about how precisely the advice should be to help them make the right decisions. I’m worried, to be honest, that people will make poor decisions.”

In some fields of policy, O’Donnell pointed out, people can be allowed to make poor decisions on the basis that they’ll learn from their mistakes and make the correct choice in future. But the decision on whether to purchase an annuity is only made once, so people have to get it right first time.

For more from the event see the November issue of CSW, published on 14 November

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