a post by Matthew Whittaker for the Resolution Foundation blog
With everything that’s going on in British politics right now, it’s easy to forget that the government was celebrating some seriously good news just seven weeks ago. You might remember that the Chancellor got handed a £74 billion fiscal windfall at the Budget that allowed him to deliver the long-promised extra spending on the NHS without having to make any significant changes to his borrowing plans or push through any controversial tax rises. Indeed, he was even able to throw in an income tax cut and restore some previously-removed funds to the Universal Credit budget. Things have, of course, turned a little sour for the government since then. And they may just have got a little bit more difficult again as of today.
Usually it’s the Office for Budget Responsibility’s (OBR) sofa down the back of which extra money is found and lost; this time however it’s the moving of furniture at the Office for National Statistics (ONS) that matters. Specifically, it’s today’s conclusion of the ONS’ review of the accounting treatment of student loans that will be concerning Philip Hammond. It’s a technical exercise, and ultimately it won’t change the true cost to government of providing student loans. But, by changing the presentation of that cost, it could well have big implications for the Chancellor’s fiscal rules.
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There are links to some explanatory stuff as well as the clearly set out information in the blog post itself.
Even I understood it.
Showing posts with label public_finance. Show all posts
Showing posts with label public_finance. Show all posts
Monday, 24 December 2018
Thursday, 29 November 2018
Improving government’s planning and spending framework
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.
Full report (PDF 78pp)
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.
Full report (PDF 78pp)
Friday, 20 July 2018
How nations finance themselves matters
a post by Patrick Bolton and Haizhou Huang for the OUP blog
To understand how nations should finance themselves it is fruitful to look at how corporations finance themselves, how they divide their financing between debt and equity.
Corporations typically issue equity when they need financing for a new profitable investment opportunity, when their shares are overvalued by the stock market, or when they need to raise funds to service their debt obligations.
But what is the equivalent of “equity” – shares sold for a stake in a company – for a country? The logical parallel here is “fiat money”: government decreed paper currency. Fiat money issued by a sovereign nation is analogous of equity issued by a corporation. Both are essentially pro-rata claims on wealth.
Linking a nation’s monetary economics to a corporate finance framework yields several important insights.
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Singapore River Skyline Building by cegoh. Public domain via Pixabay.
To understand how nations should finance themselves it is fruitful to look at how corporations finance themselves, how they divide their financing between debt and equity.
Corporations typically issue equity when they need financing for a new profitable investment opportunity, when their shares are overvalued by the stock market, or when they need to raise funds to service their debt obligations.
But what is the equivalent of “equity” – shares sold for a stake in a company – for a country? The logical parallel here is “fiat money”: government decreed paper currency. Fiat money issued by a sovereign nation is analogous of equity issued by a corporation. Both are essentially pro-rata claims on wealth.
Linking a nation’s monetary economics to a corporate finance framework yields several important insights.
Continue reading
Sunday, 24 December 2017
The State of the State 2017-18: Citizens, government and business
an article from Deloitte [via Mondaq.com]
This year’s report finds the UK government amid the complex challenge of leaving the EU. Inevitably, this early phase of EU exit is taking place under intense media scrutiny and passionate political debate. But while EU exit issues may dominate headlines, the public services face more local challenges as they address rising demand, budget restraint and renewed levels of concern about social inequality.
Overview
The State of the State report provides a unique, independent analysis of the UK public sector. Produced in collaboration with think tank, Reform, the insight is informed by interviews with public sector leaders, citizen research, a business survey and analysis of government data.
This year’s report is constructed around three distinctive perspectives – the citizen lens, the public sector lens and the business lens – and we hope they provide a fresh look at The State of the State.
The state of the public finances
Continue reading
This year’s report finds the UK government amid the complex challenge of leaving the EU. Inevitably, this early phase of EU exit is taking place under intense media scrutiny and passionate political debate. But while EU exit issues may dominate headlines, the public services face more local challenges as they address rising demand, budget restraint and renewed levels of concern about social inequality.
Overview
The State of the State report provides a unique, independent analysis of the UK public sector. Produced in collaboration with think tank, Reform, the insight is informed by interviews with public sector leaders, citizen research, a business survey and analysis of government data.
This year’s report is constructed around three distinctive perspectives – the citizen lens, the public sector lens and the business lens – and we hope they provide a fresh look at The State of the State.
The state of the public finances
- Deficit elimination goes on
This year, the UK’s deficit is expected to come down to £58.3 billion. - The summit of the debt mountain
Official forecasts suggest that government debt could peak in this financial year at £1.8 trillion representing 88 per cent of GDP. - The end of austerity?
While public attitudes towards austerity have hardened, the UK’s deficit still stands at £58 billion and government debt has reached £1.8 trillion. The government remains committed to eliminating the deficit and paying down debt, and so a blend of continued austerity and tax adjustments may be required.
Continue reading
Friday, 26 April 2013
Managing Public Finances Is Vital to Economic Prosperity
As posted on IMF Survey Online
Across the world many countries are now grappling with restoring sound and sustainable public finances: the way governments manage their budgets today will have profound economic effects in the years ahead. A new book by the IMF looks at reforms introduced by governments over the past two decades to improve management of public finances. These innovative ideas and reforms are changing the landscape of public finances and eventually aim to fundamentally change the way governments manage the public’s money.
Continue reading
Priced at $38 print and $19 PDF Public Financial Management and Its Emerging Architecture is available from the IMF Bookshop
Across the world many countries are now grappling with restoring sound and sustainable public finances: the way governments manage their budgets today will have profound economic effects in the years ahead. A new book by the IMF looks at reforms introduced by governments over the past two decades to improve management of public finances. These innovative ideas and reforms are changing the landscape of public finances and eventually aim to fundamentally change the way governments manage the public’s money.
Continue reading
Priced at $38 print and $19 PDF Public Financial Management and Its Emerging Architecture is available from the IMF Bookshop
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