Annex 1
TREASURY AIM
AND OBJECTIVES
Aim
To raise the rate of sustainable growth, and
achieve rising prosperity, through creating economic and employment
opportunities for all.
Objectives:
— Maintaining a stable macroeconomic
framework with low inflation.
— Maintaining sound public finances
in accordance with the Code for Fiscal Stability.
— Improving the quality and cost effectiveness
of public services.
— Increasing the productivity of the
economy and expanding economic and employment opportunities for
all, through productive investment, competition, innovation, enterprise,
better regulation and increased employability.
— Promoting a fair and efficient tax
and benefit system with incentives to work, save and invest.
— Maintaining an effective accounting
and budgetary framework and promoting high standards of regularity,
propriety and accountability.
— Securing an efficient market in financial
services and banking with fair and effective supervision.
— Arranging for cost effective management
of the government's debt and foreign currency reserves and the
supply of notes and coins.
— Promoting international financial
stability and the UK's economic interests and ideas through international
co-operation as a way of increasing global prosperity including
seeking to protect the most vulnerable groups.
In pursuing these objectives the Treasury will:
— Maintain a professional, well motivated
and outward looking organisation committed to open and accountable
conduct of policy both here and abroad.
— Manage its running costs efficiently,
economically and effectively.
2.4 The Treasury has a strong focus on improving
the performance of the economy through active microeconomic policy.
We are working to deliver our aim by improving the productivity
of the economy in both the private and public sectors, expanding
economic and employment opportunities for all and tackling poverty.
This includes:
— strengthening competition policy
in co-operation with the DTI. We have a particular role in the
financial sector (eg the recent Banking Review);
— promoting enterprise and innovation.
Recent Budgets have included important new measures on these themes,
and we continue to develop further policy directions;
— developing the economy's skills base,
especially through training and education. This is not just about
prioritising education in spending reviews. It is also about ensuring
better results. We have worked closely with DfEE and others on
the mechanisms designed to ensure that;
— developing strategies to deliver
the Government's objective of employment opportunity for all.
This encompasses policies on Welfare to Work including the New
Deal, where the Treasury has worked closely with DfEE and DSS
(including through EA(WW), which the Chancellor chairs);
— to back up these active labour market
policies, developing strategies to ensure that work pays. Following
Martin Taylor's March 1998 report on work incentives, the Treasury
with the Inland Revenue has led a number of tax and benefit reforms
such as the Working Families Tax Credit and changes to National
Insurance;
— promoting policies to ensure fairness
and opportunity, and to tackle poverty and disadvantage, particularly
for families with children. Here the Treasury's role ranges from
direct advice on taxes and benefits through to taking an overview
of the impact of Government spending plans. We have created a
new team specifically to address the issues of work incentives
and poverty; led the work on tax credits; made a significant input
to initiatives on child poverty; and are working to ensure that
access to financial services is available to all. To ensure that
enterprise is open to all we have worked on measures such as the
Phoenix Fund to support private investment and help enterprise
in deprived, high-unemployment areas. We have developed new and
close working links with academics and experts in these fields;
— increasing the UK's historically
low levels of private and public sector investment. To help achieve
this, for instance, the Budget announced resources to support
a £1 billion target umbrella fund to provide better access
to venture capital for small, growth firms in the regions.
2.5 We have worked with Departments to develop
Public Service Agreements which are a lever for ensuring that
public resources bring the intended results. Our work goes beyond
this "headline" level into individual programmes, working
with departments to challenge traditional assumptions about the
delivery of services.
2.6 It is not possible to draw a firm distinction
between the "economics ministry" and "finance ministry"
parts of the Treasury; our aim is that our work on the public
services should be well rooted in the context of sound microeconomic
analysis. In the public services area we work closely with the
Cabinet Office, which takes the lead on the Modernising Government
initiative. We are managing the introduction of Resource Accounting
and Budgeting, which will strengthen the connection between inputs
and outputs in our formal financial systems.
2.7 The Treasury has developed a more strategic
role in its approach to public expenditure control. Government
Departments are responsible for managing their budgets within
a prudent framework which includes Departmental Expenditure Limits,
PSAs and Treasury guidance on issues such as propriety and accountability.
A new element of that framework is the Office of Government Commerce
(OGC), which came into being on 1 April as a separate Office of
the Treasury. OGC's target is to help Departments deliver value
for money improvements of £1 billion through better procurement:
this will make a substantial contribution to our better public
services objective. As well as the Treasury's Procurement Group
and Public Private Partnership unit, the Office incorporates three
agencies transferred from the Cabinet Office: the staff transferred
totalled over 500 people. Given that its business is of a different
character from the rest of the Treasury it will be managed and
accommodated as a separate entity.
2.8 The Treasury's overseas role has become
steadily more important over the years. The Government is playing
a leading role in international financial institutions, not least
since the Chancellor's appointment as Chair of the International
Monetary and Finance Committee of the IMF. The Treasury has, for
instance, worked with DfID to advocate in international fora the
Highly Indebted Poor Countries initiative. We continue to work
closely with our EU partners across much of our business.
3. HOW WE
PERFORM THAT
ROLE
3.1 The nature of the Treasury's macroeconomic
work has changed somewhat with the transfer of operational responsibility
for setting interest rates to the Bank of England. But the need
for high quality analysis and briefing is as great as ever, to
underpin the setting up, monitoring and developing of the fiscal
and monetary frameworks and for reaching sound policy judgements
on the operation of fiscal policy, and its co-ordination with
monetary policy. There is an ongoing need for analysis, advice
and briefing for Ministers to allow them to track the progress
of their economic strategy, and to enable them to report that
progress to Parliament and the public. Information and analysis
provided by the Treasury also feeds into the monetary policy framework
through our (non-voting) representative on the Bank of England's
Monetary Policy Committee.
3.2 With the macroeconomic framework now
firmly established, more resources can be directed towards examining
microeconomic issues. Evidence-based microeconomic and distributional
analysis is essential to underpin the Treasury's output—from
Budget tax measures through developments in competition policy
and analysis of poverty issues to work on reform of the legal
aid system and deciding transport priorities.
3.3 The Treasury's work covers a range of
disciplines. For example, accounting makes an important contribution—not
just in delivering and developing the public accounts, but in
improving our understanding of all sectors of the economy. The
Treasury's Private Finance Taskforce has provided a catalyst for
the introduction of private finance and expertise to a range of
public services, bringing in expertise from outside the Department.
We need a variety of other inputs, too—from statistics through
project management to information and communications.
3.4 The Treasury's change of focus has required
a corresponding change in culture. We seek to be more open, and
more proactive in promoting innovation and change. Initiatives
such as Modernising Government recognise that good risk management
is essential in order to deliver better public services. The Treasury
is working with the Public Accounts Committee and the National
Audit Office to ensure the application of this approach in public
accountability and audit.
3.5 The Treasury now places a greater emphasis
on its interactions with the outside world.
— The publication of the Code for Fiscal
Stability, the Bank of England's inflation remit, the Government's
fiscal rules and objectives and other key policy frameworks have
made our management of policy more transparent to external analysis.
We have invited the NAO to audit key Budget economic assumptions.
— We are redesigning our website with
the aim that it should be a leader in good practice. At Budget
time the site experiences 250,000 "hits" in the first
hour after the Chancellor's statement, and one and a half million
in the two days following.
— We give presentations on economic
policy to a wide variety of audiences across the country, seeking
to explain and listen to views in equal measure. We talk about
a wide range of issues with businesses of all types and sizes
from throughout the UK; with academics and with representative
groups, such as the CBI and TUC.
— We publish papers explaining policy
and analysis, for example, the series on "The Modernisation
of Britain's Tax and Benefit System" and "Analysing
UK Fiscal Policy".
— We have strong links with other Government
Departments, and work closely with them in setting priorities
for Government spending and drawing up PSAs. Our staff dealing
with public service issues are encouraged to make contacts at
the "sharp end" of those services, so that their work
addresses practical issues.
— We learn from our opposite numbers
abroad—both in the growing number of areas where policy
has an international dimension, and in others where our domestic
policy can be improved by drawing on others' experience. Modern
communications technology is helping us to achieve more in this
area.
3.6 We are working to identify and disseminate
best practice within our organisation. Our emphasis is on developing
evidence-based policy making and on ensuring that the advice which
we provide takes account of all the implications. We are also
leading in the implementation across Government of the Performance
and Innovation Unit's report on analysis and modelling in government
("Adding It Up"). The Permanent Secretary, Chief Economic
Adviser and Director of Public Services all serve on the PIU Steering
Group.
3.7 During 1999-2000 we have successfully
applied the European Foundation for Quality Management's Excellence
Model in our Public Services Directorate and our Internal Audit
team. The former is one of the first trials of the Model in a
policy-making context. The model will be a key tool in the delivery
of our Better Quality Services reviews, which will have covered
all the activities of the Department by 2004-05.
4 PEOPLE
4.1 The Treasury is a fairly small organisation,
employing around 900 people (excluding the staff of the new Office
of Government Commerce). We regard the size of the core Treasury
as an asset. It allows us to be fast-moving and flexible, with
strong internal networks. We encourage our staff to move around
fairly regularly between different areas of work. This encourages
a broad outlook and promotes the development of a wide range of
skills—an essential requirement of flexibility. Whilst some
of our staff are classified as specialists in economics (15 per
cent—the largest single group), accountancy, IT, purchasing
and so on, we encourage many non-specialist staff to develop strong
skills in these areas too.
4.2 Our formal organisational structure
set out in chart 2A of the Departmental Report broadly reflects
our objectives. Each objective is the responsibility of one (or
occasionally two) Directorates: chart 2B of the Report indicates
lead Directorates. Each Directorate is composed of about a dozen
teams. Each has responsibility for a fairly clearly-defined policy
area. Every team is headed by someone at around Grade 5/Assistant
Secretary in the former nomenclature. (The Treasury now has its
own grading structure).
4.3 In practice, however, operations are
much more fluid and less hierarchical than the structure would
suggest. Many projects are developed by groups which cut across
different teams and Directorates; Annex 2 gives an example. People
are encouraged to contribute according to the skills and expertise
which they can deploy, rather than according to their grade. If
they show the necessary ability, staff can acquire considerable
responsibilities reasonably early in their careers. Senior managers'
role is to set the overall approach, give guidance and apply quality
control.
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