07 December 2016

Today the Institute for Government and the Chartered Institute of Management Accountants (CIMA) published a short report, looking at the Government’s progress in improving financial management. Overall, significant progress has been made, in stark contrast to many cross-departmental reforms which fail to make any tangible difference. But there is also still a long way to go. HM Treasury and the Chancellor need to build on what has been achieved to date. Here Julian McCrae explains in more detail why this matters, what has happened and what the Treasury needs to do to maintain momentum.

Politics is often about the new and the shiny – a merry-go-round of announcements and pet projects. Whitehall is unavoidably attuned to this, with structures and people designed to operate at this pace.

However, this undoubted strength also produces an undoubted downside – anything that takes sustained investment, pursued over years, following well-understood but relatively dull practices, struggles for airtime.

One example of this is that Whitehall, like most centres of government, has historically found it difficult to build top-quality, professionalised capability in areas like finance, project management and human resources – ironically the very things that would be the lifeblood of organisations capable of turning bold claims in press releases into realities on the ground.

The Government’s 2013 Review of financial management in government (the FMR) was aimed at fundamentally changing this, and set out a plan to ensure financial skills are placed at the heart of decision making across Whitehall. The review recognised this was a long-term game, estimating these reforms would require 15 years of continuous investment.

Three years in, the Treasury invited us to look at how things have gone to date. Overall, the financial reforms have delivered significant progress in a relatively short period of time. They have created a stronger sense of community among finance leaders, established new processes for understanding spending within and across departments, improved professional development for finance staff and enhanced the coherence of financial information within departments and flowing to the centre of government.

Many Whitehall initiatives fail to get this far. Building on our previous work on cross-departmental reform, our report highlights the factors that allowed the FMR to succeed. It shows the importance of finance leaders in all departments working closely with central leadership in the Treasury. Equally important is the need to go with the grain of wider government reforms, linking the changes to departments’ priorities like improving efficiency. And it is essential to have dedicated people, working within the Treasury and across departments, to drive progress.

One other point to note – this improvement has been driven by the Civil Service itself. And unlike many Treasury initiatives, it has survived a change of Chancellor.

Our report also shows the reforms are at a transition point – and all of this progress risks being undone if these reforms fall out of fashion. As one interviewee noted, this type of change is like ‘a boulder being rolled up a hill… if it doesn’t maintain momentum it will just roll back down’. The Treasury and finance leaders in departments now need to move to a new stage, with concrete plans to move finance still closer to the heart of decision making.

Philip Hammond has made clear in the Autumn Statement that he wants the Treasury to be ‘an enabler for good, effective spending across government’. Let’s hope the next stage of the FMR finds an enthusiastic backer in the Chancellor. The Institute has long highlighted the importance of, and encouraged sustained investment in, areas like financial management. Whitehall needs to build on the progress to date and avoid being distracted by some shiny, new initiative.