What are your main responsibilities?
I’m finance director for the Treasury Group and I manage the department’s finance team, as well as its commercial, IT and estates functions.
The group includes the Debt Management Office, UK Financial Investments and various smaller bodies, as well as the core department.
I’m on the Treasury board and the board of UK Financial Investments. With an HR director, I jointly manage the corporate centre group, which comprises more than 150 people.
In some ways we’re the back office that provides services to the business, which in the Treasury is policymaking.
The finance team also gets involved in some of the more complex transactions that the department undertakes. For example, there is a project team working on the mortgage interest guarantee scheme that the chancellor announced in the budget.
We will work with that team on the detailed design of this scheme.
I also take a sort of non-executive role in some of these large projects: I will sit on the steering board or on the project board for undertakings with significant financial or operational risks.
How closely do you work with politicians?
At the moment I play a supporting role to other Treasury officials who work with ministers very closely.
The ministers decide which policies they want to pursue, but they rely on officials to advise on how best to achieve the objectives they have set. We do challenge them if we think that a proposal will not work in practice.
Part of my role is to ensure that the advice we are giving on the costs and benefits of different options is robust, so that the permanent secretary, Sir Nicholas Macpherson, is satisfied that any spending we commit to will represent value for money.
How much pressure is the Treasury under to achieve cost savings?
Like most central government departments, the Treasury has been reducing its budget and staff numbers. We are going from more than 1,200 employees to about 1,000 over three years, making it a pretty small department by Whitehall standards.
This process, which will shrink the corporate centre as well, is the result of 2010’s strategic review. While making such savings, we need to ensure that we can still provide the service to ministers we want.
We’ve restructured and we have really pushed for more flexible working. We now have some staff in a central project pool, so that we can move people quickly when priorities change.
The Treasury often has to respond rapidly to new policy priorities or external events, so we’re getting better at deploying people where they’re most needed.
When the Cypriot financial crisis struck in March, for instance, we were able to bring some people in very quickly, as we had lists of individuals who had worked on similar events.
We were able to get the desk space ready for them and we have an IT system that enables them to work quite flexibly. We’ve also made savings on some of our back-office costs.
For example, we have moved to desk sharing and let out the office space that this has freed up in our building, reducing the net cost to us. We will also be sharing some of our corporate services with other Whitehall departments to obtain economies of scale.
How did you develop your career, given that you started at the Foreign Office?
After gaining a first-class degree in history and politics at the University of Cambridge, I joined the civil service fast-stream development programme as a generalist.
I wanted to work in public service and was interested in the political decision-making process. I joined the Foreign & Commonwealth Office in 1993, where I specialised in European issues and EU negotiations.
I studied for 15 months at the École nationale d’administration, where French civil servants are trained, and later spent time working at the European Commission in Brussels.
So I spent a decade in various different EU-related jobs – at the Foreign Office, the Cabinet Office and the European Commission
I worked on the enlargement negotiations when Finland, Sweden and Austria were coming into the EU and when I was in Brussels I worked on competition policy as a regulator, covering big airline alliances and mergers.
I was always interested in jobs that had an economic or financial element to them. Over time I specialised in microeconomic and financial policy, so it seemed to make sense to come to the Treasury.
Initially, I was on a formal secondment from the Foreign Office, but I hadn’t been back there for about five years and felt that the Treasury would be a more natural home for someone with my skills and experience.
I felt at home as soon as I arrived, so it was definitely the right decision.
How dark were the days of the financial crisis in 2008 when your team had key interventions to make in the banking industry?
When I joined the Treasury to help prepare for the 2004 spending review, the economy was growing steadily.
We were starting to say: “It’s beginning to flatten off in terms of the rate of growth of spending, so Whitehall departments will need to tighten their belts.”
With hindsight, those were years of plenty for the sector. At that time we would set future public spending by making an economic forecast of what GDP growth was going to be in x years and we’d then make a fiscal forecast.
On the basis of that, we could say how much tax revenue we were expecting to get in and therefore how much money we could expect to spend.
It is clear now that in the early 2000s our forecasts were pretty optimistic, although not many people were saying that at the time. (Since 2010, economic and fiscal forecasting has been done outside the Treasury by the independent Office for Budgetary Responsibility.)
The crisis started with the collapse of Northern Rock in September 2007, but the worst of it seemed to be over by the spring of 2008 when I went in to manage the Treasury’s Northern Rock shareholder team.
As things started getting worse in the summer, we were bringing in more people, but we were still very thinly staffed as more and more institutions started getting into difficulty.
The toughest time was the autumn of 2008: after the downfall of Lehman Brothers, Bradford & Bingley got into difficulty, the Icelandic banks collapsed and then RBS and Lloyds/HBOS had to be bailed out.
All these things happened in quick succession and there were three or four weeks where we were working all hours of the day and night, weekends included.
We were dealing with lots of different crises at the same time – many of which were completely new to us. We were making policy very rapidly and then having to implement it.
The markets are watching your every move, so you have to be in a position first thing on a Monday morning to be able to announce something. It was pretty frightening.
We could see the immediate crisis we were trying to sort out, but we knew that doing so was going to lead to a huge hole in the public finances.
I can remember going home and saying: “That’s the finances completely in a mess for the foreseeable future.”
We were battling on all fronts and we did feel that, if we got it wrong and the markets didn’t like what we were announcing, we could be in a position where there was no more money in the banks’ cash machines.
So it felt like a huge responsibility – a situation where you were very tired, yet trying to put a lot of things in place. Under normal circumstances policymaking isn’t necessarily a slow process, but it usually takes a little time.
There’s a lot of consultation and it’s harder for radical solutions to get through because they’re inevitably more risky. But in that situation we simply needed a solution and all kinds of ideas were on the table – things you might typically have dismissed before.
Some of what we did, such as allowing Lloyds and HBOS to merge, which had implications for competition that are playing out now, we wouldn’t have wanted to do in normal times.
On the other hand, if the whole financial system almost falls down, you’re thinking: “At this point we’re not as worried about competition – our first priority is simply to keep the system going.”
Has the financial crisis led to improvements in the government’s risk management?
If a bank were to get into trouble now, we’d be much better at dealing with the situation. The Northern Rock crisis exposed the fact that we didn’t have legal mechanisms in place enabling us to nationalise the bank – we couldn’t simply pay out to depositors in the way we are able to now.
Now that the Office for Budget Responsibility has been established to make the economic and fiscal forecasts, I think the system is more robust.
Previously, you had a team of economists here doing that and their work was signed off by ministers.
Forecasting always requires judgement and ministers might affect that judgement. Then there’s the question of how we look at risks and prepare for unlikely, but very high-impact, events.
We are better at that in the Treasury than we were before 2008. We do consider, for example, how the eurozone might collapse and what the consequences might be.
There has been a lot of contingency planning with regard to the eurozone and what the worst-case scenario might be, so there is more thinking about what might happen and what we might do.
The crisis in Cyprus showed the value of doing lots of contingency work beforehand, so we were able to respond rapidly as events unfolded.
Is the economy on the mend?
I hope so – the recent signs are good – but it is taking a long time. When we set up UK Financial Investments we thought it would be selling shares within a few years, but five years later it’s not even started.
It’s all taking longer than expected and that’s mainly because the economic situation was more difficult than anybody had foreseen. With the banks, I think that we’re beginning to see light at the end of the tunnel, but the fiscal position remains challenging because the economy has taken so long to recover.
We are just having another spending round, setting budgets for 2015-16 in which we are imposing more cuts. The expectation is that there will have to be more cuts beyond that.
Within the Treasury we will have to make further savings and we’re working on how to do that without further reducing our workforce or losing policymaking capacity.
What made you decide to take the CIMA qualification in 2010?
A phase of the crisis had come to an end, so I wanted to leave the Treasury for a bit to get a slightly better work/life balance and challenge myself by doing something different.
I moved to Edinburgh to work for the Scottish government, looking after capital spending and issues of private-sector investment. It was really interesting to work in an institution with a different culture and I learnt a lot.
It’s much easier in Scotland to get everyone interested in an issue around a table, which makes for a much more collaborative style of working than is often possible in Whitehall
I completed the CIMA qualification in two years. Although I was quite familiar with accounting concepts, I thought that it would be useful to have a financial qualification to formalise this knowledge.
I had spent a lot of time with both investment banking advisers and finance professionals in government and I’d talked with them about all kinds of concepts.
I was familiar with that language and understood it reasonably well, but there’s something about doing the exams and some of the calculations from the bottom up that makes your understanding more robust. I think the CIMA qualification gives you credibility.
I certainly wouldn’t have got my current job without it. I’d really encourage people working towards it to consider a public-sector career. Some of the problems we have to deal with in government are far more complex than those in the private sector
In business you’re worried about profitability, but in government we also worry about the economic and social impact of what we do. We deal with some pretty complex and important problems – and we need really good finance people to help us with those.
Photo: The Gasette/Phil Gammon
Kirstin Baker, ACMA, CGMA, finance and commercial director, HM Treasury
1993: Enters the civil service and spends a decade working on European economic policy at the Foreign & Commonwealth Office, the Cabinet Office and the European Commission in Brussels.
2003: Moves to the Treasury to manage the 2004 spending review.
2005: Becomes head of the general expenditure policy team.
2008: Appointed head of the Northern Rock shareholder team and works on a series of Treasury interventions during the financial crisis.
2010: Joins the Scottish government on secondment, leading its work on capital budgeting and investment policy.
2013: Returns to the Treasury as finance and commercial director.
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