Memorandum from Professor Colin Talbot,
University of Glamorgan
This note deals with the role of the Treasury
from one particular perspectivethe measurement, management
and reporting of public services performance.
The advent of the new (supposedly three-year)
Spending Review/Public Service Agreement (SR/PSA) process to replace
PES is a radical step that has highlighted issues about the roles
of Treasury and Cabinet Office in relation to public performance.
This is not intended to be a fully worked out
submission for a new set of roles and structures but to raise
some possible options.
There are far wider issues about the new SR/PSA
process and content that is being dealt with in a separate paper
to be submitted to the main Treasury Committee. Suffice it to
say here that the SR/PSA process so far represents a half-finished
revolution which needs to be taken much further if it is to succeed
in modernising, democratising and opening up the way in which
Britain deals with our public expenditure and public performance
decision-making. There is a real opportunity here to create a
truly modern system and break with the inertia and unnecessary
secrecy of the past.
There are of course counter-arguments, for example
that public spending and performance target setting are (a) the
responsibility of the executive and (b) have far reaching consequences
on macro-economic policy (and in the past have even influenced
short-term fluctuations in the markets). The first argument is
true and what is being proposed here is retaining the ultimate
decision making in the executive but improving the processes by
which those decisions are arrived at (which a three-yearly process
permits). The second argument is undermined by the government's
own policies on Fiscal Stability. These, if adhered to, mean that
the broad envelope of public finances is known well in advance.
The publication and open discussion of proposed new spending and
performance plans would further reduce any danger of the ultimate
decisions causing "waves".
The Civil Service reforms of the past two decades
have so far failed to fundamentally change the culture of the
"Whitehall village" which continues
much as it was described more than 20 years ago.
The combination of constitutional and systemic changes introduced
since 1997 and some of the structural and systemic changes started
in the previous decade (especially agencies, resource accounting,
and performance measurement and reporting) makes a real revolution
not only possible but even more necessary.
Earlier discussions at the Committee highlighted
the different roles that Treasury playsas an economic ministry
and as a finance ministry. In addition, they identified two sub-roles
within the finance ministry role: public finances and public performance.
It would be useful to define these roles in
even more detail:
A. Economics ministry role
1. Macro-economic policyanalysis and
2. Macro fiscal policy including taxation
and fiscal stability
B. Finance ministry role
2. Financial management policy and operations
3. Financial reporting policy and operations
4. Financial audit policy
5. Performance targeting and reporting
6. Performance audit policy
There are several areas where the boundariesincluding
boundaries with the other two key players, DTI and Cabinet Officeoverlap
and could potentially be drawn differently.
Economic policy overlaps between
Treasury and DTI (A1; A3; A4)
Financial and (implied) public policy
overlaps between Treasury and Cabinet Office (B1; B2)
Performance of public services overlaps
between Treasury and Cabinet Office (B5; B6)
It is clear that the introduction PSAs "represent
a fundamental change in the accountability of government to Parliament
and the public" as the PSAs White Paper claims. This could
be expected to have a radical impact on the way in which the Treasury
Treasury has always had, as they admit in their
evidence, an implied role in public policy through the budgetary
process. Decisions about what does or does not get fundedunder
PES or SR/PSA processescarry implications for policy, although
clearly Treasury does not "determine" policy. In the
past this role has been largely implied and hidden. The advent
of the SR/PSA process has made the role both more powerful and
more explicit, although the detailed process remains hidden.
In their supplementary memorandum of evidence
to the Sub-Cabinet Committee (Annex A) on "Responsibilities"
it is reported that the responsibility for the Treasury Objective
3 "Improving the quality and cost effectiveness of public
services" lies with the Public Services Directorate (PSD).
It goes on to say that there are a number of
cross-cutting teams within PSD, covering:
and the secretariat for Public Sector
Productivity Panel (PSPP).
Alongside these sit the individual spending
What is striking about this is the absence of
a cross-cutting team dealing specifically with the issues raised
by PSAs and other performance systems. The secretariat and Public
Sector Productivity Panel are merely advisory and ideas generating
structures. In terms of developing and managing the whole PSA
system this has not been undertaken by a specific cross-cutting
team, as could perhaps have been expected, but by the General
Expenditure Policy team.
Given the supposed importance attached to PSAs it seems curious
that Treasury seem to have so few specific resources devoted to
policy and practical development and evaluation. In fact it seems
there has been no structural changes as a result of PSAs, which
seems extremely odd.
The advent of the three-year Spending Review/Public
Service Agreements system to replace PES has surfaced a number
of latent issues about the role of the Treasury.
Structural reasonsrole conflicts
As has been pointed out frequently by others,
the notion of putting the finance department in charge of corporate
strategy would be a strange one in the private sector. While this
argument has some validity it should be remembered that we are
not dealing with the private sector but with public services and
finance, where issues of public money and its use is surrounded
by a host of sensitivities and constraints.
Nevertheless there is an obvious tension between
the roles of Treasury-as-finance-department and the Prime Minister's
office/Cabinet Office-as-chief-executive. The place where this
is most acute is over issues of public sector performance where
there is frankly a messeg Cabinet Office is responsible
for setting broad policy and collating performance data from agencies
and NDPBs on the one hand and Treasury responsible for the same
for departments. These roles need rationalising.
Systemic reasonsmodernising decision-making
The SR/PSA system, as we make clear in our submission
to the main Treasury Committee, offers a unique opportunity to
put in place a genuinely radical change in UK public finance and
In brief, the three-year SR/PSA cycle ought
to offer the possibility of developing something analogous to
the US's annual federal appropriations process, although on a
more consultative rather than permissive model. A cycle of publishing
spending and performance reports alongside draft spending and
performance plans could lay the basis for a more open process,
including a substantial role for Parliament (through the Select
Committees) in scrutinising plans and facilitating input from
key stakeholders. Final decisions could then be based on much
more open, consultative and inclusive debates and are less likely
to suffer from some of the "group-think" mistakes of
The first and by far the biggest question is
whether, given the changed role of Treasury since the independence
of the Bank of England and other changes the economic and finance
roles ought to now be split. This is not the central concern of
this evidence but there is a strong logical case for making such
Whether or not such a change is made the roles
of Treasury and Cabinet Office in relation to public finance and
public performance need to be clarified to provide the right level
of support and expertise to this vital area. In the options that
follow "Treasury" refers to either the existing structure
or to a separate Finance Ministry.
All responsibility for public service performance
issuesincluding PSAs, SDAs, agencies and NDPBsare
transferred to Treasury.
All responsibility for public service performance
issuesincluding PSAs, SDAs, agencies and NDPBsare
transferred to Cabinet Office.
A new joint body made up of Cabinet Office and
Treasury officials is established to support EDX and take responsibility
for public service performance issuesincluding PSAs, SDAs,
agencies and NDPBs.
It seems to me that Option 1 is both unfeasible
and more importantly undesirable as it would represent far too
great a concentration of power in the Treasury (which is not,
after all, the "CEOs" ministry, however much some might
like to think so).
Option 2 would produceas Treasury officials
themselves pointed outan institutional tension between
Cabinet Office and themselves. Some may not regard this as necessarily
a bad thing, as it would at least act to introduce a new "check
and balance" mechanism into the executive. However, it would
inevitably lead to something like Option 3, as there would have
to be some mechanism for resolving conflicts.
Option 3 would therefore seem the logical choicedeveloping
a new joint mechanism for managing public performance policy and
practice. Something like an:
"Office of Performance and Accountability"
which had a role in developing broad
approaches to public performance measurement, reporting and management;
organised the process of liaison
between Cabinet Office, Treasury and Parliament over each Spending
Review/PSA round; although EDX would remain the political-side
of the decision process, supported by the OPA;
took responsibility for collating
and publishing central government performance information (from
departments; agencies and NDPBs);
developed the executive side policy
towards performance audit (in conjunction with whatever new audit
arrangements emerge from current reviews).
There may be an additional issue here about
the role of the spending departments. The idea of creating more
"joined-up" government requires a mechanism for the
management of policy processes and resource allocation across
government. For Treasury to play that role on its own seems both
undesirable and unfeasible. For Treasury and Cabinet Office to
do it jointly makes more sense, but could be dysfunctional in
excluding spending departments who would inevitably be "second
best" placed to participate. The OPA should therefore perhaps
be best seen as a "tri-partite" body with participation
of staff from Treasury, Cabinet Office and spending departments.
Most crucially it would also therefore take on an extra role of:
Co-ordinating cross-cutting Spending
Reviews and PSAs.
A structural change along the line suggested
above would allow for a far more developed, open and participatory
decision-making process as well as better co-ordination of performance
policy and reporting.
The facilitative role would permit the development
A top-level process of bidding, consultation,
scrutiny and revision of SR/PSA proposals between departments,
Cabinet Office, Treasury and crucially Parliament.
Encourage departments to develop
specific consultation processes appropriate to their own areas,
key stakeholders and the public.
Enable cross-cutting reviews to be
conducted in an open way (as already proposed by the Performance
and Innovation Unit Report "Wiring it Up").
Develop a better-informed and more
sophisticated public debate about allocative decisions within
broad public spending limits set by government policy (through
Allow for pre-decision audit of proposals
(along the lines of the pre-Budget audits).
All of the above would mark a step-change in
the way in which both the debate and decision making process of
allocating public resources could be conducted. It would introduce
a truly modern, open and involving system for a stakeholder society
of the 21st century.
While members of the Committee may not necessarily
accept the specific ideas speculatively advanced here, it is difficult
to ignore the compelling case for a fundamental review of the
role of the Treasury. Leaving aside the "finance ministry"
debate, the more explicit role in deciding priorities and policies
for spending areas developed by Treasury as a consequence of PSAs
requires a fundamental review of its role. This cannot be undertaken
without looking at the roles of Cabinet Office (including No 10)
and the spending departments nor of Parliament itself. It would
seem time for a Fundamental Review of the Treasury.
Heclo, H and A Wildavsky (1981). The Private
Government of Public Money (2/e), Macmillan.
1 See, for example, Sir Michael Bichard's remarks
in "The Stakeholder" magazine last year. Back
See (Heclo and Wildavsky 1981). Back
In questioning of Treasury officials before the Sub-Committee
(eg Q60-68) there seemed to be a deliberate attempt to avoid the