How can government improve financial and business planning?

Discussion paper

Foreword by Sir Ian Cheshire

Even after the unwinding of exceptional spending to tackle coronavirus,  government is set to spend over one trillion pounds a year through this decade.  Spending money is government’s most powerful instrument for meeting many societal needs and achieving political ambitions.

British government led the way internationally in its approach to government financial management in the second half of the last century.  It continues to be strong in some respects, notably setting and sticking to plans for spending.  However, in vital other respects, its approach has been weaker, in comparison both with what I see in the best corporates, and the approaches of other governments with whom the Commission has engaged.  I know the Treasury is determined to improve further, and the 2020 spending review announces some important reforms.  In this paper we offer some ideas about how to make a success of those intentions.

Financial management matters for two important reasons. First, the public finances have taken an enormous hit from coronavirus.  That will continue for years to come, even if the worst direct impacts cease, because of the impact on the economy, tax receipts and welfare and other demand-led spending.  The existing tension between the electorate’s desire for good public services and infrastructure and its reluctance to pay higher taxes will therefore become even more challenging to manage.  The government must make sure that every pound it spends goes where it is most needed and makes most impact.  Second, citizens expect their money to be spent well and transparently.  Failing to do that undermines trust in government.

Better financial management is right at the centre of creating a more effective, smarter, government.  This discussion paper sets out, for debate and challenge, an assessment of the current state of play, and some suggestions for further improvement.