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The Treasury's other Browne, by Joseph McHugh

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04 November 2005

Chief Secretary to the Treasury Des Browne has the unenviable task of matching public expenditure to delivery. In his first major interview, he tells Joseph McHugh how he is tackling the brief

Des Browne leans forward in his chair and confides: 'I'm not a great guy for carrying around lots of figures in my head, I rely on people to know where they are.' But the modesty of the chief secretary to the Treasury belies the fact that, as the minister with overarching responsibility for public expenditure and service delivery, his brief is recognised as one of the most complex in government.

And on Browne's watch it has got even more complex. Within two months of accepting his first Cabinet post, in the aftermath of Labour's historic third election victory, the disarmingly unstuffy MP for Kilmarnock and Loudoun found himself at the helm of a new Comprehensive Spending Review.

As a result, figures – whether memorised or neatly catalogued in Browne's elegant and spacious quarters at the Treasury's offices in Whitehall – will feature prominently in the former Ayrshire advocate's working life from now on. But Browne's experience as immigration minister, before taking over this brief from Paul Boateng, means he is no stranger to a challenge.

The CSR is the first to be conducted since the one that followed Labour's sweep to power in 1997, and work is already getting under way. Its conclusions, which will determine every Whitehall department's budget allocation from 2008 to 2011, will be revealed in the summer of 2007.

Predictably, the announcement by Browne in a parliamentary statement in July, provoked feverish speculation that the 2007 CSR would mark the moment when Chancellor Gordon Brown finally gets the keys to Number 10 from Tony Blair.

The 53-year-old chief secretary, however, gives a more prosaic explanation. He says that by 2007 Labour will have been in government for a decade and the anniversary is an opportunity to take stock.

'[We decided] it was time to see what the investment and the reforms we put in place had achieved. We also took the view that it was time to recognise there were future challenges to be met,' he explains.

'The Spending Review, when it reports, will give us a platform to look at the next ten years of spending.'

Fair enough. But when the prime minister announced in his speech to the Labour Party conference in September that his government would conduct a 'fundamental savings review of department spending', to be published next summer, there was a widespread confusion over what exactly he meant. He told delegates the review would consider: 'Where we can save, where we need to spend more, how we keep investment flowing in to our priorities but keep our tax system competitive for our economy.'

It caught many people, including members of his own government, by surprise, since it was unclear whether this was happening under the banner of the CSR or as a stand-alone exercise. Certainly, Blair's outline indicated it would be a far more detailed and strategic affair than anyone had anticipated.

But Browne confirms that this review will take place under the aegis of the CSR and its conclusions will underpin the outcome.

All Whitehall ministries will have to conduct a root-and-branch review of their spending, reassessing their existing priorities and examining the scope for further savings, on a 'zero-sum' basis.

He estimates that the exercise will be completed and its conclusions published next June. These findings, together with those from the other as yet unspecified strands of the work programme, will then form the basis of the Treasury's negotiations over funding with the spending departments.

The four public spending-related reviews being conducted for the government – Lord Adair Turner's Pensions Commission; Sir Michael Lyons' local government inquiry; Sir Rod Eddington's transport review; and Sandy Leitch's assessment of the UK's future skills needs – will also be fed in. As before, spending ministries will have to sign up to Public Service Agreements in return for their funding allocations.

The intention, Browne says, is to get to grips with the big challenges facing the country over the next decade – an ageing population, economic competition from globalisation, increasing pressure on natural resources, and international security threats.

Nevertheless, it is clear the savings and spending assessment will be at the heart of the 2007 CSR settlement. Browne insists that nothing is off limits and every pound will have to be justified.

'Clearly, if we identify public spending where the department and we are of the view that this is no longer a priority, then we will no longer continue with that particular area of public spending,' he asserts. 'The adjective “comprehensive” suggests that it will be a comprehensive piece of work, and whatever it throws up we will look at.'

He also leaves the door ajar on the possibility of a restructure of Whitehall departments, all the while being careful to stipulate that he is 'in no way anticipating the outcome' of the review.

The inspiration for this latest exercise is clear. Sir Peter Gershon's efficiency review was the cornerstone of the 2005/2008 Spending Review and stipulated £21.5bn in annual savings by the end of that period. Its appeal is not difficult to see – freeing up billions of pounds spent on bureaucracy to reinvest in frontline services is a no-brainer in political terms.

Browne indicates that the government would like public bodies to go much further in joining up their back-office functions than the relatively small steps taken so far.

'We are very aware that there are savings to be made in back-office functions by bringing together common services, not just across government departments but on a regional basis, bringing them together for other public service organisations.'

He lauds the progress on Gershon to date, but makes it clear that, while public bodies might be free to take account of local circumstances, the drive towards greater efficiency is not optional.

'We don't have in mind a prescriptive model, but we do have in mind the development of best practice and there will be an expectation that, as that best practice emerges, people will deploy it,' he says diplomatically.

As the prime minister's party conference speech highlighted, one of the fundamental objectives of the 2007 CSR is to establish efficiency as the bedrock of the next spending round.

Browne, too, vows that there will be no let-up in the drive to make substantial savings on government costs. 'Rest assured that, although the Gershon process is limited to the current spending round, we recognise that efficiency is something we will have to live with from now on,' he says.

'That is specifically why we will embark upon a stream of work for the CSR that is designed to identify where those efficiencies can be achieved.'

That recognition has been prompted in part by the financial constraints that Browne acknowledges now exist. The Organisation for Economic Co-operation and Development said in its latest report on the British economy, published last month, that growth this year would be 1.7% and tax rises would be needed for the chancellor to meet his fiscal rules. The respected think-tank's view mirrors that of a host of other independent economic forecasters.

Unsurprisingly, the government prefers its own, more optimistic, economic growth forecast. But Chancellor Gordon Brown admitted during a speech to the International Monetary Fund in September that he would use his Pre-Budget Report, due shortly, to downgrade that forecast from the 3%-3.5% outlined in his March Budget. Independent economists are expecting a revised forecast of 2%-2.5%, a figure that makes plain the extent of the UK economy's slowdown.

The chancellor's decision in July to redefine the current economic cycle as starting in 1997 instead of 1999, following relatively minor data revisions from the Office for National Statistics, reinforces the sense that the days of plenty are drawing to a close.

That move had the beneficial effect of giving Gordon Brown an extra £12bn of surpluses to include over the current cycle, and consequently a significant fillip to his chances of meeting his 'golden rule' (of meeting current spending from receipts).

Whatever the real motivation for that decision, Browne says a continuing focus on efficiency is necessary to allow for the continued spending on frontline public services that the electorate backed in the May general election.

'We got a mandate from the people to continue to invest quite significantly,' he states. 'The challenge in what we refer to as the tighter fiscal environment is to sustain that level of investment. To the extent that we want to deliver innovation [and] reprioritise within particular areas of public expenditure, then the delivery of efficiencies is exceedingly important.'

But Browne is keen to stress that he and his Cabinet colleagues are pursuing a carefully calibrated investment-for-a-purpose strategy, rather than an Old Labour-style spending spree.

'It's never been our intent as a government to inexorably increase public spending,' he explains.

'The objective was to catch up with the lack of investment in the past and we have significantly done that. The challenge now is to continue that level of investment and to ensure that we can increase the efficiency and delivery of public services.'

Browne adds thoughtfully: 'We need to refresh ourselves and reform ourselves in government and the 2007 CSR is part of that process.'

PFnov2005

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