The task of improving financial management across Whitehall is to be taken out of the hands of the Treasury, Philip Hammond has decided, in a move criticised as potentially likely to undermine efficiency for taxpayers.

In 2014, ministers implemented reforms to inject more business discipline into the civil service after a series of costly public spending errors. These included a significant procurement overspend at the Ministry of Defence, revealed by the National Audit Office in 2010, which put the MoD billions of pounds into debt; and the 2004 contract that allowed GPs to opt out of providing out-of-hours care but still gain large bonuses for hitting other targets.

One of the main planks of the reforms was to shift responsibility for financial management from the Department of Health, where the issue had appeared sidelined, to the heart of government in the Treasury.

The chancellor has now reversed that change so that the Treasury can concentrate on cutting spending and reducing the deficit. The leadership role for financial management — ensuring that taxpayers get value for money — will move to another, as yet unspecified, department.

Rob Whiteman, chief executive of the Chartered Institute of Public Finance and Accountancy, called Mr Hammond’s decision a “backwards step”. He said: “Good progress has been made to improve the timeliness of year-end accounts, but in the opinion of most independent experts there are still further improvements to be made that will now be harder to achieve.”

He cited the planning of efficiency measures and investment projects, to ensure they had been fully costed and more effectively implemented. “We have seen, for example, that in areas like prisons and social services, money is taken out only then to be reversed by the chancellor because the savings agreed were found to not be achievable.”

Julian McCrae, deputy director of the Institute for Government think-tank, said: “The evidence clearly shows that the post-2013 leadership structure was working. It is also clear that this was not a case of ‘job done’. While there have been some tangible improvements, core ambitions such as ensuring that financial insights flow into all Whitehall’s decisions are still a long way off.”

In 2013, a financial management review commissioned by George Osborne, the chancellor at the time, concluded that the Whitehall model was out of line with the private sector, where the chief financial officer sits at the heart of the organisation and its decision-making.

The following year Julian Kelly, a qualified accountant, was promoted from his position as director of public spending to also take on the role of controlling financial management.

Mr Hammond is splitting Mr Kelly’s role in two. The head of public spending will remain in the Treasury while the leading official on financial management will combine this with a similar role at another department.

James Bowler, the current Treasury director-general for tax, will take up the former position. Although Mr Bowler is a highly regarded Treasury generalist, his appointment reverses the commitment in the review to have a financially qualified civil servant doing the public spending job.

Mr Whiteman said: “Before 2013 one of the departmental CFOs took the leadership role across the civil service on top of their day job, and this is now about to happen again.”

Treasury officials said the personnel changes did not mean the government was failing to take financial management seriously. “There will continue to be dedicated staff and resources in place to deliver what the government needs in terms of financial management across Whitehall and there is no let up in our commitment in this area,” said an official.

Whitehall needs resources for Brexit, say MPs The government should ensure the civil service is sufficiently skilled and resourced to meet the significant challenges it faces over Brexit, a Commons committee has urged. The 26 per cent reduction in the number of civil servants since 2006 would put a strain on Whitehall as it gears up for negotiations with Brussels and prepares to take back responsibility for policy and regulation in several areas such as agriculture, said MPs on the public administration and constitutional affairs committee. MPs highlighted concerns raised last year by the Institute for Government think-tank, which said: “The challenge for the civil service is not skills but capacity.” The MPs also noted that the Brexit-related strain on Whitehall could arguably be seen in other areas of government business, including hundreds of outsourcing contracts that were due to expire but were renewed or extended because civil servants are too preoccupied with Brexit to focus on them. The committee also called for an in-depth consideration of the relationship between ministers and civil servants, with a clarification of rules setting out boundaries between them. Brexit made it all the more important the civil service was clear about its mission and role, MPs added. Bernard Jenkin MP, chair of the committee, said: “We believe that this is the first time that there has been select committee consideration of the relationship between ministers and officials with the active support of government and the civil service. The findings were welcomed by the FDA union, which represents the UK senior civil servants. Dave Penman, FDA general secretary, said: “The report is a welcome addition to mounting evidence that the government is failing to match commitments with the resources it provides to the civil service — and is compounding this error by insisting on Brexit on the cheap.” Jane Croft

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