A report has warned that the effectiveness of next year’s Spending Review across government could be hindered by the high staff turnover rate at the Treasury, which means the officials involved in spending decisions often lack both the insight into public services and contacts to help inform them.
In a review setting out views on how the 2019 review could be run effectively, the Institute for Government highlighted that the Treasury civil servants were widely characterised as bright, hard-working and problem-solving by the more than 60 government and public sector figures interviewed.
IfG report authors Martin Wheatley, Bronwen Maddox and Tess Kidney Bishop highlight that the churn in officials means that officials in crucial roles are often inexperienced for taking the long-term decisions for government spending.
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Chancellor Philip Hammond announced the 2019 Spending Review at the Budget last November. He will set out the overall direction of public spending in this autumn’s finance statement, with a review to distribute the funds to departments to follow next year.
The IfG report said many senior Treasury officials have years of experience in its management of government spending. “But at the level of team leader – who have considerable freedom to set the way their teams work and their relationships with departments – and those in their teams, most will be younger officials. They will typically have only spent a brief time working on spending and have no experience of the particular subject (for instance, health or education)," it added.
The authors highlighted this model has positives, including possible better challenges to departmental spending plans if the Treasury officials come from outside the sector – but concluded that it risked missing out on specialist financial skills at a time when the civil service was boosting professional skills across government professions.
The Treasury gives a weaker role to professional skills in finance than might be expected in a finance ministry, the IfG concluded, noting that “there is a view, although almost entirely confined to some current and recent Whitehall officials, that the importance of professional techniques in finance for planning and managing spending is overstated”.
The high turnover of staff exacerbates these problems, according to the report, as staff have to re-learn the policy options and build new relationships with staff in spending departments.
Given that annual staff turnover at the Treasury has been 23% since 2011, this means many of the staff making key spending decisions will not have experience of previous reviews.
The report highlighted one former Treasury spending team leader has pointed out that to bring about real policy change, Treasury spending teams need a thorough understanding of the very different ways in which different public services work. Without this depth of understanding, it is very hard to put in place effective reforms, controls, or even personnel to manage these effectively, they said.
The report also reiterated previous Institute for Government criticisms of the Treasury’s reversal of its decision to combine the department’s director general of public spending role with the head of government finance function role. The combination had been recommended in the 2013 Financial Management Review to improve coordination and the post was held by senior Treasury official Julian Kelly until he moved to the Ministry of Defence to head up its nuclear programme. Kelly was replaced as public spending DG by James Bowler, but as Bowler is not an accountant, the role of head of the profession was given to Ministry of Justice chief financial officer Mike Driver.
Combining the roles was intended to help ensure confidence in using financial expertise on leadership teams across government, especially in strategy discussions, as well as an understanding of what makes good data and reporting, and an ability to interpret this data accurately, the report highlights, that could be lost to the Spending Review process.
The report also highlighted that Brexit will make the 2019 review harder than previous efforts and called on the Treasury to “end confusion” around its 2019 review, including whether Brexit uncertainty makes a review covering only one year, rather than the more common three or four, most practical.
“Spending Reviews end up with a set of numbers that add up on a spreadsheet but don’t focus on what can be done with the money,” said Wheatley. “There is a widening gap between public expectations of public services and the money available to provide them. Improving the spending review process would help address this problem.”