12 November 2004
Whitehall's inadequate risk management and squandering of civil servants' vital commercial skills are hobbling government efforts to boost the value for money of public services, according to the National Audit Office.
Assistant auditor general Jeremy Colman told Public Finance that, although many ministries now have risk management systems in place, 'they have not really absorbed what it means'.
That partial understanding of risk, allied to the risk-averse culture endemic in the public sector, was in some cases frustrating rather than helping efforts to contract out to the private sector or exploit the commercial potential of public sector assets.
'If you have much better systems for gathering information, combined with a traditional public sector attitude, it can make the situation even worse,' Colman told PF. 'We've got departments to understand that risk is hugely important. To get them to think sensibly about managing that risk is the next stage.'
At the same time, Colman said, in many departments commercial skills are 'not well husbanded' even though they are in short supply.
'Large departments tend to be very wasteful of the skills they have in these areas. Someone who's just done a sensational deal will go off and be a private secretary to a minister.'
A string of high-profile fiascos – such as the Eurofighter project, renamed Typhoon, which was finally completed more than four years late and almost £2.5bn over budget – illustrate the scale of the problem.
Colman said he 'agreed very strongly' with arguments that civil servants needed to move from being generalists to specialising in particular disciplines. Such a move would be 'potentially the most radical change in the civil service for 150 years'.
Colman's comments following a Partnerships UK conference come at a time when Sir Peter Gershon's review has forced efficiency and the creation of public-private markets for services to the top of the political agenda.
They will carry added weight as he has just been selected as the next auditor general for Wales, subject to ministerial approval, and is due to take up the post next April when the new Wales Audit Office is established.
The NAO is about to launch an investigation into the government's wider markets initiative, which is intended to encourage a more entrepreneurial culture in Whitehall.
The inquiry, which will report back next year, will consider whether departments have the necessary mind-set and expertise to realise the benefits of increased commercialisation.
It will look at the quality of leadership provided by senior managers and consider whether differences in performance in apparently similar ministries are justified.
Early indications suggest that the NAO's conclusions are unlikely to be flattering.
Research quoted by Colman found that 80% of civil servants believed their organisations did not support risk-taking, and 75% said their departments did not offer support if things went wrong – despite adequate risk management.