A “cultural shift” is needed across government to secure long-term value for money and to change behaviours and incentives that currently prioritise short-term delivery, savings and spending control, according to a new report by the National Audit Office (NAO).

The report – Lessons learned: a planning and spending framework that enables long-term value for money – says that recent governments have taken a “highly short-term reactive approach” to dealing with fiscal and other challenges. No multi-year spending review has been undertaken since 2021 as the government has dealt with navigating the economy through the COVID-19 pandemic, an energy price crisis and soaring inflation.

However, such an approach may have “hidden underlying weaknesses” in financial management and may have led to decisions that could have “adverse implications for long-term value and resilience.” 

The report also identifies the need for more efficient cross-government working, increased transparency and the better use of data as several ways in which government can make public money work harder. In total, eight lessons are noted by the NAO, highlighting the progress that government still needs to make in securing long-term value for money, despite there being “some evidence” of improvements in recent years.

The findings come at a time of further economic challenge for the UK government, with the Autumn Budget providing vital additional investment in capital spending across a range of public services, balanced by £40bn of tax increases that the government says are essential to ensure fiscal stability.

Importance of cross-government collaboration

Both central and local government spend money on related activities, for example in achieving net zero, in addressing homelessness, or in diverting people away from the criminal justice system. However, activities and initiatives are often unco-ordinated, with the risk that money and effort may be duplicated or targeted less effectively to deliver positive outcomes.

Although the NAO argues that achieving value for money in many areas is only possible through joint efforts from many branches of government, the current system disincentivises departments spending money that benefits or saves money for other areas of government; accounting officers are purely responsible for their own department’s funds and any cross-department initiatives require additional governance arrangements, “which are hard to sustain.”

The NAO’s findings mirror the Ministry of Housing, Communities and Local Government’s previous assessment of the effectiveness of cross-government working in delivering positive outcomes for local residents, published in March 2023. It identified that structural barriers at a national level impact the ability of local authorities to meet the needs of local communities.

Encouragingly, the new government does appear to recognise the importance of cross-government collaboration in improving outcomes, with a new strategic approach setting out expectations for departments on cross-government working. 

However, it remains to be seen whether this approach will lead to positive change, with the NAO warning that government will need to plan and manage spending, risks and delivery against common objectives across organisational boundaries if it wishes to maximise value for money.

Poor data is a ‘chronic problem’

Good-quality timely data should be seen as an essential tool for government. Without good data, there is a risk that government does not allocate resources to areas where they can achieve the best possible outcomes and the best value for money for citizens.

The NAO report therefore notes the importance of basing decisions on good evidence on how to spend taxpayers’ money, although the report references previous NAO publications, which frequently identify that “poor data is a chronic problem” and that decisions about where to spend money are too often based on “too little good data and evidence”.

These problems are pervasive across government, with the NAO report also highlighting widespread challenges with the standardisation of data, a lack of data sharing where required and a lack of data evaluation. The NAO says these issues are exacerbated by the incentives to make decisions quickly, and calls for a “cultural shift” across government to focus on securing long-term value for money and moving away from short-term reactive measures.

Lack of transparency hinders effective scrutiny

Government should be “transparent about its objectives, plans and spending choices”, as well as the “performance and outcomes delivered”, according to the NAO. With public finances being constrained, transparency is vital in allowing parliament and the public to effectively scrutinise government plans to ensure that value for money is being achieved.

However, the NAO found that the current spending and planning framework “does not embody transparent decision-making, either internally or externally.” Several examples are set out in their report where effective transparency was not forthcoming, with a lack of visibility on “costs, funding, benefits, obstacles, modelling, evaluation or decision-making” being prevalent throughout government projects.

This is despite the HM Treasury report from May 2023, Managing Public Money, noting that transparency is a key principle in the management of public resources, with public sector organisations being required to “make available timely information regarding their services, standards and performance.”

Jack Bower, ICAEW Public Sector Audit and Assurance Manager, says: “The NAO report makes it clear that real change will be needed by government if it is to prioritise obtaining value for money and delivering positive outcomes for taxpayers. We believe that the next multi-year spending review provides a good opportunity for government to enact this change. The establishment of the Office for Value for Money already indicates a shift in the way in which government plans to operate.

“Beyond this, the government must also focus on encouraging the development and use of high-quality, robust data to aid efficient decision making and allowing effective scrutiny of this data. At the same time, removing the various structural barriers that hinder collaboration across both central and local government must be a priority. Government must also tackle the many other recommendations made by the NAO in its report.”

Read the full NAO report.