Greater transparency and scrutiny need to be introduced to the public spending process if faith in good governance is to be repaired
It’s well known that the British public has lost faith in many of the institutions it once respected. Attitudes towards elites have hardened, not least government and people no longer trust in its capacity to be a responsible steward of the public purse. Reducing the deficit will be necessary for government to regain this trust. But wholesale reform of the public spending process is needed too.
For the past year I have considered these questions as chair of the Fabian Society’s Commission on Future Spending Choices. Its final report, which is released today, recommends a radical package of measures aimed at opening spending to greater levels of scrutiny and transparency, forcing decision makers to think long term, and linking spending decisions to the tracking of performance and outcomes.
The commission was established to look at the spending choices open to a government after the next election. But we concluded that it is not just the substance of the choices that matter, but the manner in which they are made and how budgeting sits alongside better scrutiny and leadership in the public sector.
There will be little room to increase expenditure in the next parliament and so government needs a keen sense of the priorities it wishes to deliver on and the trade-offs it will encounter. Rather than manage these on an ad hoc basis we want government to act in accordance with a clear set of principles for public spending. By providing ‘tests’ for spending decisions the principles would help impose coherence on thinking about tough fiscal choices and would force government to be very clear about what matters most.
To really enhance transparency and accountability however, we think a more significant departure from the status quo is needed. Government should begin publishing spending plans in draft format and give parliament, policy experts and the media the opportunity to comment on the evidence informing decisions. A more deliberative approach of this kind would also help to bring the public into the rationale behind the government’s spending choices. This would be a significant departure from today’s almost non-existent scrutiny in which decisions announced at the budget and spending review are already cast in stone.
But transparency and accountability will mean little if planning remains hamstrung by the chronic short-termism which characterises the spending process today. To embed long-termism into the system government should also publish a ‘long-term expenditure statement’ showing its intention for the evolution of spending over decades. This innovation would encourage government to be open about its aspiration for the shape of the state over the next 20 years. It would also help forced ministers to show how individual decisions today contributed to this long-term vision.
A more long-termist government mind-set should go hand in hand with an increase in the level of resources dedicated to early action. Approaches based on prevention can reduce liabilities in the future and deliver better results for service users today. But the disincentives within institutions for budget holders to think cross-departmentally militates against this wisdom.
In order to make prevention and early action a reality we endorse the Early Action Taskforce’s proposal for a Ten Year Test. This would require budget holders to investigate and make public the economic and social impact of decisions over the next decade so that decisions aimed at reducing future demand for services are not stopped by short-term political calculation.
Given the difficulty that proponents of early action have experienced it may be necessary to go further however. If there is insufficient progress government could mandate budget holders to increase early action spending, by top-slicing a fixed proportion of every budget.
Finally, we think there is a strong case for new institutional support to increase the visibility of government efforts to secure value for money and enhance the performance of public expenditure. In addition to a new remit for the Office for Budget Responsibility reporting to Parliament, and a Budgetary Committee designed to complement the Treasury and Public Accounts Committees, we propose the creation of an Office for Public Performance. The remit of the OPP would be to champion excellence in achieving performance and value for money, driving productivity improvements and supporting innovation. As an independent body reporting to government it would help identify the reason for weak or coasting performance and maintain an equal focus on what spending decisions are intended to achieve and what they cost.
These institutional proposals will not remove the need for fiscal discipline in the next parliament, and tough choices will remain. However, we think that with a long-termist, open and transparent spending process, government can ensure that difficult decisions in this period are not poorly made.
Lord McFall of Alcluith is chair of the Fabian Society Commission on Future Spending Choices. 2030 Vision: the final report of the Fabian Society Commission on Future Spending Choices is published today – read the full report here.
