A report from the Public Administration Select Committee examined Whitehall’s capacity to address future challenges. It found that the department still had not absorbed a key lesson of the 2007/08 financial crash, in particular how best to prepare for a future financial crisis.
Most of the policymaking in Whitehall was ‘short-termist, reactive and uncoordinated’, the MPs found.
The Leadership for the long term report said the Treasury should base its planning on a broad range of forecasts, data sources and assumptions, which may be triggered by non-financial as well as financial events.
There is not a comprehensive understanding across government of the future risk and challenges facing the UK, it concluded.
The PASC called for the Cabinet Office to include systemic financial and economic risks in its National Risk Register and ensure that lessons learned from this are factored into policymaking and spending decisions.
PASC chair Bernard Jenkin acknowledged that the Treasury had done a lot, but said there was more to be done to be ready for another financial crisis.
‘We still have institutions which are “too big to fail” but with so much national borrowing capacity used up, they may prove “too big to save” if it happens again. We did not find evidence that government and the City are actively practising and exercising for this worst case scenario. We found this lacking in other areas too,’ Jenkin said.
‘The failure to act quickly on the developing Ebola epidemic in West Africa cost thousands of lives and billions in aid. This failure was by no means unique to the UK but the chief medical officer and the Joint Intelligence Committee combined their understanding too late for timely action.’
He added that the committee found there had been a lot of assessment and planning for the future ‘but we need to be better coordinated, systematic and imaginative analysis of trends risks and possibilities across the whole government’.
This would help the government strengthen decisions on long-term issues such as low productivity, infrastructure, technology, financial regulation, defence and security.
‘Whitehall has developed a lot of useful capacity for assessing risks, building resilience and looking for long-term opportunities, but so much more could be achieved by understanding how to bring this together. This will mean we can deal with unforeseen adverse events more effectively, but also increase the UK’s capability to exploit opportunities and innovation, which is necessary for us to remain competitive and viable,’ Jenkin added.
But the Treasury disputed the committee’s conclusions. A spokesman said: ‘It is unfortunate that the Public Administration Select Committee’s report takes no account of the relevant facts. By focusing on Whitehall procedures they have entirely missed the point: the lessons of the financial crisis have been learned and acted upon by putting in place a reformed regulatory system, ring fencing the banks, ending the “too big to fail” problem, and dealing with the risks posed to the economy by an unsustainable deficit.’
CIPFA chief executive Rob Whiteman said it was ‘worrying’ that the report found that there was neither the right methodology nor information available to facilitate an improved approach to financial management within government.
‘CIPFA believes that a holistic approach that takes in all available information and joins up the dots of public spending is the most effective way of managing public finances and evaluating how public services could align productively and save precious resources’, Whiteman said.
‘We would also urge the greater and more effective use of Whole of Government Accounts to allow the Treasury to determine long-term affordability of policy and practice and ensure transparency about the true fiscal position of the UK.’
