Kerslake calls for Treasury financial management to be bolstered

13 Feb 17

Former civil service chief Lord Kerslake has called for the Treasury’s financial management capabilities to be strengthened to tackle what he called “professional economists trying to be amateur accountants” in government.

In a review of the ministry’s capability, commissioned by shadow chancellor John McDonnell, Kerslake concluded that the department’s financial and economic management responsibilities should continue to be kept together.

However the review, which was overseen by a panel of five other members including former Birmingham City Council chief executive Stephen Hughes and TUC general secretary Frances O’Grady, called for structural changes in order to improve macroeconomic policymaking. It called for a group structure to be formed to give the Treasury’s duties equal weight, with the financial management leadership being restated within a devolved framework that would make Whitehall departments “unambiguously” responsible for policy development.

“Effective financial control by the Treasury must not be seen as synonymous with policy agenda control,” the report stated.

A number of reforms to Whitehall financial management were made following a

Treasury-led 2013 review, which proposed a stronger spending control framework, management information and internal audit across Whitehall. It also saw the appointment of Julian Kelly as director general of public spending and finance in the Treasury after the review concluded that such an appointment would strengthen value for money across government.

The Kerslake review concluded that while these improvements were welcome, there was a need to go much further.

“If the Treasury is to truly be the ‘chief finance officer of government’ it must up its game and put its financial management capabilities on the same expert footing as economic management,” it stated.

“We need to move away from a Treasury made up of ‘professional economists trying to be amateur accountants’.”

Speaking to PF at the report’s launch event today, Kerslake – also a former permanent secretary at the Department for Communities and Local Government and a CIPFA member – acknowledged that aggregate public spending in government comes in on target, “so you might say what’s the problem”.

“But I think across the whole of Whitehall there is a wider issue about accounting skills and capabilities, and this is something that came through to us very strongly. The point we’re making is that leadership comes from the top really, and if the Treasury is going to carry both roles, it needs to have the accountancy and other capabilities that go with being the chief financial officer. I do think it is a crucial part of what has been a consistent critique.”

The review also called for responsibility for devolution to be moved from the Treasury to the Department for Business, Energy and Industrial Strategy as part of its work on long-term economic planning.

“This would free up the Treasury, which should concentrate its economic effort on its broad macroeconomic responsibilities in line with a revised and more precise operating mandate,” the report stated.

“This should include measures to improve the relative economic performance of different regions, including greater fiscal devolution.”

Kerslake also called for the Treasury to be sufficient resources to deal with the demands of Brexit.

He said that the credibility of the department had been damaged during the EU referendum campaign, including the so-called emergency Brexit Budget.

“It remains to be seen whether the forecasts of the Treasury were simply wrong or just wrong in the timing,” he said.

“We think there is work to be done to restore the Treasury’s credibility with the public, and we think this is crucially important in this next stage of the journey we are on.”

There was little evidence that the government had thought about the resourcing that will be needed to deliver Brexit while also allowing the Treasury to continue with its other responsibilities, he added.

The report said a policy of “equal austerity” across Whitehall departments was being imposed across government. While this was laudable in principle, it should not be pursued at the expense of basic departmental effectiveness.

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