FD Interview: Feeling the benefit

1 Apr 11
As the government embarks on radical reform of the welfare system, how is the Department for Work and Pensions' finance director coping with the changes? Hunada Nouss tells PF about bringing Whitehall's finance function up to scratch
By Mike Thatcher

1 April 2011

As the government embarks on radical reform of the welfare system, how is the Department for Work and Pensions’ finance director coping with the changes? Hunada Nouss tells PF about bringing Whitehall’s finance function up to scratch

Whitehall’s accountants have not been getting a good press in recent years. ­Criticism of central government’s ­financial management – from Departmental Capability Reviews, the National Audit Office and the Public Accounts Committee – has been relentless.

There has been some improvement. For instance, all central government finance directors are now professionally qualified. But with government departments expected to lead from the front in the austerity drive, the pressure on the finance function has been stepped up.

Coincidentally, on the day of my interview with Hunada Nouss, finance director general at the Department for Work & Pensions, the NAO has published its latest attack. Apparently good financial management is still not embedded in civil service culture and the deficit reduction programme could be at risk as a result. So what does Nouss think about this assessment?

 ‘I would say the NAO report takes a snapshot that is somewhat out of date already,’ she tells me. ‘Have we got it sussed? Not totally. But are we on the road to really understanding where our major risks lie and how we manage them? I think we are.’

Nouss is in a good position to comment. She has worked in both the private sector – as an accountant at Arthur Andersen and as finance director for Diageo and Burger King – and, more recently, in the public sector at the Department for Communities & Local Government and now at the DWP.

Her current responsibilities include the management of 1,500 staff, the financial control of benefit payments totalling £150bn a year and a departmental budget of £8bn. As well as her core finance roles, she’s in charge of planning, procurement, estates provision and risk and assurance – all at a time when the DWP is embarking on a radical and controversial reform of the welfare system.

Nouss suggests that significant progress has been made across Whitehall as the finance function has embraced a more professional approach. The DWP has been ahead of the curve, partly because it has a strong operational background – bringing together a ‘doing’ department with two high-profile agencies: ­Jobcentre Plus and the Pension, ­Disability and Carers Service.

‘The culture is changing,’ Nouss asserts. ‘Many years of talking about it and bringing new people in have gradually made a difference. I also think the tightening fiscal climate has actually made it much easier for us as finance professionals to make our case. I say to my team “our time has come”.’

Of course, some of them might not see it quite that way. Whitehall is seeking to reduce the costs of its corporate functions, including finance, by 40% over the period of the Comprehensive Spending Review, and the DWP will be no exception. Nouss expects more than 20% but fewer than 40% of finance staff will leave during this time, although she hopes this will not involve compulsory redundancies.

She accepts that it might be difficult for finance staff to focus on the intricacies of the planned new universal benefit if they are worried about their jobs. ‘Managing that personal challenge is hard,’ she says. ‘For those of us who have been in the ­private sector, we have gone through cycles and worries about losing our jobs twice, three times, four times in our career. I think in the public sector that really hasn’t been a reality.’

Nouss believes that finance staff will have to be multi-skilled to provide flexibility within the department. She doesn’t see this as a return to the oft-criticised ‘gifted amateur’ culture of the past – but as a means to do more for less. The private sector’s approach is a model in this respect, she suggests.

 ‘A skilled person in the private sector will start with some basic accounting skills, go into financial analysis, go into business partnering and will build a portfolio of skills in that finance arena. What I want to do is more of that with my team, so they can provide support on various fronts.’

And there are a lot of fronts to support as the Welfare Reform Bill makes its way through Parliament. According to Work and Pensions Secretary Iain Duncan Smith, the changes represent the ‘biggest reform of welfare since 1945’.

A new Universal Credit will be phased in from 2013, bringing together Housing Benefit, Income Support, Incapacity Benefit and dozens of other welfare payments. The Bill will also reduce the maximum Housing Benefit available, implement a cap for total benefits and replace Disability Living Allowance with a new system.

Not only is this a once-in-a-generation reform of welfare, it will also require substantial reform of the DWP and how it does business – and it will take place in a frightening financial environment. The DWP receives two sources of income: its Departmental Expenditure Limit and its Annually Managed Expenditure ­(basically the welfare bill).

The baseline departmental budget was cut by 26% in the CSR. However, extra funding was provided to handle the reform process, which means the ­department actually had a 2% real increase in its DEL over the four years of the Comprehensive Spending Review. On the other hand, AME is expected to fall by around £3bn (2%) in real terms over the same period.

The distinction between DEL and AME is important and will cause further headaches for finance staff in the DWP and across Whitehall. Over the past decade or so, AME has been managed by the Treasury, but Chancellor George Osborne has said this will have to change, with individual departments taking over responsibility.

 ‘As we move AME management into departments, we have to agree some rules of engagement,’ Nouss suggests. ‘It’s clear that there are some impacts that we cannot control, such as unemployment, inflation and demographic change. We have to work out a formula, a set of rules.’

Such changes cannot happen overnight but there is pressure from the Treasury to enter into some form of shadow arrangements as soon as possible. Nouss believes that this will be introduced during the 2011/12 financial year.

All in all, there’s a huge task ahead. But Nouss relishes the challenge. She is effusive about Duncan Smith as ­secretary of state – a ‘thoughtful and humble ­gentleman’ – and keen to get on with the job.

‘I love what I do and I couldn’t have anticipated how energising it is to be in the centre of government. I’m a taxpayer too and I care passionately that we don’t waste money and we do things that make sense. I have a big job at the DWP for a while yet.’

Curriculum Vitae

Finance Director general, Department for Work and Pensions

Director general, finance and corporate services, Department for Communities and Local Government

Finance director, Burger King UK

Various finance director roles at Lowe Diego Plc

Director of finance and treasury, the Lowe Group Plc

Arthur Andersen

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