In this article former head of the civil service, Lord Kerslake, responds to our new report Spending Fairly, Spending Well and makes the case for better oversight of public spending.
How companies account for the money they handle is under unprecedented scrutiny amid widespread anxiety that auditors have gone AWOL or, worse, colluded with boards in covering up uncomfortable financial truth. In his recent critique of the Financial Reporting Council Sir John Kingman has hit hard. On his trenchant analysis, it does not look fit for purpose.
But Sir John also has warning words about the quality and regulation of public audit. Their grants slashed, councils desperately seek to maintain services and may be engaging in risky speculative ventures; yet how they are audited is subject to little or no quality control or external scrutiny. Government projects are also too often over budget and delivered late.
It’s time for fresh thought about the wider question of how money for public services is raised, appraised and audited. This isn’t just a technical issue – it is one that needs public attention. Questions of efficiency and equity in public spending are central to recapturing confidence in the people and processes that govern them.
Technology and demographics, not to mention Brexit, austerity and social media, are reshaping relationships between the citizen and the state. Increasingly the public need to be persuaded that their money will be spent fairly and well. If they are then voters might assent to the increases in taxation that actually all political parties believe are necessary to keep Government fit and functional.
In an important new thinkpiece for the independent think tank the Smith Institute*, David Walker and John Tizard call for a radical rethink about the way tax payers’ money is spent and accounted for. Whether or not the 2019 Spending Review goes ahead as planned, their questions about financial management cannot be ducked. Is spending properly appraised before decisions are made; do we get value for money in the fullest sense (which has to include fairness and distributional consequences); do we follow up spending to check on probity and outcomes? The answer from the report’s authors, as from much of the work of the Institute of Government and successive Parliamentary inquiries, is negative.
The Treasury is at the core of what needs to change. As I argued in the review I conducted in 2017 and has recently been echoed by the Comptroller & Auditor General Sir Amyas Morse, the Treasury must understand that controlling spending isn’t enough: HMT needs to be more strategic and look end to end, from decisions about tax and programmes through to those everyday encounters the public have with employment and benefit services, schools, clinics, policing and care. Spending must be ‘pre-screened’ for efficacy.
The authors of Spending Fairly Spending Well offer ambitious proposals for unifying the way public services are checked to ensure they are delivering fairness and value for money. At the moment, there is very little read across between Whitehall, its agencies, the NHS and local government – let alone any attempt to learn from the audit and accountability arrangements now in place in Scotland, Wales and Northern Ireland. The case is made for an independent Office of the 3Es (efficiency, effectiveness and equity), a large extension of the remit of the National Audit Office (NAO) and a new Public Interest Appraisal Unit.
Shortly, a new head of the NAO takes office, amid the confusion and strains of Brexit. He, and the MPs with whom he will work, see large gaps in how we audit and account for the 37 per cent of GDP spent by Government – money that sustains families, communities and markets. Ahead lie clamorous calls for more, to repair the damage of austerity and to respond to the multiple challenges of ageing, regional restoration and productivity – it’s a long list.
The public need assurance that we can manage public money better. The reforms proposed by Walker and Tizard would not alone restore Whitehall and Westminster’s credibility with the public or solve all the longstanding problems facing government spending, but they might make a difference. They are certainly worthy of consideration at the highest levels.