For the first time ever, the influential Public Accounts Committee has been able to examine the operations of the Bank of England (thanks to new powers given to the National Audit Office) - and the early indicators of its performance aren’t great.
Despite proclaiming that it has two major projects underway to modernise its central services and improve efficiencies, the Committee found that its technology costs are much higher than the average across central government and that it lacks a clear vision to enable its plans.
The Bank of England is responsible for monetary and financial stability in the UK. It has a wide range of differing roles, including setting monetary policy, supporting financial markets, and the settlement of transactions.
The Committee’s report out this week states, however, that the Bank’s failure to enforce compliance with its own policies undermines its credibility to demand compliance from others.
Chair of the Public Accounts Committee, Meg Hillier, said:
“The Bank of England wants to overhaul its ways of working but it is still not clear what this will mean in practice.
“Without a coherent vision it will not be possible for the Bank to make informed decisions about the people, technology and locations it needs.
“Poor preparation has been the ruin of many projects examined by the Public Accounts Committee and, indeed, runs counter to the Bank’s own ethos.
“While we are encouraged by the Bank’s commitment to develop a clear vision, the devil is in the detail and we expect the Bank to explain how it will ensure financial savings and other benefits are realised.
“We would also like clarity on the action it will take to meet its diversity targets, rationalise its property portfolio and modernise processes that are, in many cases, needlessly complex and costly.
“The Bank’s credibility is at risk if it is perceived as failing to keep its own house in order. As part of this transformation project, we urge it to aim for 100 per cent compliance with all its policies.”
What’s the plan?
The Bank of England has introduced a central services transformation programme to simplify the service across procurement, HR and finance. It expects that the project will reduce running costs by at least £3.5 million a year.
The Bank has also introduced a data centre migration programme to consolidate IT systems and move data centres. It told the Committee that this project will likely take 15 years before the investments pays off.
The Bank anticipates that the projects will save a total of £9 millions by 2021 and £15 million a year from 2021-22.
However, the Committee has raised a number of concerns with the Bank of England’s plans. These include:
- Lacking a clear vision for the significant changes needed to modernise its ways of working - The Bank does not have an overarching strategy in place specifying what central services will look like in three or five years time. It has committed to developing a clear vision for its central services by April 2019, including a target operating model and how it will measure progress from an early stage.
- The Bank is some way off its diversity targets for 2020 - The Bank’s target is for 50% of its staff to be female by 2020, but the proportion of female staff has remained at between 44% to 45% of staff since 2015. In the past year 43% of new recruits have been women, well below its overall target. It also has a target for Black, Asian and Minority Ethnic (BAME) staff to be 20% of the its workforce by 2020. Currently, BAME staff make up 18% of the workforce, but 23% of staff leaving the bank are from this group, meaning the overall proportion is unlikely to improve.
- Failure to enforce compliance undermines its credibility to demand compliance from others - The Bank found evidence that its own staff had violated its procurement policy up to 200 times between December 2016 and December 2017 for purchases above £25,000. However, no disciplinary action was taken against the people involved. The Bank accepts that its procurement policy and function were not fit for purpose and aims to introduce new policy from April 2019.
- Many of the Bank’s processes are overly complicated, inefficient and very costly - Its technology operations and HR cost £101.4 million and £15.8 million respectively in 2017-18. Compared central government benchmarks, this is 33.6% more expensive than the average. The Bank also has over 700 job titles, rather than a simple role-based system - which creates complexity and increases potential for staff to ‘play’ the system.
- The rate of modernisation at the Bank has lagged behind the UK public and private sectors - The Committee notes that the leadership of the Bank in the past has not modernised the Bank in line with the rest of the public and private sector in the UK. Many working practices appear out of date and each area the Committee probed offered a “glimpse into the past”. The Committee states that “the Bank’s ICT systems are expensive and need updating, its procurement systems are not fit for purpose, there are too many job titles creating complexity and cost, and the estate is too large for its needs”.
A fifteen year data centre migration project doesn’t exactly fill me with confidence. Neither does the fact that there isn’t an overarching strategy to understand where the estimated savings are coming from. There appears to be little mention of cultural change or an understanding of how the organisation could be restructured to reflect the modern, digital world. A long path ahead and it’s been slow to start.