The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:
“Confusion exists at the heart of government about what exactly the role of ‘the centre’ – Number 10, the Cabinet Office and HM Treasury – should be.
This current lack of clarity about the precise role and responsibilities of the centre jeopardises government’s ability to deliver value for taxpayers’ money in key public spending areas.
Correspondence we received appears to demonstrate a conflict between ministers at the centre, who want it to play a more effective, smart and challenging role, and senior civil servants who are resistant to change and remain wedded to departmental autonomy.
This lack of agreement means that there is no clear definition of the role of the centre and the responsibilities for implementing cross-government initiatives, such as debt collection and centralised procurement, are not always clear.
Too often the centre has failed to intervene effectively and quickly enough to prevent major programmes from failing and protect the interests of the taxpayer. Universal Credit is a case in point.
In part, this is because those at the centre do not have a single, joined-up view of strategic risks across government, meaning it often responds only after crises occur rather than picking up on the warning signs.
The centre should use its various sources of intelligence about strategic risks, such as information from Treasury spending teams, Major Projects Authority assurance reviews, and Implementation Unit stocktakes, to anticipate significant risks and intervene appropriately.
Departments are making unacceptably slow progress on some central efficiency initiatives such as shared back office services and debt collection, resulting in taxpayers’ money being wasted.
The centre needs to challenge departments more actively on their implementation of cross-government initiatives, like civil service reform and centralised procurement, including by holding permanent secretaries more strongly to account for departmental performance.
The effectiveness of government is undermined by shortages in specialist skills and capability, such as recognised gaps in commercial, contracting and financial management expertise.
The centre needs to urgently define what it should be doing, and how, so that its parts work together as an integrated whole – as well as build skills. Only then can it effectively drive cross-government programmes and anticipate problems before crises hit.
We hope that the combination of the roles of Cabinet Secretary and Head of the Civil Service and a new Chief Executive will drive progress on the role of the centre, and we look forward to seeing that when we return to this topic.”
Margaret Hodge was speaking as the Committee published its 19th Report of this Session which, on the basis of evidence from Sir Bob Kerslake, Head of the Civil Service and Permanent Secretary, Department for Communities and Local Government; Sir Nicholas Macpherson, Permanent Secretary, HM Treasury; Sir Jeremy Heywood, Cabinet Secretary and Richard Heaton, Permanent Secretary, Cabinet Office, examined the centre of government.
A strong and effective centre of government is vital for the effective operation of government as a whole and for ensuring a focus on improved value for money for the taxpayer. However, there is a lack of clarity about the centre’s precise role, particularly the respective responsibilities of the Cabinet Office, HM Treasury and the Prime Minister’s Office (Number 10), and how they work together as a coherent centre. The centre sometimes intervenes to address issues with high-priority government programmes, but has too often failed to do so effectively or at an early enough stage. In part, this is because the centre does not have a joined-up single view of strategic risks across government, meaning it is often reactive in its response rather than able to anticipate potentially serious problems. There are gaps in key skills at the centre and across departments, such as financial management capability and contracting expertise, which are compounded because government repeatedly fails to learn lessons and share good practice from past experience.
After our evidence session in July the Government announced that the roles of Cabinet Secretary and Head of the Civil Service will be combined, and there will be a new Chief Executive post at the centre of government. Implementing these changes may provide an opportunity to make progress on the role of the centre and we intend to return to this topic in a further session before the end of this Parliament, by which time we expect to see significant progress on the recommendations we make below.
Conclusions and Recommendations
The centre of government comprises the Cabinet Office, HM Treasury and Number 10. Together, these central bodies are responsible for coordinating and overseeing the work of government as a whole, to help government achieve its aims and priorities. The centre also works with departments to improve the efficiency and effectiveness of their operations, for example by providing direction on making cost savings, standards for financial management and reporting, and assurance over the delivery of major projects.
The current lack of clarity about the precise role and responsibilities of the centre jeopardises government’s ability to deliver value for money in key public spending areas. Correspondence we received indicates that agreement between the civil service and ministers on the role of the centre does not yet exist. The civil service remains committed to departmental autonomy whilst ministers want an effective, smart and challenging centre. This lack of agreement means that there is no clear definition of the role of the centre and the accountabilities for implementing cross-government initiatives are not always clear. We accept there needs to be a balance between central control and departmental autonomy. Nevertheless, too often we see a failure of the centre to intervene appropriately and quickly to avoid poor value for money for the taxpayer. Universal Credit is a case in point. The Cabinet Office, the Treasury and Number 10 need to focus more effectively on their central role and on working together as an integrated centre of government. We welcome the permanent secretaries’ commitment to provide us with a statement of the role of the centre.
Recommendation: The permanent secretaries’ statement on the centre should set out:
- the role of the centre as one integrated capability;
- the respective roles and responsibilities of the Cabinet Office, the Treasury and Number 10;
- how these three bodies work together; and
- how the centre works with other central government departments.
As a starting point, they should use the suggested responsibilities of the centre set out in the Comptroller and Auditor General’s report.
The centre is not working effectively with departments to maintain a focus on timely implementation of cross-government priorities. Departments are making unacceptably slow progress on some central efficiency initiatives such as shared services, resulting in taxpayers’ money being wasted. The centre needs to challenge departments more actively on their implementation of cross-government initiatives, like debt collection, including by holding permanent secretaries more strongly to account for departmental performance. While Accounting Officers do have an obligation to deliver value for money across government, as well as within their own departments, they do not then have meaningful incentives to work in the wider interests of government as a whole.
Recommendation: The centre should set out how it will improve performance management and incentives, to ensure that departments deliver cross-government priorities successfully and within the intended timescales.
The centre does not intervene early enough to prevent major departmental projects and programmes from failing. The permanent secretaries told us that the centre does intervene in individual departments when departmental programmes or projects are at risk of failure or Accounting Officers have failed on the job; although this is not usually done in public and they acknowledged that their interventions tend to occur when there is a crisis. Our examinations of failings with major projects such as Universal Credit indicate the centre is not intervening effectively before serious problems arise. Central departments have various sources of intelligence about strategic risks, such as information from Treasury spending teams, Major Projects Authority assurance reviews, and Implementation Unit stocktakes, and should ensure that this information is used to anticipate significant risks and intervene appropriately. The centre also needs to ensure lessons are learned from past experience of project failures or poor performance, and that this process is formalised. For example, in letting recent renewables contracts, government appeared to have learned little from its experience of PFI contracts in terms of ensuring some clawback of any excessive returns.
Recommendation: The centre should:
- draw together its strands of intelligence to form an integrated, single view of strategic risks. Where such risks are identified, the centre needs to robustly challenge departments, intervening earlier and more effectively to prevent project failure; and
- explain how it will ensure that lessons from past experience are properly considered when planning new projects.
Key specialist skills are in short supply and are not distributed effectively between departments and the centre. The effectiveness of government is undermined by shortages in specialist skills and capability, for example there are recognised gaps in commercial, contracting and financial management expertise. Some progress is being made, such as the Major Projects Leadership Academy’s training of senior project managers, more coordinated central leadership of corporate functions such as procurement and civil service HR, and the Civil Service Reform Plan’s focus on developing project management, digital and commercial skills. However, much of the talk about improving skills is still of future actions rather than what is being delivered now. Implementation of the Treasury’s financial management review is a clear example of where the centre must lead the push to build key skills and capability across government. We look forward to seeing the Treasury’s promised action plan for implementing the financial management review.
Recommendation: The centre should:
- clarify what is the right balance between the skills and expertise that should reside in departments, and specialist capability that should be located centrally and deployed flexibly across departments when required (for example, when a major contract is being negotiated by a smaller department); and
- in its financial management review implementation plan, set out detail of the concrete actions the Treasury is taking to strengthen the finance function across government, through providing central expertise and helping departments improve their financial capability.