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Improving government’s planning and spending framework

Today’s report from the National Audit Office (NAO) has found that HM Treasury is effectively controlling public spending and the Cabinet Office, with support from cross-government functions such as finance, is helping to improve business planning in government departments. But it concludes that, unless government makes use of a more integrated planning and spending framework to ensure its plans are deliverable and affordable, the cycle of over optimism, short-termism and silo decision-making will continue – risking value for money for UK taxpayers in the long term.

Through its planning and spending framework, the centre of government sets priorities, plans activity, allocates money and monitors progress and performance. Departments plan and deliver their objectives and manage delegated budgets. HM Treasury – through its 20 spending teams – distributes and controls funding to departments, runs spending reviews and sets rules for how money should be spent. For example, HM Treasury scrutinises the value for money of new proposals for projects and programmes with support from project management and commercial experts. The Cabinet Office monitors delivery of departments’ objectives and government priorities, and oversees departmental business planning. The Spending Review in 2015 allocated £4 trillion of public spending for the five years to 2020-21 and the next Review is expected in 2019.

HM Treasury has begun to focus more on the longer-term. It now provides guaranteed funding to support 10-year plans in some sectors such as defence and has also committed funding for investment in housing, infrastructure, and research and development. It is also increasingly focusing on long-term risks to public finances. However, this has yet to make a difference to the way HM Treasury monitors departments’ performance, and is not supported by a good understanding of the long-term value for money being delivered. HM Treasury recognises this and is developing a new approach to understanding value, but this is at an early stage. It will need to be supported by new success measures for HM Treasury itself, which balance spending control and long-term value, and by enhanced skills and capacity.

Since 2015, the Cabinet Office has required departments to prepare Single Departmental Plans (SDPs), which set out how they will implement their objectives, deliver services and track performance. Working with HM Treasury and cross-government functions, it is helping departments improve business planning and is working on how to use SDPs to challenge funding bids and inform allocations at the next spending review. As yet, SDPs are not central to decision-making in all departments, do not fully match delivery plans to resources, and are weak on measures of success. This creates a risk of unachievable commitments being made and departments failing to see when they are off-track.

Departments have had to plan to deliver more with less, and several are having to deliver complex, long-term programmes to transform public services. Yet the structure of government means departments plan and deliver in silos, which can undermine value for money and negatively affect local services. While various cross-government working groups exist, there is no visibility of their plans or impact, and HM Treasury is considering how best to allow for cross-departmental bids in the next Spending Review. Departments’ Accounting Officers are not adequately incentivised to prioritise, make realistic business plans and protect long-term value. NAO reports repeatedly show over-optimistic plans resulting in failure to deliver, lower quality service or need for further funding and an unwillingness to reprioritise or drop activity despite the pressures of EU Exit work.

Since the NAO last reported on the framework in July 2016, HM Treasury and Cabinet Office have recognised the need to move towards a more integrated approach to assessing and measuring value. The benefits of an integrated framework are self-evident: it would support government in achieving long-term value from projects and programmes; guarding against unrealistic and optimistic assumptions; and understanding the impact of in-year decisions on longer-term delivery. Without it, the system is vulnerable to short-term thinking, leading to poor outcomes for public services and poor value for money.

“Unrealistic planning based on wishful thinking risks public money being wasted on a grand scale. HM Treasury and the Cabinet Office need to work together to deliver integrated and realistic short, medium and long-term planning. For this we are dependent on HM Treasury spending teams that are just as focused on policing quality planning and capturing public value as they have always been on controlling spending.”

Amyas Morse, head of the NAO, 26 November 2018

Notes for Editors

Key facts

2015
the year single departmental plans were introduced

£4tn
allocated at Spending Review 2015 for total public spending for the five years to 2020-21

15
of 17 government departments had an approved 2018-19 single departmental plan by September 2018

Three to five
number of years usually covered by allocations at spending reviews

One-fifth
HM Treasury staff working in spending teams

24
costing projects carried out to date by HM Treasury and departments to identify and understand cost drivers and potential efficiencies in specific areas of spending

Of the officials involved in business planning and spending who responded to our survey:

92%
agreed that HM Treasury spending teams actively seek to build a constructive and transparent relationship with them

75%
said that their department’s single departmental plan had clear and agreed objectives

53%
told us their 2018-19 single departmental plans aligned proposed deliveries with actual capability and capacity

33%
agreed that HM Treasury spending teams provided mechanisms to support and encourage departments to work together

1.     In 2016 the NAO published two reports examining how government plans and manages public sector activity: Spending Review 2015 and Government’s management of its performance: progress with single departmental plans.

2.     In some cases departments’ draft SDPs did not cover all their activities or did not include all the information required in the central guidance. For example, the Ministry of Housing, Communities and Local Government’s SDP did not include commitments in the Housing White Paper and the Ministry of Defence’s draft SDP did not provide sufficient detail on the £7.4 billion efficiency programme.

3.     Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.

4.     The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 785 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services. Our work led to audited savings of £741 million in 2017.

Contact

NAO Press Office
+44 (0)20 7798 7400 or email pressoffice@nao.org.uk

PN: 52/18