As next year’s spending review will be done under the most ‘challenging’ circumstances for years, the department – the most powerful in Whitehall – must tackle its “recurrent failings”, the Institute for Government said in a report out today.
The think-tank also said that the Treasury’s spending plans were “not credible”, suggesting the department relied too much on “flattering accounting adjustments” – effectively ‘putting it on the credit card’ – and “optimism bias”, such as understating the likely costs and timescales of projects.
The IfG quoted a public service leader in The 2019 Spending Review report, saying: “[The Treasury] reaches a view without engaging outside government, above all with leaders at the sharp end of public service delivery.
“Not only does this mean its view lacks grasp of the real world, it also insulates itself too much from politics.”
The report authors wrote: “The Treasury’s staff are widely characterised as bright, hard-working problem-solvers, but they also lack experience and key skills.”
It also noted there was a high turnover of staff, which “means spending teams tend to lack deep insight into public services and projects, and lack the contacts who would help inform them.”
The IfG researches added: “Departmental spending plans are not reliable.
“There is a tendency towards optimism bias, too little focus on risk, and there are incentives to shunt costs between programmes. There is now an unfortunate history of using accounting devices to flatter the numbers.”
The report noted: “The spending review team in the Treasury, civil servants in the big spending departments and ministers all want to believe the best possible picture”.
The IfG warned there was not enough independent scrutiny or validation of Treasury spending plans.
The report added that the Treasury failed to communicate with public services and the people beyond Whitehall.
“It should aim to draw in the insight and ideas of public service leaders and others with relevant expertise and promote understanding of the challenges it is trying to solve and the approach it proposes,” it said.
The difficulties the Treasury will face in producing the spending review next year are created by a variety of circumstances, the think-tank explained.
These included the government not having a majority, Brexit – which is throwing a “fog of uncertainty” over the timetable of the public spending statement - and the on-going effects of austerity. There is also a growing gap between the public’s expectations and public services’ resources to provide these, the researchers added.
The think-tank called for the Treasury to “end confusion” and explain whether austerity is over or not and make clear its aims for the performance of health, education and other key public services.
It also said it needed to clarify if the review was for three years or whether Brexit – timetabled to happen in March next year – will make that impossible.
The IfG spoke to 60 people, including politicians and senior officials, in interviews and at a private round table in June 2018 as part of its research.
A spokesperson for the Treasury said: “The Treasury is consistently recognised by international organisations for its record on spending control and fiscal transparency.
“We will be looking to build on this strong reputation at the next spending review in 2019.”
