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18 October 2012 | Anna Reynolds
The Treasury’s current budgeting system ‘fails to encourage departments to work together’ to deliver value for money, according to a report by the National Audit Office (NAO).
Managing budgeting in government found while the current budgetary system meets the Treasury’s objective to control government spending, there is ‘patchy’ information available related to spending between departments.
The report revealed departments do little to integrate budgets with departmental business plans or structural reform. Further, the budgeting system does not require ‘performance budgeting’, where spending is based on past performance levels and through the assessment of value from cross-departmental comparisons.
Margaret Hodge, Labour MP and chairman of the Committee of Public Accounts said in a statement: “It is extraordinary that the Treasury makes no clear link between a department’s budget and its business plans, reform priorities or even performance.
“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.”
With the government expected to spend £683 billion in total in 2012-13, the report stressed the Treasury requires spending teams to identify opportunities for departments to gain from working together. Departments should also provide more detailed information on what level of service and value will be delivered through spending and how performance will be measured.
The NAO also suggested the Treasury ensures greater consistency in budgetary approaches across government, and is more direct at carrying out external reviews of departmental proposals.
In response, a Treasury spokesperson said: “We welcome the NAO’s report and its recognition of the strength of controls on public spending. The spending review was underpinned by a rigorous process and we have introduced new, tougher rules on spending and information sharing, so that taxpayers can continue to be confident we are spending their money responsibly in tough economic times.”