I have written in various blogs and discussion groups, beginning with the one at http://nigeles.blogspot.com/2010/09/public-sector-audit.html , many times but thought one last plea for sanity might be worthwhile. The debate in the UK goes back to the planning for Whole of Government Accounts and adoption on IFRS - I guess about 15 years. Yes the wheels of change to central infrastructure do turn very slowly.
At the time I was reviewing US GAO reports based on sets of programme accounts where Congress set out resources, milestone and measurable targets. This seemed like a huge leap forward to me as it ties audit and accounting to time, inputs and measurable outcomes all at one go. Just what the UK cannot do.
I made representations but they were ignored; the team wrestling with WGA (Whole Government Accounts) felt they had enough to do without proposing a change in the entire Parliamentary accountability system. Unfortunately they also ignored the advice that private sector accounting standards do not fit the public sector and lead clients to do nugatory and, arguably, meaningless, work trying to squeeze the public sector based on social objectives agreed by Parliament into a private sector model meant for investors and shareholders.
The most fundamental issue in the public sector is why it exists at all. That reason, at best, is some communal need. In the early days these needs are basic such as currency, defence and the humane treatment of those unable to fend for themselves – dead piles of babies with servant mothers and aristocrat fathers on church steps eventually do lead to calls for action. It is also bad for business to have members of the community wandering around starving in rags. These issue may even need reconsidering today with the current government unable to understand that the over 50s and inexperienced 20s will become destitute as will the disabled.
The result is a realisation that the rich have to be taxed heavily in order to pay for social programmes run at a defensible level to defend from outside and inside threats all the community members. There follows a small, but necessary, diversion on taxation.
Taxation is, therefore, a necessary evil for a morally sound community. It is important at this point to realise that those who can afford to pay it are those who make money within the community whether or not they then export it via dubious means to other communities and that that the level of tax will depend on their legitimate obligations to their families as well as the money however raised.
A fair (progressive) tax system has to be wholly based on income and the rate has to rise proportionately to avoid further impoverishing those on a lower income; so tax bands arise. My view is that these should go all the way up to 90% for those on incomes more than three times the median income. This would not only raise money for the programmes voted for by the citizens but give the elected representatives some chance of delivering the desired outcomes without crippling debt.
The most unfair tax is one on consumption since the impact on the poor is much higher than that on those rich who fail to evade it. It is therefore ironic that the UK government choose to raise VAT when those hardest hit are least able to absorb payment of more tax.
Assuming that democracy is working the citizens should be able to recognise the programmes that they voted for when Parliament allocates funds. This is essential since the rights of the government to tax should be directly derived from the costs of the programmes they were elected to deliver. I am, after 30 years of auditing central government, well aware that manifestos can be seen burning even on election night. Pressure groups are the citizen's only other weapon between elections and they are now largely starved of funds perhaps as a matter of policy; it is certainly convenient to strengthen the few rich supporters, ignore their tax evasion and cut funding of groups to support those who have neither the good fortune or abilities to move from poverty to the funded elite.
At present funding is allocated in huge blocks; there is no clear link back to the programmes the electorate wanted or to measurable indicators that will show whether the desired aims are being achieved. Even an elected representative cannot dig down to the the meaningful information on objectives achieved and costs incurred either in the past or in the future plans. Questions asked in the House about the odd weapon, war, crisis or flood take an enormous amount of effort to answer because the accounting is not constructed to answer questions about programme costs or benefits.
Parliament exists to deliver the outcomes it promised on election so should have been insisting on a programme accounting system linking inputs and outcomes from the outset yet few MPs to this day understand that the adoption of accounting systems designed more for private sector interests than public sector purposes has led to the increasing invisibility of the true cost of the initiatives they themselves are deeply committed to.
In a programme accounting system it is the delivery bodies that become hazy whilst the programme and its measurable outcomes is what Parliament votes for and reviews each year. If standards are maintained and outcomes achieved the monolithic departments of state become irrelevant since it may be them or any other private or third sector body that delivers the outcome required. Most monoliths would decompose becoming planning, resourcing, monitoring and contracting agencies tasked with one or more of the the key objectives.
More than half of the current central government audit effort is taken up in checking accounts with the result that you end up with something resembling company accounts giving scant information on programmes (especially those that span monoliths). Parliament is left with piles of numbers that cannot be interpreted in their role of programme delivery agents unless they specifically ask about costs or performance targets of programmes they have a particular interest in. The cost of answering such a question is immense since that is not how the accounts are set up to deliver. This must change as scarce resources need to be very carefully targeted at the programmes that parliament agree have the highest priority.
When the audit report is complete it is formally submitted to a parliamentary committee called the Public Accounts Committee. At present they are faced with the same problem as Parliamentary Members and often ask for more detail on programmes than either the audit office or civil servants can provide. Surely it makes sense to realign the accounting process to produce results relevant to the programme value for money questions that the Committee should really be probing both on behalf of their colleagues in Parliament and their constituents in the electorate. The voter cares whether their local services have improved but I doubt that one has read a set of government financial accounts unless they are themselves in the monolith concerned.
This meaningless waste of resources on producing information no-one wants has to stop. The public services report to us all on the progress made on the mandate we gave them; they are not companies who need to worry about misleading opportunistic investors or shareholders. That is why public accounting and auditing needs to be radically different to that found in the private sector and somebody must surely have the will to act on this.
The lack of programme accounting damages effective accountability but there is another issue namely sector boundaries. There are arcane mechanisms by which a programme that crosses the boundaries between central and local government or between the government and third sectors is now having to be pushed hard as the government try to make third sector (charities) take on delivery responsibilities with little or no payment as an incentive to do anything. Since the third sector is already impoverished by the failing economy dumping delivery of services to those in dire need can only lead to further deterioration. There is, for example, almost no provision in my Borough (Bexley) for any support for those on the street, unemployable, psychiatrically disturbed or in need of further training for employment. Social Workers used to be visible for those who needed them but the needy are now simply ignored - this is care in the community in action. Now think back to those wonderful accounts - is any of this misery apparent. Perhaps MPs just don't care - I get little sympathy from David Evennett in our Borough and it may be that there are none left with the will or power to restore our welfare state. The point I wish to make is that even if they wanted to they would not find it easy to get the performance or expenditure statistics necessary to show how bad the situation is becoming.
If Parliament allocates funds to an independent agency solely responsible for delivery of a specific programme many of the awkward barriers between sectors simply disappear as they are absorbed into a single programme team with. The means of delivering the outcomes required would have, of course, to follow ethical rules and be subject to comprehensive audit by the government audit office but the boundaries and obstacles to choosing relevant, local experts disappear at a stroke. Of course for social welfare to improve you still need MPs to care but at least they would have ammunition to use in order to improve failing programmes if they knew the performance statistics.
My personal view is that a decision has been taken to hide as much misery as possible using the financial standards of the public sector, to destroy social services and ignore those who are impacted but since I have seen the impact at first hand and seen how it can be ignored by the centre I may be biased. I believe we will see health, education, careers and housing for the advantaged and a Malthusian purging of everyone else.
I'm not even sure that the UK is a democracy any more rather an an oligarchy.
At the time I was reviewing US GAO reports based on sets of programme accounts where Congress set out resources, milestone and measurable targets. This seemed like a huge leap forward to me as it ties audit and accounting to time, inputs and measurable outcomes all at one go. Just what the UK cannot do.
I made representations but they were ignored; the team wrestling with WGA (Whole Government Accounts) felt they had enough to do without proposing a change in the entire Parliamentary accountability system. Unfortunately they also ignored the advice that private sector accounting standards do not fit the public sector and lead clients to do nugatory and, arguably, meaningless, work trying to squeeze the public sector based on social objectives agreed by Parliament into a private sector model meant for investors and shareholders.
The most fundamental issue in the public sector is why it exists at all. That reason, at best, is some communal need. In the early days these needs are basic such as currency, defence and the humane treatment of those unable to fend for themselves – dead piles of babies with servant mothers and aristocrat fathers on church steps eventually do lead to calls for action. It is also bad for business to have members of the community wandering around starving in rags. These issue may even need reconsidering today with the current government unable to understand that the over 50s and inexperienced 20s will become destitute as will the disabled.
The result is a realisation that the rich have to be taxed heavily in order to pay for social programmes run at a defensible level to defend from outside and inside threats all the community members. There follows a small, but necessary, diversion on taxation.
Taxation is, therefore, a necessary evil for a morally sound community. It is important at this point to realise that those who can afford to pay it are those who make money within the community whether or not they then export it via dubious means to other communities and that that the level of tax will depend on their legitimate obligations to their families as well as the money however raised.
A fair (progressive) tax system has to be wholly based on income and the rate has to rise proportionately to avoid further impoverishing those on a lower income; so tax bands arise. My view is that these should go all the way up to 90% for those on incomes more than three times the median income. This would not only raise money for the programmes voted for by the citizens but give the elected representatives some chance of delivering the desired outcomes without crippling debt.
The most unfair tax is one on consumption since the impact on the poor is much higher than that on those rich who fail to evade it. It is therefore ironic that the UK government choose to raise VAT when those hardest hit are least able to absorb payment of more tax.
Assuming that democracy is working the citizens should be able to recognise the programmes that they voted for when Parliament allocates funds. This is essential since the rights of the government to tax should be directly derived from the costs of the programmes they were elected to deliver. I am, after 30 years of auditing central government, well aware that manifestos can be seen burning even on election night. Pressure groups are the citizen's only other weapon between elections and they are now largely starved of funds perhaps as a matter of policy; it is certainly convenient to strengthen the few rich supporters, ignore their tax evasion and cut funding of groups to support those who have neither the good fortune or abilities to move from poverty to the funded elite.
At present funding is allocated in huge blocks; there is no clear link back to the programmes the electorate wanted or to measurable indicators that will show whether the desired aims are being achieved. Even an elected representative cannot dig down to the the meaningful information on objectives achieved and costs incurred either in the past or in the future plans. Questions asked in the House about the odd weapon, war, crisis or flood take an enormous amount of effort to answer because the accounting is not constructed to answer questions about programme costs or benefits.
Parliament exists to deliver the outcomes it promised on election so should have been insisting on a programme accounting system linking inputs and outcomes from the outset yet few MPs to this day understand that the adoption of accounting systems designed more for private sector interests than public sector purposes has led to the increasing invisibility of the true cost of the initiatives they themselves are deeply committed to.
In a programme accounting system it is the delivery bodies that become hazy whilst the programme and its measurable outcomes is what Parliament votes for and reviews each year. If standards are maintained and outcomes achieved the monolithic departments of state become irrelevant since it may be them or any other private or third sector body that delivers the outcome required. Most monoliths would decompose becoming planning, resourcing, monitoring and contracting agencies tasked with one or more of the the key objectives.
More than half of the current central government audit effort is taken up in checking accounts with the result that you end up with something resembling company accounts giving scant information on programmes (especially those that span monoliths). Parliament is left with piles of numbers that cannot be interpreted in their role of programme delivery agents unless they specifically ask about costs or performance targets of programmes they have a particular interest in. The cost of answering such a question is immense since that is not how the accounts are set up to deliver. This must change as scarce resources need to be very carefully targeted at the programmes that parliament agree have the highest priority.
When the audit report is complete it is formally submitted to a parliamentary committee called the Public Accounts Committee. At present they are faced with the same problem as Parliamentary Members and often ask for more detail on programmes than either the audit office or civil servants can provide. Surely it makes sense to realign the accounting process to produce results relevant to the programme value for money questions that the Committee should really be probing both on behalf of their colleagues in Parliament and their constituents in the electorate. The voter cares whether their local services have improved but I doubt that one has read a set of government financial accounts unless they are themselves in the monolith concerned.
This meaningless waste of resources on producing information no-one wants has to stop. The public services report to us all on the progress made on the mandate we gave them; they are not companies who need to worry about misleading opportunistic investors or shareholders. That is why public accounting and auditing needs to be radically different to that found in the private sector and somebody must surely have the will to act on this.
The lack of programme accounting damages effective accountability but there is another issue namely sector boundaries. There are arcane mechanisms by which a programme that crosses the boundaries between central and local government or between the government and third sectors is now having to be pushed hard as the government try to make third sector (charities) take on delivery responsibilities with little or no payment as an incentive to do anything. Since the third sector is already impoverished by the failing economy dumping delivery of services to those in dire need can only lead to further deterioration. There is, for example, almost no provision in my Borough (Bexley) for any support for those on the street, unemployable, psychiatrically disturbed or in need of further training for employment. Social Workers used to be visible for those who needed them but the needy are now simply ignored - this is care in the community in action. Now think back to those wonderful accounts - is any of this misery apparent. Perhaps MPs just don't care - I get little sympathy from David Evennett in our Borough and it may be that there are none left with the will or power to restore our welfare state. The point I wish to make is that even if they wanted to they would not find it easy to get the performance or expenditure statistics necessary to show how bad the situation is becoming.
If Parliament allocates funds to an independent agency solely responsible for delivery of a specific programme many of the awkward barriers between sectors simply disappear as they are absorbed into a single programme team with. The means of delivering the outcomes required would have, of course, to follow ethical rules and be subject to comprehensive audit by the government audit office but the boundaries and obstacles to choosing relevant, local experts disappear at a stroke. Of course for social welfare to improve you still need MPs to care but at least they would have ammunition to use in order to improve failing programmes if they knew the performance statistics.
My personal view is that a decision has been taken to hide as much misery as possible using the financial standards of the public sector, to destroy social services and ignore those who are impacted but since I have seen the impact at first hand and seen how it can be ignored by the centre I may be biased. I believe we will see health, education, careers and housing for the advantaged and a Malthusian purging of everyone else.
I'm not even sure that the UK is a democracy any more rather an an oligarchy.
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