The curse of perverse budgeting

We live in a world, or so it seems, of collapsing school roofs, directionless railway projects, hospital buildings keeling over in decrepitude, and roads made up more of potholes than of tarmac.

We have a strange view in the UK of what we could achieve and how we could achieve it. It is, of course, a cultural problem – most problems are – but we do less and less to resolve it. At its heart is the concept of budgeting.

Ostensibly this is a process to ensure that what you want to happen does happen, and that you don’t run out of the required cash before you reach your goal. This is how any mature economy or business should behave. It is about enabling. It is about sticking with a project and seeing it through despite the unexpected problems that will inevitably occur.

This is how the Elizabeth Line, the vast cross-capital underground railway link, was eventually completed in London. There were disagreements and quarrels as it came into its final years of building. But they stuck with it, and the passengers and customers did indeed come. A year after its opening, the Elizabeth Line accounts for one in six of all passenger rail journeys in the UK. It has been a triumphant success.

You would assume that success would breed success and that umpteen further projects are now nearing completion as they bowl down the line. Not so. Instead it has been years of stop and start, with huge extra costs incurred as concepts are altered or cancelled mid-project. It is bewildering. But it is how budgeting works in the UK. The system tends not to be used as an enabler but as a controller, a spanner in the works rather than an enhancer of the original vision.

Power play

The curse, certainly in the UK, is that budgeting becomes a way for the people controlling the cash to teach the underlings a lesson, to bully the people beneath them in the pecking order, to assert their superiority by denying them access to the means of success.

At the highest level, in government, the Treasury becomes almost a pantomime villain as it strives to reassert its position at the apex of the pecking order by being seen to crush the aspirations of lesser ministers and ministries, and their ambitions. But the process is repeated throughout the business world.

It becomes a means of teaching a lesson to and belittling the lower management orders. The underlings are being punished for their lax ways. Stasis is the endgame. No one wins.

The results reverberate around us in a myriad of examples. The public sector inevitably provides the most obvious because it can be argued that it is taxpayers’ money that is being squandered. Routine maintenance, for example, is an easy thing to chop out of a budget.

But from concrete roofs coming to the end of their days to hospitals that are gradually becoming much less efficient places to fulfil their central objectives, the budgeting malaise worsens the possibilities of any improvement.

Mindset muddle

What would make a difference is long-term financial planning, rather than the short-term closing down of what seems innocuous at the time but eventually will prove disastrous. In the end it is a mindset that needs to be changed, and that is very difficult in the long-term cultural mess that business and the public sector are in.

Almost every business management thesis decries the idea of top-down methods of managing. Yet that is exactly what the budgeting process enshrines. The whole process needs to be viewed from the correct end of the telescope instead. The objectives need to be agreed, and only then should the process of how people get there and how the funding will work be discussed. As well as producing results that are in line with the original objectives, this approach will make the people involved much happier.

The current budgeting approach grinds people down and marginalises their efforts and their share in and support for the objectives. There is no satisfaction or happiness in the outcomes. But the current culture of budgeting is engrained. Much work is needed to free the people from its curse.