Statement from PAC Chair on Managing Budgeting in Government

18 October 2012

A statement from the Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts

Government expects to spend some £2.6 trillion between 2010 and 2015 and plans over £200 billion of cuts over the same period. In a time of such financial constraint it is more important than ever to maximise the value we get for every pound of taxpayers' money, in order to protect frontline services from cuts that might have been avoided.

Unfortunately this report suggests that the Treasury is better at simply cutting spending than at promoting value for money. Its system for managing budgeting across government falls short on a number of counts.

It is extraordinary that the Treasury makes no clear link between a department's budget and its business plans, reform priorities or even performance. Its ability to challenge departments' budgets suffers from an eye-watering level of staff turnover that is, according to the Treasury, "three times higher than the civil service average". I am amazed that only 8 out of the 52 staff working in the Treasury teams the NAO examined were still in place 20 months after the spending review.

Opportunities to design better and more cost-effective services are being overlooked because the way budgets are currently set fails to encourage departments to work together. A miserable 0.2 per cent of departments' budgets in 2010 were for 'joint' activities.

Ahead of the next spending review, the Treasury must put in place far stronger incentives to get departments to work together and support spending decisions with better information. Departments need also to show they have properly thought through the consequences and trade-offs of spending in one area over another.

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