DEVOLVED FUNDING - POLITICIANS DON'T FIND THE WAY

The Scottish independence saga has provoked urgency to the English devolution question. Centralised government breakdown calls for decentralisation. Politicians know what they want to achieve but are not good at doing it according to published evidence of costly implementation blunders (King and Crewe). There is “dissatisfaction with politicians, political parties and UK politics”.  

Local funding is high on the list of blundering failure over decades of wasted inquiry, change, implementation and operational failure. For decentralisation to work new insights and ways of working must be found if the public finances are not to finally drain away along with political competence.

At present all local spending and ‘local’ tax is part of the totality of public finance  and recorded as such. This requires central management from the top. Yet is only very recently that consolidated accounting has been introduced WGAs (Whole of Government Accounts). These are defective for the same reason that the European Accounts have failed their audit for 19 years to date and are so late as to be unhelpful to the OBR (Office of Budget Responsibility). For example: funds voted are left to be managed by recipients without feedback to the centre which control requires. Controlled decentralisation does not however require detailed centralised control of local decisions and activities.

It is said that local people must contribute to their local area with local’ taxes. They already do with council tax, business rates, VAT and income tax. It is said that people ought to be able to identify ‘local’ council tax payment with local needs and spending but mixed revenue flows prevent this allowing the unaccountable ‘loony left’ to ignite a general  explosion in spending over recent years. The corresponding explosion in council tax around 2003, when raised with councillors, produced the ‘nothing to do with me guv’ syndrome. Over-riding central reaction had to be the council tax ‘cap’ which in its various forms continues but now accompanied by reducing central funding.

It is said that under those conditions there is local accountability. That is self-evidently false and efforts in the future to go down that route with local income taxes, sales taxes and so on will decentralise bureaucracy at great operating cost without achieving anything like the desired result. The present hybrid system is a perfect demonstration of a compromise too far. In reality the local unit is accountable for its performance, with public funds, not its tax calculation.

The main method flaw causing the muddle is “equalisation”. This is redistribution as a secondary process to cross-subsidise regions according to formulaic grant calculations of needs and differences not locally determined nor catered for in the primary taxation system. There is the suggestion, by the LGA (Local Government Authority) who badly want the present arrangements changed, that this should be replaced by another, supposedly ‘independent’ central body, again detached from local needs. That would change nothing and would still not allow for genuine inter-area transfers which are a necessary part of any sovereign state arrangements. It incidentally also seems from information received that the LGA is also still wedded to ‘no representation without taxation’.

There is only one way that wished-for local autonomy can be provided so as to go ‘off balance sheet’ or privatise - call it what you will. A constituted body run by elected representatives must raise its own revenue and be allowed to borrow only on the guarantee of its own people. There are ‘off the shelf’ pricing/subscription methods and existing ‘tax bases’ in the form of electoral registers and residencies. There is also on government record a simple to administer ‘automatic’ method given to Sir Michael Lyons for his Inquiry for drawing from central taxation which would work well, and indeed become necessary, once WGBs (Whole of Government Budgets) are operated as intended.

In any case there needs to be clear organisation and flow charts both for decision-levels and accountability. For example a Police Authority can source  funds from and be accountable to EITHER a central government specified place or a local authority which in turn can EITHER be accountable upwards (as in the NHS) or to local electors. LEPs (Local Enterprise Partnerships) are not accountable anywhere. The form of routine accountability to owners is specified in legislation and best practice but not ‘delivered’ by government. It is also necessary for devolved bodies to have the right to either refuse to observe central dictats or negotiate a price for carrying out activities not necessary to meet their own objectives. Conversely a central government body should be able to charge a local body for such as standard-setting advice.

The ‘joker in the pack’ in this and failure to solve the problem before now can be laid at the door of hidebound politicians, political scientists and economists and more specifically the Treasury which is out of date and has not evolved as in Industry to a position of influence in ‘how to do’ management infrastructure and systems. 

Government isn’t very good at balancing the books

If you want to show your ignorance and upset his feelings call an accountant  a bean counter. Then, as government does, turn to the  economist.

Governments favour economists for their magic with statistics. Apparently skirt length is correlated with the incidence of breast cancer, or on a much more dangerous level tax and benefit policy is correlated with conveniently optimistic forecasts of the “economy” or GDP (defined in note 1).

And what do you get ?…  not only   “is government’s view of its operations obscured” (Economy and Efficiency Board member) but the ‘enterprise’  is loss-making requiring borrowing increasingly from outside the country. Each in-year deficit adds to the accumulating debt. Interest on this debt threatens to engulf spending departments. Moreover the ease with which tax can be taken, money borrowed and money printed leads to “moral hazard” and sloppy administration …which is what we have got: waste, poor decision-making and antiquated systems,  compounded  by ‘limited liability’ on a change of government.  There is unrest under the weight of the Westminster/Whitehall government machinery which 8 years ago was said by a civil servant whistleblower to be breaking down “and no-one knows what to do about it”. No-one at the top in Whitehall seems to be telling our leaders what it is that they should be asking for to correct this. No-one seems to understand that financial control is about KNOWING what is happening.  

Accountancy is not about keeping a tally, or just record-keeping. The evolutionary steps have been: notches on a stick led to a shortage of firewood and resort to quill and single column ledger. In 1492 came what many historians agree as a milestone in human history: Luca Paciola invented the beautifully simple double-entry book-keeping. It provides self-checking (the total of the column on the window side must equal that of the column on the door side) – not only what have I paid but who do I owe. The balance sheet was born. Readers of Hilary Mantel’s Wolf Hall set in the XVIth century  have met Thomas Cromwell’s accountant experiencing the joy of balancing the books. Our government does’nt balance the books and is so ill-equipped believes it easier to go “off balance sheet” with PFI contracts. We all feel the pain of those, both in cost consequences and later as part of the newly accounted for total debt !

Next came a shortage of candles for the nocturnal shift and burning at both ends (even then). It was insufficient to keep the ‘book’ as for the ‘guvnor’ King alone. With the rise of credit the employment of other peoples’ money, required stewardship accounting. With credit came larger enterprises with owners needing managerial tools. Money becomes a very convenient unit of measurement as well as a resource. Delegation of responsibility required planning/budgetary control. ‘What has happened’ becomes basis the for modelling ‘what will happen if ?’ Accountancy joined  other numerate disciplines eg Operational Research (project management techniques, common sense and mathematical solutions for resource deployment and optimization) and other aids to purposeful thought for example MBO (Management by Objectives).

The resulting Total System concept aided by IT reflects the merging of the dynamics of time and events with action and feedback, like the moving pointer on a dial in a vehicle dashboard. Transactions and simulations add up to the continuous total system. It is the basis for all or any information reports as by-products to interested parties eg decision-makers and  taxpayers (eventually). It needs the rotation of data and reaction to become as close together in time as possible.

The evidence of the cinderella status of financial discipline in government is clear. There is a flaw at the heart of UK government: feedback is missing from ‘feedback and control’. It is the same flaw which for 19 years has caused the European accounts to fail their audit because, as identified by an MEP, money voted to recipients is left to be managed only by recipients.  In UK Whole of Government Accounts (WGAs), or ‘proper accounts’ were only started 4 years ago, have been audit qualified and material omissions noted. In UK both in Treasury staffing and basic philosophy economics have held sway at the expense of accountancy. If economics is theoretical and statistics based, accountancy is factual and operations orientated. Management accounting is only slowly being adopted. It is the tool which organises data for decision-making, and for financial control in large decentralised organisations.

It is truly astonishing that the  Comptroller & Auditor General (National Audit Office)  should in the 21^st century have to “call on the government to help fully realize the potential benefits of WGA  in the running of government and use them to inform policy making and assist in medium term financial management.” The same applies to the CIPFA (Chartered Institute of Public Finance and Accountancy) hope that “the treasury will start to lead the way in this by using WGA in the presentation of fiscal events such as the budget and the autumn statement, including by reporting outturn against budget for the whole public sector, and publishing forward balance sheet forecasts.” The ICAEW (Chartered Accountants) have pointed out the lack of a Chief Finance Officer at the cabinet table. Heaven help the OBR and the Chancellor for his Autumn statement.

There are many ‘side effects’ of all this. Topically, with the fallout from the Scottish desire for independence, is the constitutional. It is now being more widely understood that there is a stress point between the need and desire for decentralisation and the need for central control over the money supply, currency stability, and regional monetary cross-fertilisation. The eurozone is learning the painful lesson. But what is not realised is that there are conceptually simple ‘accounting’ solutions for this which, for example, extend into the possibility of new thinking on such as local taxation. Conventional accounting to taxpayers as owners has yet to happen.

To take just one side effect, right now the statistic called GDP  in ratio with debt is much talked of (Gross domestic product – see note 1). There is no absolute relationship but if debt rises and GDP falls that is bad news for politicians and “hard-working taxpayers”. It is now thought important to make sure that GDP is inclusive of ‘gross income’. This means finding out and adding in such as the national sex and gambling industry income. However accountants will tell you that in comparisons and trends consistency is better than spurious precision.

Someone in the treasury right now is debating how to treat the cost of the new aircraft carrier Queen Elizabeth. Should it be ‘written off’ as money spent (good news – GDP goes up)? Talking up GDP doesn’t fatten the pig for market. Should the cost  be amortised over the life of the asset (bad news - in-year GDP goes down), and if it gets sunk does that mean a terminal ‘write-off’ or should  the unexpired life remain on the books ? Again accountants coped long ago with such questions in serving industry.

Another symptom: just the other day realisation began to dawn that taxpayers have a right to know where their money goes. Solution: place online a pre-1492 simple tally of payments over £500!  Why? Do we pay our council tax and have our roads repaired in parcels of £500 or single transactions? And what does it all add up to in context?

How out of date is the local authority attitude to the Annual Report? Eric Pickles claims as new the requirement for certain facts to be disclosed to taxpayers such as pay scales. He says he believes in the need to address voter engagement. But those facts and many others have long been included in financial statements which are integral to the narrative. Positive engagement requires the delivery of the Annual Report as a conventional procedural matter. But on present performance that would happen AFTER the election.

To sum up: the tragedy is that the TaxPayers Alliance has done great work on examples of waste and there is a book out on government blunders but money spent cannot be unspent. It is  not possible to calculate the effect of good versus bad management.  But causes of blunders are more important than individual mistakes. For those who recognise what is unprofessional, untrained and unaccounted for know for certain that we as a country don’t have the governance that we need, deserve and miss. Politicians, Party people, academicians  please note or leave the stage.

Note 1 GDP or Gross Disposable Product is the sum of private spending, government spending, business capital spending and total net exports minus total imports. The underground or ‘black’ economy is excluded.

Transparency or accountability ?

Politicians piously profess transparency and open government. But that is a qualitative  attitude not an act. It too often means only  access to lifeless and historical mass data. It has no primary operational point, only secondary  availability for academic research or statistical  purpose.

Accountability on the other hand, which is professed  but not practiced by government, is an act of discharge or formal process for  a purpose. It is to support with evidence and organised data the formation of policy and operational decision. That embraces the total management control system and also democratic discharge and renewal. At root is the transaction which once executed is not informative in isolation.

Often the word accountable is left meaningless and in the air as in 'making councillors accountable". But for what, to whom, and how ?

The total system concept means for a functioning enterprise the nervous system exactly as it is in the human frame: alive and dynamic with constant feedback and reaction. All organisations to a greater or lesser degree operate such a total system. The corner shop version functions considerably in the mind of the proprietor. As enterprises grow larger they must give greater attention to the design drawing and flow chart etc governing people (and machine) inter-action. The stated objective(s) of the enterprise will determine  the system  but there are timeless disciplines and techniques with many reflected in legislation.

Government(s) tend to be the only organisations that have not grown into that concept largely because of the ‘Ponzi’  or Bernie Madoff mentality in the face of supposed electoral pressures, and failure to link performance and stewardship reporting to electoral proposal. The worst recent case of government failure to do ‘proper accounts’ was that of Greece in 2009 but with UK not so far behind and the European Court of Auditors refusal to pass the accounts now for 19 years with no assurance likely in the future because of the basic defect. UK government's view of its own operations is officially said to be obscured

One must remove from one’s mind the artificial separation between numbers and words. Paradoxically in government “financial statements” are for other people. But quite simply there is the human aspiration and ‘people’ and material resource inextricably linked to the monetary resource. The recording and reporting essentials are very simple: money being a conveniently universal unit of measurement a finite amount is required to do what has to be done and stakeholders need to know the outcome; the exception is the laying out of funds (investment) and the anticipatory borrowing of money ahead of events with the score being kept for that. Contrary to what many people realise there are additional disclosure requirements such as for pay level scaling.

The Annual Report is the customary vehicle (except in government) for telling we interested parties what has been the performance, reasoning and outlook and then seeking a vote of approval plus renewed or changed authority to proceed ‘in office’. 

As regards disciplines and techniques there are a number of professional bodies. Accounting is represented principally by the ICAEW (Institute of Chartered Accountants in England and Wales; the Scottish Institute is separate !), CIMA (Chartered Institute of Management accountants) and CIPFA (Chartered Institute of public Finance and Accountancy). Some years ago there was an attempt (unsuccessful) at a merger. CIMA is least noticed in government and the Treasury ‘majority party’ are economists. The ICAEW has identified the lack of a CFO(Chief Financial Officer) at the cabinet table.

It is worth mentioning alongside the above 'philosophical' analysis that there are probably two causes of the many major project failures, Not only has there been a lack of project management skill in the manderinate but also an experience-lacking inability to think clinically and expressively about objectives and requirements sufficient for translation into IT system specifications.

Who will mend UK governance ?

DYSFUNCTIONAL UK GOVERNMENT: CONSPIRACY OR COCK-UP ? DOES IT CARE?

Chancellor George Osborne in November 2013 says in talking up the recovery prospects that “the biggest risk…….was to give into popular policies that would damage domestic businesses and the UK’s economic competitiveness”. Quite right, but not with continued  populist political short-termism trumping sound professional management for the longer term.

1 Conspiracy ?: why has government not observed the purposes, norms, concepts, principles and standards of accountability practice ? Three ‘authorities’ asked have not denied that this as a ‘secret’ Machiavellian tenet of political science ie that the masses should be kept in the dark as much as possible. Until proven otherwise professed “transparency”, being  passive,  is a lie. And, “Government’s view of its own operations remains clouded” Efficiency and Reform Board member with cost and management accounting in mind.

2 Cock-up ?: BIG-time - By 2010 the UK public sector debt had risen in two years from £580bn to £820bn (+ 40%) and is “now” (31/3/12) £1,190bn ( +another 45%) and still rising. And big-time -  repeated operational failures such as during the implementation of the universal credit welfare reform.

3 The European context first: Euro-stress ?: One only needs to read The Lost Continent by Gavin Hewitt to realise how government negligence cripples the eurozone arrangements with dire consequences for peoples. See below.

4 In the UK we now have clear evidence: The Treasury has allowed governing politicians to work on the basis that future taxation is  certain and therefore to be disregarded.  See below.  The consequence – behaviour  for which Bernie Madoff is in prison -  now dangerously goes on to assume certainty of debt finance. Such negligence grows ‘character weakness’ on top of debt: in resource management, lax banking, inefficient processes, and so on. In populist terms emotive “cuts” submerge the language of governance.

5 These conclusions, which naturally follow HAS GOVERNMENT A BRAIN ? and WHO WILL MEND UK GOVERNMENT ? follow sight of the transcript of the Public Accounts Committee meeting with Treasury mandarins and others on 21^st October to receive answers to questions on the Whole of Government Accounts 2011-12 (WGAs). Some utterances by Sir Nicholas Macpherson, Permanent Secretary, are:

“For many years, members of this Committee have criticised, first the accumulation of public pension liabilities and, secondly, the accumulation of PFI debt. The benefit of WGAs is that those liabilities are squarely on our balance sheets.”  “The WGA is helping to inform the treasury’s approach (traditionally “national accounts” – basically revenue and spending - statistical) to the public finances and is a response to Parliament’s, in my view, wholly legitimate concern that a whole lot of activities were off balance sheet.”

Two sets of accounts… “The reality is that national accounts are an economist’s concept and the Whole of Government Accounts are an  accountant’s view of the world. Both are right in their own terms. Why does the Chancellor primarily focus on the national accounts when he stands up and delivers his annual Budget ? Mainly because all the big international institutions – the IMF, OECD and so on – are run by economists rather than accountants, …” WGAs ….focus on long-term liabilities…” “what accountants don’t take into account is the fact that the state has power to tax its citizens, so we don’t discount future revenue flows to set against the very big pension liabilities”.

6 There are also some 20 major topics from the WGA questioned for answer by the attending civil servants. It is striking  that without proper accounts there would be no PAC questions. Yet the newness of and approach to WGA is incredible if one realises that they are meant to be exactly the same in consolidated format and purpose as has been the norm in corporate life for generations. It is  striking too that the PAC, by default, is exercising the role and responsibility which elsewhere would be that of management in a way Parliament is not capable of. And surely the PAC is duplicating an auditor’s role ? There is also the further implication,  never mentioned, that consolidation of the whole defines the subsidiary role of all public activities – which rather spoils all the heated political ‘localism’ and ‘centralism’ arguments which are so unproductively wasteful of energy.

7 The role of debt finance is growing alongside that of taxation to fund increasingly interventionist electorate-pleasing programmes. With that comes the need to refinance old debt and service the total.  Excessive reliance on debt finance has undermined democracy, with government finance increasingly determined by repayment schedules  rather than electoral cycles. Creditors are not concerned with how money is spent, only debt security. This lies at the heart of the euro crisis of coherence and violent antipathy of Greek, and Spanish populations towards the arguably better managed Germans. It has  actually caused such depression and punishing austerity but so far without popular admission that the fault is  domestic. Treaty-based debt ceilings (expressed relative to GDP) are toothless.

8 Extracted from Gavin Hewitt’s The lost Continent pp55-68 et seq.

“During the Greek election campaign in 2009 the socialist candidate, George Papandreou tried to unearth the true state of the economy. He didn’t start to find out until later. On the day before polling the outgoing government sent an official document to the European Commission which lied about the deficit..”It was not keeping proper accounts”.

It emerged that pension funds had no money to pay the October pensions. State hospitals had not been paying their bills (e6bn). “Paying tax was almost a lifestyle choice”. “Bogus welfare claims on fake medical certificates. “millions of euros were wasted on retirement payments to long-dead pensioners”. And much more…

In 2010 Andreas Georgiou returned from the IMF to run the National Statistical Institute: “records were adjusted to suit the demands of politicians”. He found no documentation for hundreds of entities that were already classified as part of general government. “ Very importantly, a number of state-controlled bodies, like the Greek National tourism organisation and national and radio and television network were not included on the books of the government as they should have been”. A major enterprise also left out was the Hellenic Railways, which was experiencing heavy losses. NOW READ THE Comptroller & Auditor general’s qualifications of the UK Whole of Government Accounts ! And in the context of ONS statistics versus WGAs…… read  Network Rail for Hellenic Railways !

9 Growing debt burdens drifted into with the associated recessions, a vicious circle,  have provided the huge jolt required.  Political leaders realise the dreadful truth when saying things about long term austerity. But where is the reform of governance ? The solutions are to hand if not definable in political language. With political short-termism having democratic benefits there can still be transformation. As an aside at PAC Q89 chair Margaret Hodge said:” “I think the Committee would always stand behind the treasury if it was tougher, as we always say, as a Finance Ministry, rather than just dishing out the money”.

10 Why must we The People be governed by people always eager to legislate, regulate and obfuscate, but not to lead by example ? Please may we now have BETTER GOVERNMENT ‘moving on’ from the military and imperial, to the professional ? Perhaps Her Majesty could ‘have a word’.

WHO WILL MEND UK GOVERNMENT ? (2)

GOVERNMENT ACCOUNTING   

Imagine: May 2013 LOCAL ELECTION RESULTS TO BE PUBLISHED ON 2^nd March 2015

That is the time it takes to produce the UK Whole of Government Accounts (WGAs) !

These, now in to their second year, are “a giant leap forward when compared with what was there before” and are “in the forefront internationally”. The Chief Executive of CIPFA commenting on the appalling PAC report (The redoubtable Margaret Hodge’s Public Accounts Committee) is being kind to the Treasury. WGA failed to get a mention in the budget 2013 documentation. Conventional consolidated accounts have been the norm in groups of companies since  time began. Yet the same Treasury defensively claims academic interest rather than operational integration, the true purpose.

The facts portrayed should be integral to the decision-action-feedback-decision loop which elsewhere is moving feedback inexorably in to real-time. As well as the discharge of accountability for performance their timeliness and quality is of the essence as data input to decisions for the future. For its forecasts and evaluations the OBR(Office of Budget Responsibility) depends on factual input for course correction. It was kept waiting 18 months for draft-only accounts. 4 months later still the Auditor General qualified his report. Normally the quality of forecasts depends on the analysis of variations between the  forecast to be updated and rolled forward, and ‘actuals’ fed back. ‘Actuals’ mean as just now, not in the dim and distant past since when much has changed.

It is not generally realised that there is a fundamental flaw at the heart of government management accounting and reporting. We have publicly protested at Brussels-led spending  whose accounts have still after 18 years not satisfied the court of Auditors. On 10^th November 2008 Matthew Elliott for the TaxPayers Alliance joined 8 of his European counterparts in signing a published letter protesting at inaccurate and audit-failed EU Accounts over 14 years (now 18). On the day following, MEP Ashley Mote’s answering letter explained that satisfactory assurance would never be attained because of “the concept of “shared management” which leaves accountability in the hands of recipients of public funds”. This immediately suggested to the undersigned that the UK hadn’t even started on its 14 year audit failure because, put another way,  ‘governments vote funds and then walk away’. Correspondence with the Comptroller and Auditor General (NAO) confirmed this and general fears about national government financial disciplines. While good intentions and improvements were stated in reply there unexpectedly came the news that it was intended for the first time to produce Whole of Government Accounts(WGAs), followed by budgets (WGBs). Called for by Parliament in 1995 the WGAs did not arrive, incredibly, until those for 2009-10 15 years later, and then only after 22 months delay in publication.   WGBs never materialised !

It has been suggested that other countries are more advanced. That seems to mean having, but not getting beyond, such as multiple area income taxes instead of simply just one. For the UK local funding theory destroys the link between local tax and local policy spending because muddled with equalisation (redistribution through grants), confiscation and precept.  

“Walking away” sets the tone for tax and spend.  Down in local government taxpayers are disregarded and disenfranchised. Nationally it is relied on that something will turn up in the form of increased economic activity. GDP at all costs is the cry notwithstanding that that includes non-productive government activity, the black economy, even crime. The cumulative circulation of money is spoken of as an unmitigated good even to the point of destruction of it’s exchange value. It all adds up to a net accumulated deficit of £1.1tn and rising currently by more than £120bn each year. Oh, look everybody. Where did that  come from ? It came from not keeping the score properly and because grandiose politics negligently trumps thrifty forward planning and sound management.

Care is required on urgently necessary decentralisation which is currently only talked about ad nauseam in such as the H o C Constitution Committee  or the debt and deficit  will become even more threatening and unmanageable. In 2005 Sir Michael Lyons was given, face to face,  a scheme for local government funding which provided for both macro control and decentralisation. It was disregarded. As to “shared management”  MPs (The Business, Innovation and Skills Committee) criticise the government’s “hands-off” approach to monitoring the performance of LEPs (Lord Heseltine’s local Enterprise Partnerships) “despite the fact that they are being given taxpayers’ money and are responsible for key areas such as local infrastructure, planning and job creation”

Surely the archaically titled Treasury should BE the OBR;  its OTS (Office of Tax simplification) should BE integral and deploy rather more than the present 6 people; should SET THE STANDARD and BE THE EXAMPLE for the discharge of accountability and management reporting at all levels; should SET THE STANDARD for government managerial infrastructure and deployment: only now are senior Civil Servants receiving training in project management; it is 50 years out of date. Why are Ministers powerless in the face of the Manderinate ? Why is the Cabinet Office, with eg its component the Major Projects Authority,  uneasily trying to fill the vacuum ? Is it not understood from experience-based thought experiment what domestic government is supposed to be about ? It is not now about fighting and paying for wars, or running an empire (with a few District Commissioners), but professionally managing its own responsibilities in the domestic sphere where an increasingly interventionist stance requires modern industrial systems and attititudes to cope with the progressive sub-division of labour in modern society.

Note: reference has been made to “gobbledegook” in the WGAs. Over time the art of communication has been lost in ever-more legalistic and jargon-filled detailing of the accounting simplicities of book-balancing, assets and liabilities and factual disclosure. That this has continued is itself damning evidence of Treasury failure. And where is CIPFA and the NAO in all this ?

WHO WILL MEND UK GOVERNMENT ?

 

“For those who understand, no explanation is necessary; for those who don’t understand, no explanation is possible”

Regardless of Party or big-issue policy debate, we need better domestic government. Aside from its ordering of civil society it needs to look to the design of its own management, process and  delivery. Politicians, capable of radical thought but not radical action, are helpless in the face of a civil service that can be reluctant or inept and wrongly skilled. At least one 72 year-old body of professionalism, Operational Research, seems still beyond  their ken.

Here are just seven compelling pieces of evidence:

1. ”This is the big dirty secret that politicians scarcely talk about, an all-party fact of life. The machinery of government is breaking down. Nobody knows what to  do about it” (former government special adviser in three departments of state Katherine Raymond, Sunday Times, 28^th may 2006)

2. The extreme complexity of the over-engineered taxation system is evidenced by the unwieldy length of the annually updated official Tolley guide (the page count nearly doubled in 6 years recently to over 10,500 (larger print equivalent)). Also the individual taxpayer is denied an answer to the question “where has all the money gone ?”.

3. In 2012 HM government produced its first-ever proper and consolidated annual accounts, but with a qualified audit report. Apart from what they contained, some of which was bad enough, they took 16 years in gestation, and another 20 months to publication date after the event. The late evolution and execrable performance standard characterises a Treasury failing a nation in dire need of financial management.

4. The local government funding system does not allow real local control and accountability. Many abortive or tinkering attempts over decades to resolve its contradictions and   ‘Heath Robinson’ machinery, have been money down the drain. Similar remarks apply as in 3 to the failure cleanly to resolve the local and central divide in decision competences, and given the existence of more modern money seeking and financial management concepts. (My personal diagnosis was developed during close experience of the ‘many attempts’, coupled with relevant experience in a UK conglomerate with global reach, small HQ, sophisticated non-interfering management and key figure financial control).

5. The announcement of an academy for training senior civil servants eg in big project management is long overdue and comes only now in 2012.

6. Over-use of legislation as the instrument to solve operational problems (alluding to remarks   by recently retired Head of the Civil Service, Lord O’Donnell). Red-tape is spawned, creativity and personal responsibility inhibited yet overpaid for limited risk.

7. Evidence for proper public accountability is absent.  Government excuses itself from disciplines that it legislates for compliance by others. The once only Annual Report for 1999-2000 released on to the high street, was presumably thought too brave an idea.

That no progress has been made is amply evidenced by continuing media reports of red-tape and  lethargic bureaucracy over many years. The language is almost word for word unchanged. One exception to this thanks largely to the TaxPayers Alliance, is that money is now recognised as deriving from taxpayers  rather than being a different currency called “government money”.

The solution lies in:

1. The establishment of a small System Architect’s Department of State headed by a ‘Chief Engineer’ for the ‘Ship of State’, to give intelligent design impetus to all machinery and processes. 

2. The Crown appointment of a person of Beeching-like strength to head a ‘polaris’ project for the simplification of tax and reduction in number of the different levies. Re-stated  primary objectives for taxation as a whole, and  implementation-ready end-date would be established before commencement of project planning.

3. Attention to  financial discipline as called for by the National Audit Office

4. Implementation of a new local funding system as offered personally to  Sir Michael Lyons in 2005, and others, which would resolve the anomalies described in 4 above, This would be simple to implement without conflicting with 2 above.(The Local Government Select Committee’s consideration in 2006-07 included evidence submitted by me (ev111) which was clearly reflected in the conclusion drawn that a return to the drawing board was necessary.  This was ignored by government.)

5. Delivery of timely narrative audited annual reports to discharge accountability (for public money). This with 6 below will be transformational.

6. Provision to individual citizens of a tax share statement or calculator, linked to the national accounts, and printed on the back of existing documentation such as coding notices and council tax invoices.

Peter Webb                                                                                                            17^th February 2012

HAS GOVERNMENT A BRAIN ? And what of Surrey CC ?

Elected government is ultimately responsible to the people for getting it right executively and operationally, yet politicians stand apart  from the Civil Service. The retiring  Head Sir Gus O’Donnell has just said that there is too much problem solving by legislation, and not enough risk-taking.

The Rt Hons Eric Pickles, for local government, and David Cameron, for Departments of State, knowing that government costs an awful lot of money but trying to leave it to us to do their job for them, love the new idea of the “armchair audit”. They fondly imagine you and I excitedly poring over masses of  unformed data about things beyond our ken and “holding to account”.  But this only means that we are left to wonder what it all adds up to, and who in the shapeless body of government can be held to account, how and for what exactly.

Consider a terrifying thought in the light of the deficit-laden  public finances.  The Chancellor, for his Autumn Statement, relied on input from the Office of Budget Responsibility. This included provisional data in the first ever Whole of Government (consolidated) Accounts, for 2009-10. These are only now (today) due to be placed before the House of Commons by the Treasury with a report by the Comptroller and Auditor General ( will he not sign them as has happened in Europe now for 17 years ?). That data is 21 months out of date.

So called management-speak, particularly of the financial kind, is anathema to politicians. The front line is good and the back office bad. They have a poor sense of the dynamics of delivery up to the point where the word sounds good in political-speak. Government is 50 years behind the times in the evolution stakes. The ship of state is not designed to cleave the waters and is without a chief engineer (a new Department of State perhaps ?). They seem unable to grasp the concept of the Total System, and System Architecture now transformed by communication technology advance. This failing is crystal clear to one who has been fortunate in his industrial post-graduate on-the-job training and career-long senior experience.

There is a crying need for simplification with a big S in thought and practise. And this is aside from the desperate need for radical simplification of the tax system beyond just the usual tinkering which seems only to increase the length of the official guide.

Big problems have spawned a body of analysis tools and techniques based on common sense and some mathematics, and the ordered and disciplined use of symbolic and diagrammatic portrayal for communication and resolution.  Operational Research has like other professional disciplines been prone to jargon. However it has given sight to blind people. One can quote Organisation and Methods, Work Study, Critical Path Planning (CPP), and now Lean Technology.

The important thing is the mind-bending leading to decisions for action and its direction, completion and feed-back. What is the economic case for a fire extinguisher ? What is the optimum pump layout and spacing on a forecourt ? What the best alternative cash flow projection.

Here is some history which may be news to some.  In the US in the cold war there was an urgent need for a new weapon. Its creation had to be from then unknown science to  meet a definable objective delivered in the shortest possible time. It was a vast project. The Polaris submarine was born of CPP which in turn was based on Network Analysis. That in turn took a simple line (activity) and joined it to a circle (event) from which the inter-connections spread out working back from the wished-for deadline. This is still at the heart of project planning and  management with additions for optimum resource allocation – not a restraint financially with Polaris.

My pet example: Local government let alone national government doesn’t even yet discharge and sign off accountability by delivered narrative Annual Report by the leader or chairman. To do this it requires the financial aspect, ie audited annual accounts, to be available quickly to complete the  picture. Our resident taxpayers’ rights are dismissed with bland talk of (passive) transparency. It has often been said that to speed up from the present six months or so would cost more in council tax when in practice the reverse is probably true. Certainly each day of delay wastefully diminishes value. I first met the problem early in my career 50 years ago when a new Chief Accountant.  I had been on a one-day Operational Research course  and discovered the remarkably simple network analysis idea –simple is revolutionary as was the invention in 1492 of double entry book-keeping. I was able to apply this to the production of a bar-chart company-wide  inter-facing timetable for completion of the Accounts. It was  a crash course in my employer’s  manufacturing company activities outside the financial. But only now in 2011 has SCC, according to an official Minute (of a committee), come to understand this interdependence within itself to contrast with the traditional departmentalised silo mentality, a political rather than reality tuned mind-set.

As a local tax campaigner I recently spotted a recruitment advertisement for a Lean technologist for the Royal Surrey County Hospital. Expecting to be able to go yah boo non-job ! I contacted the recruiting agency who, however,  gave me full explanation and reference to the professional body. Once again I experienced the thrill of discovery. This technique started life in the Toyota Company seeking to ‘car-centre’ its production and assembly process to optimise the movement of people and parts etc. focussing on the car  rather than the separate and remote or awkwardly placed departments. It is increasingly used in hospitals to patient-centre the medical process. The working analysis will discover and portray for resolution the high proportion of ‘idle’ time and ‘in-between’ activity. It is noteworthy that these disciplines are not employed primarily to save money but anyone with imagination will see that this must be one result.

It is good to be able to report that at our recent meeting with  Leader David Hodge and Acting Assistant Head of Finance of Surrey County Council Sheila Little, we learnt that work and results now ensue from Change and Efficiency Directorate employment of this thinking in its Public Value Reviews. Please may it extend to a revolution in the ‘mainline’ ways things are done by, for example, simplification  of its constitution and innovative streamlining of due process. The last World War took less time to fight and finish than it took SCC to initiate and “sign off” the new street lighting.

Please let’s transform the ways and attitudes of government by letting in and encouraging higher quality brainpower and management clout.  Politicians need to regain our trust in their competence.