Written by Ben Yardley, Learning Coordinator

 

The Challenge

The Malaysian state of Sabah, situated in the north-east of Borneo, faces a number of pressing current issues relating to public finance.

Sabah recorded a budget surplus of RM35.9 million (£6.3m) in 2023, the largest in the state’s history. This was achieved despite a fall in the price of both petroleum and palm oil, two commodities which are important to the state’s economy.

However, despite the relatively strong fiscal position of its government, Sabah still faces significant challenges, most notably the quality of its infrastructure. Water, power and transport infrastructure have been highlighted as particular areas of concern. The State Government has committed to significant public spending in 2024 to address these priorities, but strategic budgeting and effective allocation of resources will be essential to tackling these issues effectively and promoting the long-term development of the state.

 

The Action

To address the challenges faced by the Sabah State Public Service in this area, Civil Service College facilitated a two-week Finance and Strategic Budget Planning programme.  The schedule combined classroom sessions with visits to government departments, devolved administrations and subject-matter specialists to give a comprehensive overview of how strategic finance is conducted in the United Kingdom.

Delegates met with finance professionals representing organisations at all levels of UK public service, from the Treasury to Oxford City Council, to the devolved administration in Wales. Each brought a different insight into the challenges public sector organisations face. The programme focused on three main areas of public finance:

• Putting Finance at the Core of Government Decision-making
• Finance at the Subnational level
• Sustainable Finance and ‘Green Growth’

 

Putting Finance at the Core of Government Decision-making

A recurring theme throughout the course was the need for the finance profession to be held in higher esteem at all levels of public service. The UK Civil Service has undergone significant reform in this area in the past two decades. A cultural shift has occurred, meaning that greater financial expertise and relevant qualifications are now expected for any person in a position of significant budgetary authority; in addition, the launch of the “functional model” in the Civil Service has encouraged sharing of best practice among finance professionals across different departments and helped to improve governance in the UK. 

The programme was designed to share this practice and encourage state officials to reflect on how finance could be embedded in decision-making in Sabah. The courses began with classroom sessions from leading experts in government economics and finance. Mike Driver, former head of the Government Finance Function, explained how value for money is embedded in decision-making throughout government. Former government economists and co-authors Vicky Pryce and Andy Ross then delivered sessions on Budgets, Spending Reviews and how to conduct Medium Term Frameworks.

Next, the focus moved from theory to practice. The group visited the Treasury and the Ministry of Justice, both situated in the heart of Whitehall, to learn about how central government departments plan their spending and ensure resources are allocated strategically. A focus was placed on how government departments work together to control spending, including the need for strong business cases within the public sector, to prove that an initiative is both effective and provides value for money. This was followed by a talk from HMRC (His Majesty’s Revenue and Customs) on effective tax collection.

The programme concluded with a discussion on Whole of Government Accounts, or how Public Financial Management is conducted in the “big picture”. Led by representatives of CIPFA (the Chartered Institute of Public Finance and Accountancy) and ICAEW (the Institute of Chartered Accountants in England and Wales), the delegation learned how financial reporting ensures stability and sustainability in the UK’s public finances, the key skills needed for Public Financial Management and what advancements in technology might mean for the public sector.

 

Finance at the Subnational level

For the second week of the course, the delegation travelled outside of London to learn about how financial planning is conducted at all levels of governance in the UK.

The first stop was Oxford, where Duncan Enright, a District and County Councillor and former Mayor of Witney, spoke to the group about local budgets in the historic environment of Oxford Town Hall. County councils are on the front lines of delivering government services such as education, social care, waste disposal and infrastructure maintenance. The session focused on how councils such as Oxfordshire allocate resources between these vital areas, while working together with central government and remaining accountable to those who live in the local area.

Next stop was Cardiff, to discover how spending and governance are conducted in a devolved administration. Although there are important differences between the two, subnational governments in both Malaysia and the UK face many of the same challenges in providing for their citizens while working in cooperation with the central government. Audit Wales, the organisation charged with monitoring Welsh public spending, spoke to the group about the challenges facing public services in the nation. In particular, the 2015 Well-being of Future Generations Act commits public bodies to work towards Wales’ long-term development goals including equality, sustainability and cultural development; the lecture set out how tax revenue and central government grants can be used most effectively to achieve these ambitions.

Similarly to local governments, the Welsh Government needs to plan its yearly budgets with the knowledge that the amount of money it receives from Westminster may change year-by-year. At the Welsh Treasury, an official explained how a government can account for this while ensuring that decision-makers consider how a budget affects all areas of Welsh life. The delegation also got the opportunity to see the Senedd Cymru (the legislature of Wales) in action, as they observed a parliamentary session on healthcare.

 

Sustainable Finance and ‘Green Growth’

Sabah is a state rich in biodiversity, both in its dense forests and coral reefs. As a result, it is essential that economic development in the state is pursued in a way that is environmentally sustainable and contributes towards the global lowering of carbon emissions.

The delegation met with an official from the Department for Energy Security and Net Zero, one of the newest government departments which is responsible for ensuring the government meets its carbon reduction targets. Later on, within sight of the Radcliffe Camera, the delegates met with Injy Johnstone from the University of Oxford’s Sustainable Finance Group, an organisation which conducts world-leading research into investment and Net Zero. Aligning finance with greener sectors and divesting from industries that are harmful to the environment are complex challenges which will require cooperation across the globe. Johnstone’s lecture discussed both Malaysia and the UK’s role in making Net Zero financially achievable by acting at the regional, national and international level.

 

The Results

During the Closing Ceremony, delegates shared presentations on what they had taken from the programme and how they planned to implement this knowledge in their roles in Sabah. Throughout the programme, the participants were encouraged to reflect on how they could apply what they had learned; this included greater training in finance for key decision-makers and embracing the opportunities afforded by green financing. The ceremony was attended by Sir Philip Rutnam, an adviser to Civil Service College and former Permanent Secretary, and Tariq Osman, a Minister-Counsellor representing the High Commission of Malaysia.

Feedback was universally positive: all participants rating the programme as either “excellent” or “good”. When reflecting on what actions they would take following this programme, participants highlighted the necessity of embedding financial expertise into crucial decision-making roles, aka “having the right person for the right job”.

As the Civil Service in the UK continues to innovate and grow, Civil Service College remains committed to the exchange of knowledge and practice in governance across borders. Sharing our information and experiences will help both the UK and Malaysia to learn from one another, strengthening relations and helping both countries to provide the highest possible standard of public service.