Devolution is continuing apace across Wales, Scotland and Northern Ireland. But it’s important to take the opportunity that greater autonomy will bring to reinvigorate our approaches to financial management
The Prime Minister’s recent response to the Silk Commission to give Wales greater autonomy and revenue/borrowing powers is welcome. It gives confidence to the devolved administration that it will gain more influence over the levers of economic renewal and public service provision.
The assemblies in Wales and Northern Ireland and the Parliament in Scotland are relatively new; but already, as with the mayoralty in London, Tony Blair’s constitutional reforms have stuck. Meanwhile, polls and more general sentiment indicate that voters would make the same choices again.
Of course, devolution was designed in part to assuage the yen for independence, so we will see how far it has succeeded with the outcome of the Scottish referendum in September 2014.
However, whilst tax-raising powers may be welcome, this does not mean they can be used. If the electorate in Wales affirm tax-raising powers in a future referendum to bolster autonomy, that is not to say they will automatically support higher direct taxation.
Devolved administrations have differentiated themselves from Westminster in the policy choices they make, committing to some services free at the point of delivery such as NHS prescriptions and university tuition fees. Before voting for higher taxes then, will their electorates not expect greater efficiencies or means-testing?
In a constructive sense these are the tensions that reform can bring.
The Welsh administration expects greater efficiency via the Williams review of public services. It is thought that the number of unitary councils will reduce from 22 to 11, and public service reform will drive toward issues such as social care and health integration.
Councils acknowledge that so far they have not had to bear the savings of their English counterparts, but now higher savings are coming through, they are concerned that the freedoms introduced over the border by Communities Secretary Eric Pickles will not be granted.
They fear the worst of both worlds; whilst there is presently not universal confidence that local government or health bodies will deliver reform. We certainly hope that as part of the Williams review, CIPFA’s five-point blueprint for public service reform in Wales is adopted.
This will enable us to discuss the best model of reform and how it could work, because ultimately the outcomes on Silk and Williams present a great opportunity for consensus to be achieved and better public services delivered. CIPFA’s blueprint offers the opportunity for a uniquely Welsh solution because public service reform, not dominated by academies, trust schools or clinical commissioning groups, is unique, as indeed it should be for devolution to be meaningful.
In Scotland the question of independence dominates and, whatever the result, the important thing now is for the big question to be settled so that pressing issues can be assessed through other prisms. For example, CIPFA has argued for a separate balance sheet for Scotland, something currently missing in the whole of government accounts. Powers exist for this to happen.
Paradoxically, despite this need for transparency in the debate, it is hard to discuss this at present, because whether assets are greater than liabilities or vice versa (remember public sector balance sheets do not make pretty reading when pension liabilities are taken into account) the debate would be inevitably skewed toward what it means in the light of independence, rather than just a good move toward transparency. Whatever the outcome, the country will have to brace itself for some big decisions on public spending.
But there is a referendum or two first that will determine the shape and scale of that!
What we are seeing in differentiation from Westminster are the practical consequences of devolution in action. But whatever constitutional settlements or policies are chosen, CIPFA believes that there are three key and common challenges for finance professionals:
- developing new skills in investment and alternative service vehicles; managing community or mutual-based models and measuring the costs and benefits of capital investment or, for example early intervention
- ensuring that finance underpins transformation in public service organisations; and
- delivering strong medium-term financial planning that goes beyond the reporting of accruals accounting and into sound and sustainable financial management decisions made with a three- to five-year horizon on revenue budgets.
If CIPFA has taken pride in the past in not just ‘training accountants’ but producing strategic leaders who work across all public bodies and the organisations around them, it is now clear that we must take the opportunity that greater devolution and autonomy will bring to reinvigorate approaches to financial management in our reconfigured public services.
This means that the public finance professionals of the future will need to be innovators as much as they are already stewards, business partners and the commissioners of beneficial outcomes for the people in our communities.
Good public financial management goes hand in hand with good governance. Spending decisions run at the heart of democracy, and accountability drives the right choices to be made. In Scotland all committees are led by the majority party, and, whilst in Wales this is proportionate, for both countries investing and building in greater scrutiny will be an important element of reform.
There will be a renewed focus on affordability and prioritisation in our devolved public services and CIPFA’s three common challenges for all devolved administrations together with our blueprint for Wales provide a firm foundation for the discussion of further efficiencies and public service reform.
Rob Whiteman is chief executive of CIPFA
