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Welsh public sector ‘must move from firefighting’

Author: ICAEW Insights

Published: 22 Feb 2024

The Auditor General for Wales has issued a major new report on how public services can be made more cost effective and sustainable in the long-term.

The Auditor General for Wales and head of Audit Wales is calling for investment in public services to end a spiral of short-term firefighting.

In a major new report, Adrian Compton says that despite budgetary pressures across the public sector in Wales, investing now to address long-term issues will be essential if public services are to escape from a spiral of short-term firefighting.

“We cannot rely on the way things have been done in the past to future proof our public services,” he says. “If starting from a blank sheet, we would be unlikely to design things the way they are. It will require a bold vision to reimagine what public services might look like and courage, drive and a long-term commitment to implement change.”

The report highlights themes that Audit Wales believe could help the public sector achieve more with the money it spends and enable a shift to more sustainable public services:

  • recognising the cost of failure in governance and financial management;
  • tackling fraud and error;
  • making sense of the public sector landscape;
  • creating the workforce of the future;
  • upping the bandwidth on digital transformation;
  • zeroing in on the sustainable development principle; and
  • putting value for money to the test.

The Welsh government has a budget of £26.4bn in 2024/25, or almost £700 per person per month for the 3.2 million people living in Wales. Day-to-day revenue funding is up 0.4% in real terms over the previous year, while the capital budget is 1.7% higher. Most budget areas have experienced real-term cuts (including a 10.5% reduction for rural affairs), apart from health and social care (up 2.6%) and local authority core funding (up 1.4%).

The cost of failure in governance and financial management

Failure in governance and financial management has a high cost when identifying and fixing issues. Crompton cites the recent National Museum of Wales report as an example, where the museum did not have adequate policies in place to deal with complaints from board members, leading to costs of £750,000 of which “some or all could have been avoided”.

Crompton argues that the biggest impact of governance failure and poor financial management is “how these issues can deflect organisations from their core objectives and services to the public”, and that each time standards slip there is an erosion of public trust and confidence. With the theme of the report arguing that investment in public services is critical, it is undeniably more difficult to gain support for such investment when public trust is dented by such failures.

Tackling fraud and error

Fraud and error risks may not be getting the attention they deserve, says Crompton. Citing work by Audit Wales, including facilitating the National Data Initiative, he argues that some participants “appear not to recognise its importance or are unwilling to allocate the necessary resources to investigate matches”.

With the Public Sector Fraud Authority estimating that at least £33bn of UK taxpayers’ money is subject to fraud and error every year, the report argues there is a plethora of opportunities to catch fraudsters and deter fraud where there is a will to pursue them. 

The complex public sector landscape

The creation of more public bodies and new legislation over the past few years “does not always align or reflect the practical and capacity realities of implementation”, with creation of new bodies and legislation coming at a cost. Crompton argues that “it is essential to ask whether the landscape of public services in Wales and the expectations placed upon them is sustainable” amid continued financial pressures.

Creating the workforce of the future

Public bodies in Wales are facing increasingly stiff competition for often scarce skills, according to the report. In the new world of hybrid working, they are “learning how a more flexible employment model affects productivity and employee engagement”.

The report argues that there must be concerted action to invest in careers in public services, as well as incentivising them. It is not simply enough to imagine the workforce of the future, as public bodies are suffering from increasingly higher levels of turnover and recruitment issues at senior levels. A focus on long-term workforce planning across sectors and professions is therefore essential, it says. 

Upping the bandwidth on digital transformation

The overall pace of progress in harnessing digital technology is concerning, argues Crompton, with financial pressures presenting issues for investing in such technologies even though solutions should result in more efficient or effective services. Where digital investment has been implemented, it is also not always clear that “significant investment in new systems is reaping the intended rewards”.

Zeroing in on the sustainable development principle

Public bodies have a framework to develop sustainably through the Well-being of Future Generations (Wales) Act 2015, which requires public bodies to “balance what they need to achieve today with what they and future generations need to achieve in the future”. 

According to the report, long-term planning remains a challenge for many bodies. Where bodies are planning ahead, there is not always a “clear assessment of financial resources that may be required to achieve their stated objectives and the prospect of those resources being secured”. Crompton argues that amid short-term budgetary pressures, many bodies are struggling to demonstrate a shift in resources towards prevention, with systems of accountability incentivising narrow or short-term thinking. This needs to change for the Act to achieve its ambitions and avoid higher costs in the future.

Putting value for money to the test

Finally, Crompton calls for public bodies to consider value for money in all the work they do, recognising “possible costs and benefits in the round and in the interest of the long-term wellbeing of the communities they serve”. 

You can read the full report here 


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