NAO Report on Managing budgeting in UK Government

[Napodano]

http://www.nao.org.uk/publications/1213/managing_budgeting.aspx

'This report examines how the Treasury has designed and implemented the budgetary process, as well as how departments responded to central guidance, and developed their budgets. It assesses the processes and information behind the decisions, but does not question judgements on the budgetary decisions themselves.'

'The Government’s ability to show that its spending decisions represent the best value for money is being hindered by the patchy availability of good information.
 Today’s report by the National Audit Office shows that many aspects of government budgeting compare well with good budgeting  practice – particularly in support of the Treasury’s objective to control spending. The system is less effective at addressing objectives for prioritization of public spending and delivery of value for money across government.'

[John Short]

Managing Budgeting in Government - Public Accounts Committee Report 8 March 2013

The Government needs strong budgetary systems to be able to control and manage public spending and to provide high quality public services that offer value for money to the taxpayer. Departmental spending is approved by Parliament in the annual budget process based on the multi-year budgets set in the spending review. The 2010 Spending Review set a four-year spending total for each department. The Spending Review focused on reducing public spending and delivering the coalition Government's programme.
The Treasury managed the Spending Review by collating bids from departments and challenging submissions. The process built on the experience of previous CSRs and was better managed. However, we continue to have concerns about the capacity of the Treasury to effectively challenge departments, and Government continues to take some decisions which will not ensure best value for money.
 
Departments and the Treasury failed to take a longer term view on spending, making cuts in those budgets that were easiest to cut. For instance, whilst Treasury improved assessment processes to be able to rank capital projects, the overall level of capital investment was cut from (£57 billion in 2009/10 to a planned £41 billion in 2014/15. Resource expenditure as a whole will increase in nominal terms, albeit at a much slower rate. These decisions may not have been the best to meet the Government's growth objectives.
There were gaps in data which made it difficult to compare options or benchmark spending proposals. There were no incentives for departments to collaborate on cross-government issues. There was no evidence of clear thinking on how one decision to save money in one budget area might lead to an increase in expenditure elsewhere. There was also evidence of game-playing.

Decisions on where to spend or cut rest with Ministers and cannot be divorced from the political process. But these decisions need to be informed by rational analysis. Officials must do more to provide Ministers with reliable and comparable information to help them weigh up the effect of different spending options. The Committee welcomed the Treasury's commitment to follow up the National Audit Office's recommendations for improvement. The Treasury will need to implement the findings of this report in time for its next spending review.

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Treasury and the Head of the Civil Service, who also represents the Department of Communities and Local Government.

http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/661/66103.htm

[petagny]

From the conclusions, it seems like the Treasury is in a state of crisis:

'5.  High staff turnover and lack of commercial skills undermines the Treasury's ability to scrutinise departmental budgets effectively. Staff turnover in the Treasury is too high: 44 of the 52 staff that worked in the Treasury's spending teams covering the five departments we examined had left within 20 months of the Spending Review. On the Department for Energy and Climate Change team only one of the thirteen team members remained. In past hearings on the Private Finance Initiative we have raised wider concerns over the lack of commercial skills in departments and the Treasury. The lack of corporate memory, relevant skills and sector knowledge means that the Treasury is not as effective as it could be in challenging departments - allowing some to engage in game-playing, for example, by deliberately withholding information from the Treasury. The Treasury should be clear about the skills it needs to be effective in challenging departments on their spending plans and subsequent performance, and put in a place a strategy to secure and retain staff with the appropriate skills and experience.

6.  The Treasury remains unable to demonstrate how it is enabling departments to learn from past experience to ensure better value for money. There is little or no learning across departments and Treasury has yet to demonstrate leadership in this area. For instance, lessons learnt from PFI were not used to frame the contracts to transmit energy from off-shore wind farms. Treasury should consider how it will establish effective mechanisms to enable departments to use previous experience across Government in framing current and future programmes.'

This picture was confirmed in an FT article not so long ago.

[STONE]

You have to feel sorry for the Treasury. High staff turnover, non-cooperative spenders (not giving information even when they have it) and politicians do not make for good decision making processes.  Its an age old problem unless and until those in charge of the challenge function have the power to reject any submission that does not meet minimum information standards and process compliance there will be little incentive for staff to dedicate themselves to a (glorious) career to budget analysis and the spenders will withhold or not produce information and will play games.  What's the office of budget responsibility going to do about it?

[STONE]

And then I saw this:

"The Major Projects Authority (the Authority) was set up in 2011 to address weaknesses in the central system for assuring major projects across Government. The Authority, a partnership between HM Treasury and the Cabinet Office, is responsible for examining and reporting on projects , and intervening where they are going off track. The Authority has made good progress in its first year, but, with only one third of major projects being delivered to time and budget, much more needs to be done.

The Authority spends £6 million to monitor over 200 projects worth £376 billion. It has much stronger powers but much less money than its predecessors. Clearly, the resources it has will affect its impact. It focuses its resources on the projects of highest cost and risk and it is dependent on engagement from departments to achieve its aims, but this is not always forthcoming. Some 62% of departments have adequate formal plans to provide assurance on projects, although the extent to which these are used to manage projects varies. The remaining departments have been slow to adopt the new assurance system. The Authority told us that it is engaging with departments to ensure they understand the value of these tools in improving the performance of government projects.

The Authority's reports should inform HM Treasury's decisions on project funding, and there are signs that this is beginning to take place. The decisions to re-scope the National Programme for IT in the NHS and to cancel the first Carbon Capture and Storage competition were taken following reviews by the Authority. But a stronger link is needed between the results of the Authority's assurance reviews and the spending decisions made by HM Treasury.

Long-standing weaknesses in the project management skills of civil servants are being addressed by the training provided by the Authority's new Academy. However, retaining these skilled individuals in the public sector and ensuring they remain in the one job long enough to enable projects to succeed will be challenging.

The Authority has significantly improved the quality of management information available to Government on its projects, but this is not yet being used to best effect by HM Treasury to oversee spending on projects. The Authority has not met its commitment to publish information on project status; on-going discussions within Government are seriously delaying the publication of the Authority's annual report and calling into question the Government's commitment to transparency.

http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/384/38403.htm

Information and skills again...

[STONE]

Probably not the right place for this, but I did enjoy the opening of the PS Treasury evidence to the PAC on last year's accounts - it jargon busts "negative financial uplift"  (I imagine jargon bust means "explains").

http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/uc659-i/uc65901.htm

[petagny]

The NAO report on the MPA, which forms the basis for the discussions on the parliamentary select committee, has been the subject of an earlier post in the PIM subject area of the board. The MPA was created on the basis recommendations from the NAO following investigations into problems delivering major projects on time, on budget and to specification.

According to the NAO report on the performance of the MPA, 'The extent of what the Authority can achieve on its own is limited. For example, HM Treasury's investment decisions should draw on the Authority's recommendations but the Authority cannot stop projects or withdraw funding. Similarly, the Authority is not accountable for delivering project outcomes successfully but its recommendations should influence the decisions taken on projects. Senior responsible owners in charge of projects must either implement the recommendations or formally declare why they have not taken action.'

The MPA's responsibilities cover:

- Validate project assurance plan in conjunction with HM Treasury
- Plan assurance reviews
- Provide project information to reviewers
- Produce and issue assurance reports
- Produce annual report on status of government major projects
- Produce Government Major Projects Portfolio report
- Arrange escalation
- Agree and manage updates to the assurance system

Amongst other things, Treasury's responsibilities are:

- Use assurance information to inform approval decisions
- Review portfolio spending data
- Assess financial commitment of the portfolio

For one reason  or another, one of the problems seems to be the failure of the Treasury and spending departments to engage with the MPA:

'Some departments have engaged poorly with the system. Departments' compliance with the requirements of the [MPA's] mandate, such as providing government major project portfolio data and producing integrated assurance and approvals plans, has been of variable quality and completeness.

'HM Treasury has not engaged as strongly as we would have expected at a senior level. There is a positive engagement at a working level, but senior sponsorship is important. The senior officials from HM Treasury's Public Spending Group only attended two out of the six Authority board meetings between April and December 2011...'

Possibly this is a function of the general level of pressure on Treasury staff, but it could also be a sign of a turf war. Note that Infrastructure UK remains within the Treasury and describes as one of its functions as providing 'support to government on the delivery of major infrastructure projects to help ensure that the specification, design, and procurement are undertaken effectively...'