Chief Secretary to the Treasury on financial management in government
The Chief Secretary's speech to the Financial Management Reform conference in Birmingham.
Good morning, and thank you for inviting me here to Birmingham today.
I feel I am returning home to some extent – because half my family is from Birmingham.
My parents met here, and my father grew up here, one of 18 children in a terraced house in Handsworth.
He attended Handsworth Grammar School, was brilliant at mathematics – I suppose with 17 siblings you get very good at long division – and went on to study at Birmingham University.
He was a great example of what we politicians call “aspiration” – that drive which spurs people on to achieve.
I will speak about my own aspiration shortly!
It’s great to see so many people here – but then again, HMG Finance is quite a major operation…
It employs 14,500 staff across 39 departments, manages 4000 billion pounds’ worth of assets and liabilities, and is responsible for over 700 billion pounds’ worth of expenditure a year.
There are, by the way, many people in the City of London who would like to manage a £742 billion portfolio.
The difference is, of course, that my indicator of success is not how big I can make that number!
The point about these numbers isn’t just their size: it’s also that they have a direct impact on the lives of every single person in this country (as well as quite a few beyond).
However, I never like thinking of it as government money. It is public money.
That distinction is important, because it’s the public who pay the taxes we allocate; and it is ultimately the public to whom we are accountable.
Spending that money wisely is one of the most important aspects of public service. I would argue that that should be the case at any time.
But when the country is on a path of economic recovery, it is particularly crucial.
So my first message today is this: thank you for the hard work you have put in, over the last few years, to make sure we get the best possible bang for our buck.
Getting the public finances in order has been one of our biggest areas of focus since 2010, to reduce the deficit – indeed, to eliminate it altogether.
We’re here now to finish the job. And that’s precisely what we are doing.
At the same time, we have also been asked to cut taxes; to protect and indeed increase spending in several major areas; and to deliver better public services.
This builds on the important changes made since 2010 to the way the country is run – with the aim of creating a modern, reformed state.
Whether that’s reforming the criminal justice system; making tax digital; introducing fresh safeguards to UK borders; or recalibrating the way we finance our infrastructure projects – plenty of big decisions have been taken, and HMG Finance has been at the heart of them.
So, even at a time of deficit reduction, we also have to continue the important reforms we started five and a half years ago.
In other words, we have our work cut out.
To make the job even more of a challenge, in recent months we’ve seen the economic storm clouds once again begin to gather on the horizon: whether it’s the China slowdown, the tumble in oil prices, or the turbulence in various markets.
Our economy is inextricably linked to other economies across the world – as one would expect from a country whose products and services are sought after worldwide.
Unfortunately, that means that when other markets slow down, that has an impact on us.
The best possible antidote to all those external economic risks is making sure that our economy is healthy enough to withstand them.
As the Chancellor said earlier this month in Cardiff, though we’ve made a great deal of progress, on the deficit as well as on the wider economic picture; it’s still “mission critical” rather than “mission accomplished”.
So we cannot let 2016 be the year where the foot is taken off the pedal.
Our long-term economic recovery depends on us continuing to seek ways to be more efficient, more effective, smarter in the way we use our resources.
That is my aspiration!
Agreeing settlements with my Cabinet colleagues was one of the major tasks of last year.
The task now is to ensure that those settlements are delivered – even though we will of course have to maintain the flexibility to deal with unforeseen issues that will inevitably arise.
What that means in practice is that the work you all do, as finance experts, will only become more and more important.
That’s why I regard it as essential that the Civil Service – right across the departments – has the best possible financial capacity and expertise.
The 2013 Review of Financial Management gave us a set of recommendations to improve our finance function.
In response, we developed the Financial Management Reform programme – a programme that’s now recognised as the model for delivering change around Whitehall.
The programme is committed to ensuring five things in particular.
First, creating a pipeline of talent, one that extends to senior roles.
Second, developing the skills of everyone working in Finance.
Third, sharing expertise and developing more standardised processes across departments.
Fourth, enhanced use of data and management information across Government.
And fifth, introducing new projects on specific areas of Government spend, so we can develop a more detailed understanding of the spending issues involved.
Already, you, as our Government Finance Function, have made great strides in putting finance at the heart of decision-making in Government.
And there’s been impressive progress on all fronts.
We have a Finance Fast Stream, for the first time ever, alongside two intakes of Finance Fast Track Apprentices.
There are now established talent forums, and recruitment campaigns, higher up the career ladder.
And there’s the launch of a Finance Academy in the pipeline – something which will really serve to improve our capabilities in this area.
We have 10 costing projects completed. Working across government, these have allowed us to implement savings of £100 million for infrastructure policing, or – another example – announce £600 million extra for mental health services.
I can tell you that the work done in this area was extremely helpful in my cross-Departmental negotiations last autumn!
And within the Treasury, we now have a Costing Centre of Excellence. Down the line, this will make government much better at forecasting what specific projects will cost – which is invaluable for agreeing budgets.
We have a strategy in place for improving the data from which we make decisions – not least through “data sprints”, which are 6-week projects to provide immediate insight into particular issues.
Not least, we’re in the process of agreeing a Finance Operating Model for government. This will enable us to share expertise, and make the finance profession much more effective.
The future is going to see much more of the same – and to that end, in last year’s Spending Review, we committed to resource our Financial Management Reform programme, setting up standing teams to drive forward our work.
I wouldn’t call this the sexy part of running a country, necessarily! And I certainly don’t expect to see, for instance, data sprints on the front pages of national newspapers…
But without getting the finances right, it’s extremely unlikely that in the future, we will be able to meet this country’s aspirations for the public services it receives.
People demand more from government. They demand better.
They demand services more quickly, and for longer.
They want those services to be more accessible. And of course they also have to be affordable.
Through your work, we can make that happen.
The last thing I want to do today is to talk for too long.
Nobody ever leaves an event saying “I wish the Minister had spoken for longer”! And I know that on these kinds of occasions you will be very keen to ask me questions.
But before I’ll take those questions, I’ll leave you with two quotes, which I hope will provide food for thought for the rest of this conference.
The first is from the founder of FedEx, Fred Smith. As well as founder, he is also Chairman, President and CEO. I guess he likes to leave no doubt about who’s in charge…
An interviewer asked him to what he owed his success. His answer, after a brief pause, was:
“The main thing is to keep the main thing the main thing.”
Our “main thing” is the public finances. I know that, and you know that!
But it’s in all of our job descriptions to persuade our other colleagues of it, too.
The second quote is a little less recent.
In fact, it comes from the earliest ever guide to running the British economy, printed as far back as 1178.
It says: “The highest skill at the Exchequer does not lie in calculations, but in judgements on all kinds”.
I find that invaluable advice.
Because it places the emphasis, when you’re making decisions, on realising it’s never a matter of black or white.
There are trade-offs and nuances to consider, and the best submissions and briefings I see invariably take those into account.
Thank you, once again, for the hard work you have put in over the past years.
Have a great conference. And I’m looking forward to working with you over the next few years, as we secure the foundations of our long-term economic recovery.