Too much slang on the Whitehall street

"Tight" and "loose" are two terms that have entered the street slang of Whitehall in the past few years. "Loose" refers to the decision making that has been devolved from the centre to, for example, the increasing number of academies in the schools system and the many clinical commissioning groups in the NHS. Whereas "tight" refers to, for example, the financial accountability which has returned to the centre, moving away from bodies such as local education authorities or the disbanded regional health authorities. All academies’ accounts now get consolidated into the Department for Education’s own accounts—tight. And the Secretary of State for Health owns all the property that used to be owned by the independent bodies abolished via this Government’s Health and Social Care Act—super tight.

The tight-loose dichotomy can matter if it gets in the way of knowing what is going on and who is accountable for it. Yesterday the Auditor General, Amyas Morse, published “an adverse opinion” on the Department for Education’s latest annual accounts for precisely this reason, concluding that they are not a “true and fair” statement of the Department’s affairs and that the level of error is “both material and pervasive.”

There are three sources of error: academies have a financial year that ends in August, in line with the academic year, whereas the Department’s accounts run until March, the conventional financial year. Matching up the two sets of accounts across seven months introduces errors. On top of this, there is an increasing level of change in the assets, income and expenditure of academies between their August cut-off for preparing accounts and the Department’s March date, so those errors in matching up are magnified. Finally, there are inconsistencies between the latest returns academies have made to the Department and their previous returns.

These errors matter. Most bluntly, Morse notes that the Department spent £166m more on one of its budget lines than it had been authorised to do by Parliament. How this happened is that academies have freedom to determine their profile of spending across the financial year and to carry forward unspent grant—loose. Because the Department has to consolidate their accounts into its own it ought to know what academies are doing—tight. But it doesn’t. In fact the Department didn’t know what the cumulative impact of all the decisions made by individual academies was until 8 months after the end of the financial year—umm, loose, and not in a good way.

The advice from the National Audit Office to the Department is to find a way to fix these problems. But this is easier said than done. One approach would be to remove the financial freedoms of academies—go tight all the way through. This isn’t going to happen. Instead, there were an additional 1,082 academies created during the last year alone.

An alternative is to embrace the loose: academy trusts are autonomous organisations, they can present their own accounts to Parliament rather than have them consolidated into the Department for Education’s report. Their public funding, after all, is largely determined on the basis of a formula. The Department could be accountable to Parliament for setting the formula, then each academy is responsible for how it uses the money. While this may be theoretically possible it ignores the political reality that on the whole we do want some national accountability for how schools are run. That was underlined for many by the Trojan Horse controversy about the potential of radicalisation in Birmingham schools. Birmingham City Council, Ofsted and the Department for Education all had to answer for their part, it wasn’t merely a controversy about the actions of school leaders.

While Education now has an urgent and difficult problem to fix, the same challenge is coming to other parts of government too. All parties are promising further decentralisation in the next Parliament. Discussion of the tight-loose dichotomy will become ubiquitous in government and perhaps more and more incomprehensible to anyone trying to understand public services.