New boys, but same old club

August 16, 2002

Labour claims to have reformed the state's finances. It hasn't, says Colin Talbot. We still have the same old private government of public money.

When the new Labour government came to power in 1997 it instituted a new approach to public spending. Sticking to the Tories expenditure plans for their first two years, it set about creating a whole new system for deciding on public finance.

The Comprehensive Spending Review and the Public Service Agreements (CSR and PSAs) that sit alongside it were first revealed by Gordon Brown in 1998. Hailed as a revolution in the management of public finance and modernising government, it does not seem unreasonable to ask just what, if anything, has changed?

The new system abounds with seemingly incontestable rational devices for managing public resources: a split between current and capital spending; a split between volatile spending and more controllable "elective" departmental spending that can be fixed for three years ahead; public-service agreements that spell out what departments will achieve for their newly stable financial projections, and so on.

In 1974, Hugh Heclo and Aaron Wildavsky's The Private Government of Public Money exposed the secretive world of "the Whitehall Village". The villagers all knew each other, went to the same universities, entered the Civil Service and were groomed for the top. They operated the public expenditure process as a gentlemanly game closed to all but a few ministers and, of course, themselves.

Heclo and Wildavsky wrote a decade after one of the previous largest attempted reforms of the Whitehall "getting and spending" process - the introduction of the Public Expenditure Survey. PES attempted to have three to five-year plans, rational allocation decisions and more information about what was achieved, and so on. Despite these rational trappings the PES was still, the authors showed, primarily a political process of bargaining and secret manoeuvrings inside the Whitehall Village. The CSR/PSA has largely gone the same way.

First, the supposed "three-year review" has become a two-year process because of the electoral cycle. So the "fixed" third year becomes automatically "unfixed" by the next review.

Second, the government has thrown extra money at spending programmes at numerous points between the reviews - budgets, pre-budgets, even on breakfast TV. Politics rules again. But because the changes have been upwards there have been few protests.

Third, the one really revolutionary aspect of CSR/PSA - reporting on performance - has largely been ditched. The number of targets has been steadily reduced so that all that is left is a set of long-term outcome-based targets that it is easy to "spin" about.

With the government's Annual Report to Parliament abandoned because critics said it lacked objectivity, we have been left with a bewildering array of departmental annual reporting that even cognoscenti find hard to disentangle. Recent exchanges between the chancellor and members of the Treasury select committee on this subject make fascinating reading. The chancellor's reaction to being asked for evidence of where performance had affected resource allocation was clearly irritable.

Above all, the CSR/PSA process remains secret. Even the guidelines are not published. Where it would be easy to publish draft expenditure and performance plans as white papers and conduct a consultation process, through the select committee system for example, instead we have the same old private government of public money. Our Welsh and Scottish processes are far more open. Whitehall's processes remain the sole domain of the villagers.

Colin Talbot is professor of public policy and management at the University of Glamorgan and a director of Public Futures. He gave evidence on this subject to the Treasury committee in 1999, 2000 and 2002.

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