On the case

No one said being the holder of the big red box was going to be an easy job.
But then a chancellor of the exchequer is unlikely to get a great deal of
sympathy from FTSE100 FDs, many of whom face similar challenges to the FD of UK

A chancellor’s job description, if it appeared in Accountancy Age,
would probably go like this; the chancellor must serve the needs of
‘shareholders’, inspire trust, and show integrity and transparency. He has to
provide control and a method of co-ordination in preparing the Budget, amid the
endless speculation about when he might be moving on to his next exciting career

Budget day may be a permanent fixture on the calendar of the government’s
information machine, but if you believe the hype, you would be forgiven for
thinking that budgeting in business is set to become a financial dodo, destined
to join the abacus among other accounting tools of yesteryear.

Why bother with a budget?

It is understandable why there are pockets of discontent with the budgeting
process. In some organisations, the budget is used as a stick to beat
departments with, taking on almost contractual status between management and
finance teams. Not surprisingly there have been calls for reform, particularly
by those who believe organisations should drive value through strategic planning
rather than create dissatisfaction with a bureaucratic exercise in cost cutting.

It could be argued that, as the chancellor’s Budget is essentially an
estimate of tax revenue and public spending and how to balance the two, it
avoids some of these behavioural distortions that have the potential to skew.

The current chancellor has made some changes that are widely considered to be
bold and deserving of respect, and from which FDs could do worse than eke out a
few lessons.

He has, for example, delegated the setting of interest rates to an
independent and well-informed body with relevant expertise (the Bank of
England). Similarly, FDs might consider that those closer to the coalface have
better assumptions on which to base their numbers, which could in turn lead to
less iteration in the preparation of budgets.

The budget-in-waiting

Meanwhile the introduction in 1997 of the pre-Budget report was, arguably,
both innovative and responsive to changing demands. It set out to improve both
co-ordination and communication and, in the words of the Treasury website, ‘help
build the foundations of shared understanding and sense of national economic
purpose between government, business and individuals’.

Again, this aligns with the increasing use of rolling forecasts in business,
driven by the need for a clear line of sight between the numbers used internally
and those communicated to the outside world.

Those corporate FDs spending increasing amounts of time managing the
relationship with investors will surely sympathise with a chancellor burdened
with the weight of expectation of the nation on his shoulders. Neither
chancellor nor plc FD can please all of the people all of the time.

Crunch time

Inevitably, at some point in the budgeting process, someone has to draw a
line and make a decision. A new IFAC paper describes how the professional
accountant in business needs to combine a challenging and questioning approach
with a high degree of understanding of the business, its market and competitive

IFAC also warns how it is essential that the ‘integrity and ethics of the
professional accountant be beyond reproach so that management can rely on their
reports, findings, and recommendations’.

The public sector has had to move from performance measurement to a more
proactive performance culture. A framework that informs strategy implementation,
risk management and resource allocation may seem a long way off to a government
currently battling with widespread concern over the amount and worth of public

A chancellor may look to comparison with budget or forecast as one of the key
management tools, but he has to place more emphasis on the future, which can be
influenced – rather than the past, which obviously can’t.

Whether you are the FD of UK plc, or in the financial hot seat of a FTSE100
company, there is a real opportunity for finance to raise its game and become
more of a business partner by encouraging understanding of budgets across the
business and creating a performance culture.

Commitment at the highest level is crucial to making changes and, like many
FDs, no doubt a chancellor will be weighing up the effect that making unpopular
decisions may have on his own career ambitions. As the average FD tenure
continues its downward trend, that’s surely something with which his
counterparts on the corporate side of the fence might sympathise.

Louise Ross and Kim Ansell work in the technical department at CIMA

Job swap: calling all budding chancellors

Gordon Brown’s sideways step to Number 10 would open up a career opportunity
for the next budding chancellor. The question is whether aplc FD would be
suitable for the roleof UK FD.

The answer, in a word, is no. Don’t get me wrong, though. There are
similarities between the jobs.

A finance director has to be a critical friend to the chief executive and the
business, but the CEO is the ultimate decision maker, particularly when the
decision shapes the destiny of theentire business.

Similarly, the chancellor is a critical ally to the prime minister and has to
support the ‘operational management’ (or ministers, as they prefer to be known)
to make sure that their grand schemes are sensible, fundable, and a proper use
of the ‘company’s’ money.

The chancellor also represents the best interest of the shareholders (in this
case, the electors) and has to be accountable to them for the financial state of
the country.

In many ways, he is the FD of the largest plc in the country.But despite the
growing trend of commercial people moving into public roles, I’m still not
convinced that it would be good to recruit a plc FD into the chancellor’s role.
While many aspects of the job are similar, many issues are fundamentally

Of course, finance directors are used to dealing with the numbers, but the
demands on a chancellor are as much political, social and ideological as they
are commercial.

‘Political beast’ might well bean integral part of the chancellor’sjob
description, but a listed companyFD does not, and should not, workthat way.

Mark Freebairn is head of the CFO practice at Odgers Ray &

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