In his annual speech to parliament last week, Gareth Davies, the Comptroller & Auditor General of the UK and head of the National Audit Office (NAO), outlined some fundamentals of financial management that can unlock improved decision-making in Whitehall and deliver much better value for money for taxpayers.

ICAEW has a long history of making the case for stronger public financial management at all levels of government in the UK, to tackle issues, such as high level of public debt, the cost and effectiveness of public services, and the management of the public balance sheet. ICAEW believes the role of professional accountants is key to this, as detailed in its Better Government Series.

Davies said speech: “Managers often do not have access to the activity cost information they need to drive efficiency and performance. Government systems are set up to control spending within budgets, not to help managers manage.”

ICAEW identified similar points back in 2013 in its publication A CFO at the Cabinet Table, which stated: “Departments focus on managing budgets within an agreed spending limit rather than managing costs.”

The report described how this creates: “A disincentive to proactively manage costs and deliver services.” 

ICAEW has been consistent in calling for a long-term fiscal strategy to put the public finances on a sustainable path and for stronger financial management across the UK public sector.

While scrutiny around budget performance is in theory quite strong, with underspends challenged by ministers and overspends by the Public Accounts Committee, the consequence of focusing primarily on balancing a budget is that this becomes the goal rather than focusing on better outcomes for citizens. 

The UK needs a different approach to address chronic under-investment in public services and facilities, one that takes a longer-term view which looks are the allocation of resources more holistically.

Henning Diederichs, Senior Technical Manager in ICAEW’s public sector team, says: “As the UK government’s external auditor, Davies is right to highlight the importance of improving public financial management and ensuring the public sector has the skills and capability needed to support effective financial decision-making, and in embedding a culture of continuous improvement.

“We believe there is a need to augment the perceived value of financial reporting and external audit within the public sector and to demonstrate that strong financial oversight and better financial information can improve operational performance and resilience.” 

He continues: “We have seen the consequences of when this is not happening, for example in English local government, and we fully agree with Davies when he says that taxpayers are not getting the most basic form of financial accountability." 

Despite this, Diederichs acknowledges that the civil service has and continues to improve its financial and fiscal governance. The creation of the Government Finance Function and its support of continuous professional development to more than 8,000 finance professionals are to be applauded. 

“ICAEW is proud to partner with the Government Financial Function to design and deliver learning and development solutions that respond to identified upskilling needs across the network, ensuring interventions are relevant and impactful,” he says.