Conclusions and recommendations
Introduction
1. Change
is a constant challenge. Governments cannot foresee all the changes
and unexpected shocks that will come, so flexibility, resilience
and imagination are essential. Plans must be adjusted in response
to political and other developments, rather than fixed upon. The
UK must have the capacity to take advantage of trends and shocks,
so the Government must see them as opportunities, not just threats.
(Paragraph 22)
2. There are good
examples of successful cross-government working, including the
National Security Council in respect of crisis management, and
counter-terrorism policy and planning. We also commend the Government
for its intentions in introducing the Better Care Fund, which
aims to improve integration between NHS services and social care
services, addressing the pressure on the NHS caused by local government
spending reductions. (Paragraph 23)
3. These examples
of far-sighted policy making demonstrate what is possible. The
evidence, however, is that these are the exception. Officials
strive to work together but tend to stay within their department
boundaries. The UK Government could learn from the Scottish Government,
for example, which has restructured so that policy is coordinated
across the administration as a whole. We reiterate our conclusion
in "Strategic thinking in Government" that the Cabinet
Office must be given the means and the influence to act as an
effective headquarters of Government or the failure of cross-departmental
working will continue to create wasteful conflict. We commend
the Cabinet Secretary and Treasury Permanent Secretary for their
determination to improve this and we will keep the matter under
review.
(Paragraph 24)
Known trends and drivers
4. The
use of jargon in advice to ministers can obscure meaning, hide
inaction and invite ridicule. Terms must be well understood for
Government to be able to conduct coherent analysis and for officials
to act accordingly. Jargon must not be used to lend a false legitimacy
to otherwise ill-thought through ideas, concepts and policies.
(Paragraph 45)
5. Whitehall lacks
discipline about how to think about ends, ways and means in part
because people use different terms in different contexts. For
example, for the Ministry of Defence, strategy is how you achieve
policy aims. For many in the rest of Government, the reverse is
true: they understand policy to be how you achieve strategy. In
our review, strategy includes both: it is about how you choose
your long-term objectives, and how you assess the ways and means
of achieving them. Both require longer-term thinking. (Paragraph
46)
6. Without a coherent
understanding in the Civil Service of the trends and drivers of
change, the Government will fail to develop associated opportunities,
which depend on developing skills, educational opportunities,
and investment in the UK's science and industrial base. This is
the most effective way to improve productivity and innovation.
(Paragraph 47)
7. The Civil Service
usually responds brilliantly to fast onset, short duration crises,
with clear responsibility taken by a lead government department.
This capability is tried and tested, both through exercises and
real events. Market-wide exercises have been conducted to test
resilience, but not on a comprehensive basis to address the risk
of systemic financial collapse triggered by an unexpected event.
Yet there is seldom an emergency that one government department
can handle entirely on its own. (Paragraph 48)
Current Government capacity
8. There
is an impressive array of high quality long-term thinking and
horizon scanning across Government. The Civil Contingencies Secretariat
and Met Office provide an excellent public sector capability.
We welcome the Parliamentary Office for Science and Technology's
work in this area, prompted by our previous recommendation. We
also welcome the establishment of the Cabinet Office's horizon
scanning programme team and its aim to coordinate work between
departments. However, this central resource is much too small.
It needs the capacity and the authority to address gaps and duplications
and to coordinate a comprehensive and coherent analysis of the
risks and challenges facing the whole of Government. (Paragraph
90)
9. We commend the
development of the National Risk Register. It is a vital tool
to enable and encourage thinking about better management of short
and long term risks. Together with Whole of Government Accounts,
which provides a deeper understanding of long term actual and
potential financial liabilities, they set down the context which
decision makers must consider. The challenge is to ensure that
this information is used in advice to ministers, and not ignored.
(Paragraph 91)
10. The Development,
Concepts and Doctrine Centre is generating world class horizon
scanning which embraces the whole of Government. Though its work
is used across Whitehall it is not even acknowledged by the Cabinet
Office in their written evidence. This shows that horizon scanning
is still regarded as ancillary rather than central to the business
of Government, and requires wider awareness of horizon scanning
and changes in attitude. (Paragraph 92)
11. Long-term thinking
and the consideration of emerging trends need to be the driving
force behind financial management and far more coordinated with
public investment decisions. At present, horizon scanning has
little impact on financial planning, though we commend the desire
of the Cabinet Secretary, the Treasury Permanent Secretary and
the Civil Service Chief Executive to address this problem. (Paragraph
93)
12. Comprehensive
Spending Reviews reflect the Treasury's legitimate preoccupation
with setting spending limits department by department. But there
is insufficient understanding of the cross-departmental effects
of investment decisions, and a lack of capacity to create genuinely
cross-government financial plans. The comment made by John Manzoni,
Civil Service Chief Executive, that "normally, in the headquarters
of a company, […] parts of the Treasury and Cabinet Office
[…] would be in one headquarters [… which] makes it
slightly more complex", shows that the present structure
does not serve the interests of financial planning and management.
Other governments including the federal governments of Canada
and the United States have a single body to conduct financial
planning. Some, like the think tank GovernUp, have recommended
that functions from the Treasury and Cabinet Office should be
combined in a new Office of Budget and Management. The present
divide between the Treasury and Cabinet Office is a structural
impediment to effective financial planning and management. (Paragraph
94)
Known and unknown risks
13. A
core role of the Civil Service is to look beyond single Parliaments
to the long-term. Its leadership must look beyond managing and
controlling risks we already understand to systemic risks and
uncertainty. The Civil Service value of impartiality implies a
responsibility to provide advice about the longer term. Civil
servants should not block or subvert ministerial decisions, but
they should ensure their advice reflects a frank and honest assessment
of the impact of ministers' decisions on the long-term aims of
Government. (Paragraph 118)
14. The Treasury acknowledges
'massive risks like banks collapsing' but has not absorbed the
key lesson of the 2007-08 financial crash on the interconnectedness
of financial uncertainty with wider uncertainty. This leaves the
UK exposed to the risk of another adverse event on the same scale
as the 2007-08 financial crash. Financial and economic risks are
ever present but not included in the National Risk Register. The
Treasury does not therefore consider financial risks alongside
other, non-financial risks, such as pandemic flu. The division
of responsibilities has changed but the Treasury retains its overall
accountability for financial crises. (Paragraph 119)
15. Resilience depends
on informed challenge and putting in place sufficient resources
to provide a buffer of redundant capacity. This is harder to justify
at times of austerity but it is all the more essential to plan
carefully if cuts are being made. Independent advice is key given
that group-think contributed to the financial crisis: 'challenge'
is not about contesting the authority of ministers, it is robust
information and advice to help ministers make their decisions.
There is not enough challenge to Government horizon scanning,
either from external views or from nurturing dissenting voices
within the Civil Service. (Paragraph 120)
Recommendations
16. 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 individuals Ministers to inform
decisions about spending and policy.
(Paragraph 124)
17. 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.
(Paragraph 125)
18. The
Cabinet Office, working with HM Treasury, should include systemic
financial and economic risks in its National Risk Register. (Paragraph
126)
19. 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. (Paragraph 127)
20. All
Government strategic planning documents must state how they are
using the results of-not just conducting-horizon scanning. (Paragraph
128)
21. 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. (Paragraph 129)
22. 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. (Paragraph 130)
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