The National Audit Office (NAO) has published a new guide to help central government finance leaders monitor budgets and their performance and ensure forecasting is effective, as the focus on demonstrating better value for money across public sector ramps up.

The good practice guide – which has been put together following feedback from experts including ICAEW – is part of a series supporting financial management in government. It focuses on three principles: promoting a culture of accountability; developing the right skills and capabilities; and making the best use of data and information.

Effective management of public finances

For public services to be efficient and productive, the effective management of public finances is essential. A report published by the Institute of Fiscal Studies in October warned that Chancellor Rachel Reeves had inherited an unenviable public finance situation; taxes are at a historic high by UK standards and yet debt is high, rising and only barely forecast to decline in five years’ time, while many public services are showing obvious signs of strain. 

At the same time, a report published by the Treasury Select Committee last week warned that a lack of resources, a short lifespan and high risk of duplication has left MPs sceptical about the newly-formed Office for Value for Money (OVfM) achieving its objectives. 

The OVfM was established by Chancellor Rachel Reeves in the 2024 Autumn Budget to “provide targeted interventions through the multi-year Spending Review” and make “recommendations for system reform”. Both objectives are intended to root out waste and inefficiency. 

Not spending less, but spending better

Alison Ring, Director, Public Sector and Taxation at ICAEW, welcomed the guide’s publication and said that in the context of tight public funds, the onus was not about spending less but spending better: “How the UK government spends more than a trillion pounds a year is of critical importance to all of us citizens.”

Ring continued: “Effective monitoring of financial performance, ensuring finance professionals have the skills and capabilities they need, and high-quality data and internal financial reporting are all key to delivering the best value from public resources. We therefore welcome these guides and would recommend them to everyone working in public sector finance.”

The guide is the fourth in a five-part series supporting financial management in government. Other guides in the series are:

• Enablers of success – which looks at the fundamental themes that underpin each stage of the financial management lifecycle.
• Strategic planning and budgeting – which sets out how finance leaders can plan strategically and realistically in the face of an uncertain landscape.
• Allocating resources – which focuses on how to allocate resources effectively when they are scarce and trade-offs need to be made.

The final guide, due to be published later this year, will focus on reporting and will demonstrate how finance leaders can lead their teams to make the greatest impact to organisations on financial performance. 

Further reading

MPs sceptical about Office for Value for Money impact