6 Recommendations
124. The centre of government must strengthen
its capacity for analysis and assessment of long-term issues and
challenges. It should be capable of providing comprehensive advice
to ministers based on this foresight and horizon scanning, as
the basis for strategy and comprehensive cross-departmental financial
planning. This capacity should inform spending reviews and decisions
about financial priorities. It must be capable of formulating
and overseeing the implementation of cross-government financial
plans. The Government should set out how leadership of this work
will be shared by the Chief Executive of the Civil Service and
the Treasury, under the overall direction of the Cabinet Secretary
and Head of the Civil Service, who should have overall responsibility
for cross-departmental risk and radical uncertainty, so that this
work is integrated. It should be presented in the form of advice
to Cabinet, its committees and individual Ministers to inform
decisions about spending and policy.
125. In order to demonstrate that the Treasury
is fully prepared for another financial crisis as a consequence
of the systemic risk arising from the interconnectedness of wider
risks and uncertainties, the Treasury should:
· Plan
for a range of different crisis scenarios, based on a broad range
of forecasts, data sources and assumptions, and which may be triggered
by non-financial as well as financial events;
· Conduct
desk-top simulated exercises ("war games") involving
the Bank of England, and the Financial Conduct Authority, to test
institutional responses and systemic resilience. This should inform
a wider programme of cross-government exercises to test policy
resilience (financial, economic, political and strategic); and
· Ensure
that lessons learned from the above are synthesised into policy
making and spending decisions, not just to ensure financial and
systemic resilience, but to counter the risk of 'secular stagnation'
in the economy, by seeking out and exploiting opportunities to
promote growth through innovation.
126. The Cabinet Office, working with HM Treasury,
should include systemic financial and economic risks in its National
Risk Register.
127. The Cabinet Office horizon scanning programme
team should be strengthened, to allow it to:
· promote
a stronger appetite in the Civil Service for the understanding
of risk, uncertainty and the longer term;
· continue
its efforts to encourage the use of systematic and imaginative
analysis of trends, risks and possibilities in the Civil Service
professions. In due course it should expand this work from targeting
just the policy profession to all the Civil Service professions;
· find
out what horizon scanning and foresight is going on across government
and in public bodies, and report annually on the coherence and
effectiveness of this work; and
· work
with departments to ensure named individuals are responsible for
the quality, quantity and application into policy of this work
in each government department.
We recommend that civil servants' career development
should include a period with the team in order that they understand
its role, and they are exposed to long-term thinking, fresh ideas
and challenge, and able to think about systemic risk, risk management,
uncertainty and future challenges. This would also provide the
team with some much needed extra capacity.
128. All Government strategic planning documents
must state how they are using the results of-not just conducting-horizon
scanning.
129. The Treasury's next spending review must
not be rushed, to allow time necessary for it to be based upon
cross governmental analysis and assessment and so to address the
cross-governmental impact. It should then be possible for the
spending review to reflect other cross-departmental strategy and
plans, such as the next Strategic Defence and Security Review
and for opportunities in areas such as infrastructure and technology.
130. All Select Committees should inquire at least
once per Parliament into government actions to analyse trends,
risks and future challenges and opportunities relevant to their
remit. We also recommend that in the next Parliament, our successor
Committee should lead by example in this, and offer to take a
coordinating role in respect of the parallel work of other Select
Committees.
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