Given the challenges facing the UK’s public finances with a growing national debt and increased borrowing, with the negotiations and potential cost of Brexit looming ahead, with the weakening of the pound and household incomes starting to be squeezed, I am both surprised and disappointed that HM Treasury has given up responsibility for improving financial management across the UK Government.
Only four years ago, as part of a review of financial management, the then Chief Secretary to the Treasury accepted recommendations included within our publication CFO at the Cabinet Table that highlighted the need for strong financial management at the very top of government. As part of the Financial Management Review (FMR), he created a new position – Director General for Spending and Finance – to oversee spending and financial management, providing leadership of the finance function and overall public spending.
It therefore feels counter-productive for the Chancellor to move this role out of HM Treasury at a time when strong financial leadership is needed more than ever. It also brings into question the Government’s commitment to following best practice when it comes to managing the public finances.
Eliminating the deficit
As it stands, public spending needs better oversight. The UK’s public spending still remains high and national debt is set to reach yet another all-time high. With the current role diminished, there is no single person looking at overall finances across Whitehall, leaving it open to inefficiencies and ineffectiveness across the board. Whilst the recommendations of the FMR were taking shape, albeit slowly, it feels that the Chancellor has now taken two steps back in attempts to modernise the Government’s approach and sharpen its game.
I still maintain that government needs a CFO at the top table. The task facing the incoming Chancellor when it comes to balancing the books will be enormous and, as we know from the public spending figures, there is an increasing urgency. Having a qualified accountant with strong financial leadership skills at the top would help government instil financial disciplines across Whitehall (accountability, transparency, governance and ethics), provide strategic advice to policymakers on key financial policy decisions, strengthen standards, improve balance sheet management, and drive value for money across government.
As the FMR says, ‘focussed and empowered leadership is essential to driving even higher standards in financial management and ensuring that finance is integral to decision-making at the very highest level across Whitehall.’ Anything less than that is a weakening of the Government’s financial controls.
A manifesto commitment
If any political party is serious about making change, they should commit to putting back a framework for managing the public finances that is fit for purpose. Our proposals in 2013 were radical for the public sector. But radical change needs to happen if the Government is to manage our public finances in a sustainable manner – it is essential for the right role and the right structures to be in place.
Having the right financial leadership, with both the technical skills for the task and the strength of character to challenge Whitehall's financial culture is what is needed in these uncertain times.