Improving Government planning and spending Contents

Conclusions and recommendations

1.We are concerned that the Treasury and the Cabinet Office lack the skills and experience they need to challenge over-optimism and ensure departments make realistic plans. Given the instrumental role they play in advising ministers, stewarding submissions for new spending and challenging the realism of departments’ plans, Treasury spending teams need to be highly-skilled and effective, as well as having very specific expertise to particular departments. The Treasury is, by its own admission, a ‘young department’ with high staff turnover. Only 17% of finance and business planning staff in government departments consider that their spending team in the Treasury has good operational experience. SDPs have improved, but they are still not central to departments’ decision-making and do not all reflect real prioritisation, if indeed there has been any. As a result, we see poor forecasting, planning and understanding of the long term. The Cabinet Office reports that it is helping departments to plan better, for example by getting departments to self-assess their planning maturity. To better inform ministerial decisions the Cabinet Office and the Treasury say that they are building functional capability and experience back into the civil service, but it will take time. It is vital that the right skills and experience are in place to achieve a culture of challenging objectives, plans and progress.

Recommendation: By June 2019, the Treasury and the Cabinet Office should write to us with its action plan to fill the gaps in skills, experience and behaviours needed across the Treasury, Cabinet Office, functions and departments. Specifically for Treasury spending teams, this action plan should identify strategies to:

2.The Treasury and the Cabinet Office’s overall approach to planning and spending can encourage short-term decisions rather than long-term sustainability, which risks value for money. Controlling costs has been a strength of the current system for some years. Yet, despite the Treasury’s view that multi-year budgets aid long-term planning, the pressure on departments to meet annual budgets and uncertainty around future funding ultimately drives short-term decisions, like cash injections, which in turn impact on longer-term value for money. For example, the NHS has used capital funding to plug funding gaps for day-to-day activities. Mental health services for children and young people lack a sustainable model which would save money in the long run and deliver better outcomes. The government has begun to focus on the long-term through: 10-year plans for the NHS, defence, infrastructure and capital spending; its analysis of the government’s balance sheet; and the Office for Budget Responsibility whose economic forecasts run to 2060. The Treasury updated the ‘Green Book’- its guide to appraisal of policies, projects and programmes - in 2018 to include a broader consideration of costs and benefits, including the environmental impact of different options. However, too often Government and Ministers opt simply to relaunch already-established schemes aimed to tackle long-term issues, making it difficult to mark out the short- and long-term planning needed to address these systemic issues. SDPs are intended to be long-term plans which are updated annually to reflect changes in circumstance and both the Cabinet Office and the Treasury say they expect them to be central to decision-making in Spending Review 2019.

Recommendation: When issuing guidance for the next spending review and future SDPs, the Treasury and the Cabinet Office should require departments to show how their plans and funding bids deliver long-term, sustainable value for money. They should report back to the Committee on this, demonstrating how they ensured SDPs were central to spending review decision-making for each department.

3.We are frustrated that the Treasury and the Cabinet Office’s lack of action to prevent departments working in silos has, in some cases, led to cost-shunting and poorer services for the public. There are many policies and services which cross departmental boundaries, such as increasing housing, and effective delivery requires departments to co-ordinate their work – and the government must have the structures to support this. When departments do not have shared objectives and funding, then government ends up with conflicting or duplicated objectives and multiple funding pots. This can lead to one department making decisions that increase costs to another part of government, often local service providers, an issue that the Treasury say its ‘Public Value’ work has also recognised. We are disappointed that government has not made more progress in tackling this long-standing problem, which this Committee has continued to raise. In the 2015 Spending Review, the Treasury received only two bids for joint funding. Around one-third of finance and business planning staff in government departments do not believe that the centre of government incentivised joint working. For the 2019 Spending Review, the Treasury told us that joint working would be a key focus, but it did not explain how it will encourage joint bids from departments. The Treasury told us that, in some areas it is highlighting duplication between departments through its examination of where costs fall across the system. As the Local Government Association highlights, the 2019 Spending Review will be a critical and revealing test of effective cross-government working.

Recommendation: In advance of the 2019 Spending Review, the Treasury and the Cabinet Office should write to us to explain what they will do to incentivise joint departmental plans and delivery, clearly stating how this is different from their previous approach. Given the importance of SDPs to the 2019 Spending Review and the commitment to joined-up working, the Cabinet Office should share SDPs across departments.

4.We are concerned that, unless management of planning and spending are brought together more effectively, the next spending review will not fully address the problems surrounding the financial sustainability of the public sector. The previous Committee recommended in 2016 that the Treasury and the Cabinet Office should work together to set out a vision of how the overall approach to planning and spending will ensure value for money in time for the next spending review. We are pleased to hear that SDPs are intended to be a key input to Spending Review 2019 but we are concerned about the lack of alignment between the objectives and plans set out in SDPs and departments’ actual capacity and capability to deliver. The Treasury accepts that lack of realism and prioritisation remain big issues and recognises that, in the last spending review, departments promised efficiencies that did not come to pass. We also have serious and ongoing concerns about the impact of central government decisions on the financial sustainability of local services. Planning and spending remain firmly separate and, therefore, individual departments do not have the incentive to understand the cumulative impact that funding decisions have on local government. Our work has shown that government had to introduce a range of additional short-term funding measures to support the local government sector, starting in the first year after the last spending review, and still lacks a long-term funding plan for local authorities.

Recommendation: In advance of the next spending review, the Treasury and the Cabinet Office should write to us to explain how they will work together, along with functions and departments, to better challenge the realism of departments’ plans and the wider effect on sustainable public services.

5.Despite our previous recommendation, the Cabinet Office has failed to ensure that public SDPs provide Parliament and the public with the information they need to hold departments to account. We firmly believe that transparency helps to drive improvement and strengthen accountability. But the short-form single departmental plans that are made public are too high-level to enable Parliament and taxpayers to see what departments are achieving for the money. Although the Cabinet Office says that the public plans are getting better, from our review of a sample they are not very helpful. For example, departments’ stated objectives are just broad aspirations, not hard goals, and there is no reference to priorities being dropped or changed from year-to-year. These things may be evident in each department’s internal single departmental plan, but these are not made public. The Cabinet Office considers that it would be counter-productive to make the full plans public, but, as it stands, there is far too little information available to enable us or the public to hold departments properly to account.

Recommendation: To help taxpayers see what they are getting for their money, the Cabinet Office should ensure that the public single departmental plans for 2019–20 include, for each objective: how departments will deliver it; with what money and people; and how success will be measured, by when.

6.It remains to be seen whether the Treasury’s latest initiative to improve value for money will lead to long-term change. There is increasing focus on the value created when public money is translated into outputs and outcomes which improve people’s lives and economic wellbeing. In 2017, in a report commissioned by the Treasury, Sir Michael Barber recommended a ‘Public Value’ framework to improve policy outcomes for citizens and measure the likelihood that public spending will produce results that improve people’s lives. Since spring 2018, the Treasury has been developing and piloting the framework. It has completed some pilots and others are underway. Findings from the pilots will inform the 2019 Spending Review. But we note that other similar initiatives such as ‘value maps’ have not lasted.

Recommendation: By June 2019, the Treasury should write to us to explain how and when it will develop the public value framework and embed it in day-to-day decision making. It should include specifics on which departments or areas of public spending it will prioritise and we are particularly interested to hear about plans for areas covered by the Ministry of Housing, Communities and Local Government and the Department of Health & Social Care.

Published: 8 February 2019