Andrew Likierman: Knight of the round figures

Professor Andrew Likierman will be there to officially receive his knighthood, an award he received in the Queen’s birthday honours list in June.

So was this an expected reward for his work in central government accountancy?

‘No, it was a wonderful surprise,’ says Likierman in a genuinely humble voice. ‘The idea that one gets to be knighted is rather amazing. I was very flattered because I hope it reflects the work on the central thrust of accounts and the whole way of thinking about financial management in central government.’

But Likierman is the first to point out that although he was the head of the initiative to bring government accounting into the modern world, he would have never achieved success over the last eight years without the backing and resources of a large number of people working behind the scenes.

‘I have been the project champion for this, but a huge number of people have been, and still are, involved in the development of the new framework. My colleagues in the Treasury and very many in departments have put in a fantastic amount of work and have achieved enormous strides.’

A radical shake-up
For the last eight years, Likierman has presided over the most radical shake-up since Victorian times in how government accounts for itself financially.

The old-style cash accounting has been replaced with resource accounting, which is designed to improve the quality of central management so that departments are aware of what they have and then know how to maximise use of those resources. So what had forced the changes?

‘Unlike many cases where changes are forced on an organisation because of some crisis, this was a planned change to how government ran itself,’ Likierman explains.

There had been considerable international interest in the subject, as governments started to realise just how great a financial impact the public sector had on the economy and therefore recognised the need to make sure the available resources were managed in a sensible way.

The switch to resource accounting
The switch to resource accounting was first successfully implemented in New Zealand, a move that gave Likierman and his team the comfort that a country could implement such a change.

Other countries had also looked at the issue – France had started on the road to change, then stopped, began again and is now due to have the necessary framework in place by 2005.

Technically, the UK was part of the second wave of countries to switch its central government accounting methods, but many countries now see us very much as being in the forefront of the movement.

‘There was the realisation that the systems (in place at the time) were not terribly good and that cash accounting had severe limitations, particularly in the treatment of capital,’ comments Likierman.

The backing of influential people
But the initiative would have fallen at the first hurdle back in the early 1990s if it had not had the backing of senior and very influential people. Sir Andrew Turnbull, the current permanent secretary at the Treasury, was in charge of public spending at the time. He saw the importance of the initiative and put his full weight behind it.

As one of the most senior civil servants, and not an accountant, he was seen to be neutral, and it was this neutrality which may well have convinced the politicians that this had to be good idea. Kenneth Clarke, for example, the then chancellor of the exchequer, gave it his full support.

However, the paymasters changed on 1 May 1997, and this might have brought the project to a swift end. But Likierman is quick to point out this was never a party political issue and that the current administration had said before they came into office that they saw the change as very worthwhile.

Public backing
Over the years, the Public Accounts Committee and the Treasury select committee have held a number of hearings on the subject and at each stage have given it their backing. ‘We’ve had parliamentary approval for this all the way through,’ says Likierman. ‘Parliament understands it’s a necessary change – it gives them much better information than in the past.’

Certainly the likes of David Davis, the former chairman of the highly influential and powerful Public Accounts Committee, have been right behind the change, as it has allowed the PAC, now to be chaired by Tory right-winger Edward Leigh, to see exactly how government is spending its money and using its resources.

The whole process began back in November 1993, when Kenneth Clarke, then chancellor, approved the notion that central government had to change.

A green paper was published in July 1994, with the aim that resource accounting would go live on 1 April 2001.

Pride over green paper
‘I’m particularly proud that the green paper said we would go live on 1 April and we really did go live on 1 April – we kept to the timetable we’d set out back in 1994,’ says Likierman with enthusiasm.

But it wasn’t all plain sailing, and there were times that Likierman thought they were not going to hit their deadlines. ‘I have never thought that we would never make it, but on a number of occasions the difficulties sometimes seemed insuperable,’ Likierman remembers.

The bill that was passing though parliament last year containing the necessary changes to legislation was caught in a logjam in the House of Lords as departments rushed to clear the decks before the summer recess.

Likierman knew that if they didn’t get the bill through then, the whole project could have fallen at the final hurdle – it was clear that with an election likely to be called during the next session, resource accounting would not have taken priority in the legislative pipeline. This was something outside of his control and he admits to a number of sleepless nights.

Another headache came in the form of the Ministry of Defence. As Likierman said in front of the PAC, the task faced by the MoD in switching to resource accounting was as great as the rest of Whitehall combined.

But the change over in accounting techniques is only half the story.

Likierman is determined that Whitehall should be able to use the new information.

The national asset register
This is no more evident than in the role the national asset register will play in central government financial management. It is the first time that any government anywhere in the world has produced a list of its assets with values attached to them, and in the UK’s case, that represents an asset base of some Pounds 274bn.

The government can now move on from counting its assets, knowing where they are and valuing them to managing them.

Departments are charged for the use of their assets recognising that the funds used to buy their assets are not free.

But this has meant a massive training programme throughout Whitehall so that civil servants, and their political paymasters, know how to use the information.

Increasing the level of knowledge
‘I am very keen to increase the level of knowledge of accountancy – that also means training people who are not accountants to be able to use accounting information and understand what accountants are talking about,’ says Likierman.

He has in the past complained that in some areas there are not enough trained staff, and this is an area he hopes will be addressed before he steps down from his role as head of the government’s accountancy service.

So what are the next steps for ‘Sir Andrew’, who juggles work at the Treasury with an academic career – he is professor at the London Business School? ‘I’d like to spend more time back in academic life, but for the moment I’m keen to combine the two,’ he says.

At the LBS he focuses on performance measurement in the private sector, to ensure he keeps his Treasury work separate. He describes this work as ‘an exciting new challenge’.

But before he retires from public life, which will be no later than 2003, he will be helping to take the changes further still through the wider ‘whole of government accounting’ project. Unfortunately, the project is scheduled to be completed after his retirement date, so he will not be around to see it finished.

The Sharman report
And then there is the Sharman report, looking into accountability in central government the ramifications of which will be very significant.

Likierman was on Lord Sharman’s steering committee, although the final report was very much the work of Sharman himself.

The government will, in due course, give its response to the Sharman report, but Likierman is not letting slip when that might be. But what ever happens, Likierman is sure that there is a great future for accountants in government.

The 57-year-old has not advised his two step children to go into the profession.

‘They’re far too independent to take advice from me anyway,’ he jokes.

‘I see far more opportunities opening at senior levels for accountants,’ he continues.

‘I hope that we can both promote from within and attract an increasing number of good people into the service. People will realise the need for a finance director role, not just an accountant’s role.’

If that proves to be so, Likierman’s knighthood will have been well earned.

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