I listened with interest to the recent UK Government Spending Review and although I concluded that on balance it was a favourable review for UK Plc, I couldn’t help but think that its chances of success would be so much better if the proposals had been rooted in a robust long term outcome focused strategy for the country.
I recently visited China and was struck by the significance of their ‘Made in China 2025’ strategy which, similarly to the German Industry 4.0 plan, aims to comprehensively upgrade industry for the benefit of the country as a whole. Recognising the risk of being accused of ‘waving a little red book’ by pointing to China, I do believe that the best chance for a strong UK economy would to have such an outcome focussed long term economic strategy.
The strategy would clearly differentiate between expenditure for investment and operating expenditure. The former would be supported by clear and robust target return on investment looking to the favourable outcomes such infrastructure and capability building would bring. This requires good management accounting and reporting that connects the various elements of the economy in terms of cost inputs, activities, outputs and outcomes i.e. it recognises the ‘business model’ of the UK economy linking all areas from welfare to health, from education to defence, from taxation to innovation.
Such a strategy, would allow the rationale for current spending cuts to be properly assessed in terms of long term impact. Much like the private sector it seems to me that too much emphasis is placed on the short-term. We need our politicians to think beyond the next election. A long term strategy within which to frame their near-term decisions should also yield a political benefit. Whether it is on the doorstep or on Question Time, a long term strategy for success will give context to current decision making even when short-term pain is being traded for the opportunity of longer-term gain. It may be naïve of me to think this, but ultimately a focus on what is good for the country must be a vote winner.
It strikes me that all this talk of strategy, accounting, reporting and business models is what I talk about on a daily basis within my more usual business circles. I have previously written about the need for the public sector to be run more like a business enterprise which already has a number of tools and techniques that could help. There has been progress, but it is slow, and the opportunity for improved outcomes should be grabbed now.
It was for this reason that I was pleased to see in the Spending Review the announcement regarding the new finance academy, centres of expertise, and a new costing unit to drive productivity. And our CGMA Global Management Accounting Principles set out how to establish a first rate management accounting function that generates the necessary information and insight essential to effective planning and decision making provides the framework to support these initiatives. Integrated Reporting with its emphasis on integrated thinking across the broad range of resources and relationships used and affected by an organisation is an ideal basis for public sector reporting. Mix in the core competencies of a qualified management accountant relating to strategy, business models and integrated thinking with a long term view and you have a real recipe for success not just another political strap-line.
Charles Tilley FCMA, CGMA
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