The Treasury has been accused of dismantling flagship Whitehall financial management reforms by deciding to move the post of head of the finance profession to another department.
In changes confirmed during the pre-election purdah period, Julian Kelly will leave the Treasury after three years as the director general of public spending and finance, and head of the government finance profession. He is moving to the Ministry of Defence as director general of its nuclear programme, and will be replaced by James Bowler, the current Treasury director general for tax.
As Bowler is not a qualified accountant, he will take the public spending but not the finance part of Kelly’s portfolio. The roles were merged in 2014 after the government-commissioned Financial Management Review concluded that placing the post in the Treasury, rather than with a finance director in another department, would strengthen leadership.
The head of the government finance profession has a formal management relationship with all the heads of finance across departments and leads on the implementation of the recommendations of the FMR. As well as placing the head of the profession in the Treasury, the review called for greater investment to better understand the costs of activities, and the adoption of a framework that would allow departments to take greater responsibility for some areas of expenditure currently controlled by the centre.
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Speaking to CSW, Julian McCrae, the deputy director of the Institute for Government, warned moving the head of the finance profession out of the Treasury was reversing one of the key commitments in the FMR and undermined the overall reform process, which he said had been proceeding with a real sense the Treasury wanted to support the review.
“It could be taken as a sign that the Treasury is no longer serious about this,” he said
McCrae highlighted that the Treasury has known since the review that the next head of public spending would need to be someone who was financially qualified to maintain the reforms.
“They have managed to both uncouple the job and essentially declare that the head of public spending is not a finance job, it could be done by anyone. If you look at our research, it is very clear the effect you have in organisations [from such switches]. They’ve spent three years saying: 'Treasury takes this seriously, the lead person in the Treasury at the heart of the spending review is a finance person leading the finance profession'. And then you say that, actually, you don’t need to be.
“And anyone who is getting a qualification in Treasury, because it has been telling people that to reach the top you need to get qualified, well, you’ve shot that message – and more widely the notion that Treasury is a leading voice and force for the changes to financial management.
“The Treasury didn’t even try to advertise the combined job to see if there was anyone out there with the experience for it. It really does not look like an organisation taking seriously the commitments it made in the FMR.”
McCrae argued this meant that discussions around public spending would have a greater focus on the high-level politics of implementing planned policies, rather than managing value through the public services. “That is the balance, and the Treasury has come down on the side of people who know about the heart of Whitehall as opposed to people who know what a decent financial management system looks like at a very stressed time period. It looks to me that would compound the risk the public sector faces rather than mitigate the risks.”
The FMR was developed alongside the wider civil service reform plan overseen by former Cabinet Office minister Francis Maude under the coalition government, McCrae highlighted. He added that plans to tackle well-evidenced gaps in Whitehall capability were driven by Maude when they could have been driven by the civil service leadership beforehand but hadn’t been.
“I think this raises quite a lot of questions about actually, was Francis Maude right that the civil service will never take these issues seriously and it requires a political driver from the government?
“That is the question. I hope the civil service leadership is capable of these things, but it is really quite a surprising decision. Either they’re saying the arguments in the FMR were wrong three years ago which they weren’t, or there’s a sense of real carelessness about this change.”
CIPFA chief executive Rob Whiteman said the decision to centralise the management of the public finance profession in the UK Treasury was "a good and necessary one", and called the switch a "backwards step".
He added: “During the three years, progress had been made towards improving the timeliness of year end accounts, but in the opinion of most independent experts, much is still needed to be done. Under this reversal of policy, such improvements will now be harder to achieve.
"In particular, there is more to be done to link business planning to financial planning so that efficiency measures and investment projects are fully costed and more effectively implemented. We have seen, for example, areas like prisons and social services have money taken out only then to be reversed by the chancellor because the savings agreed were found to not be achievable."
The Treasury said the department remained committed to the FMR recommendations, and would continue to lead the implementation of the programme working with the new head of the finance function and the Cabinet Office.
There will continue to be Treasury staff and resources dedicated to the finance function, according to an official.