Preparing for power

15 Apr 10
Next PM, please take note: whichever way you cut it, Whitehall is going to need a radical shake-up to cope with the upheavals ahead. The Institute for Government has got a to-do list. Simon Parker reports
By Simon Parker

15 April 2010

Next PM, please take note: whichever way you cut it, Whitehall is going to need a radical shake-up to cope with the upheavals ahead. The Institute for Government has got a to-do list. Simon Parker reports

Michael Barber, the former head of the Prime Minister’s Delivery Unit, was once asked about his greatest regret over the Tony Blair years. His answer: not doing enough to reform the civil service. According to Barber, Labour realised too late that Whitehall was not set up in a way that could achieve the reforms the PM wanted.
This time things might be different. As we experience a highly contested election campaign, it is becoming clear that the next prime minister – whoever that might be – will be very interested indeed in the shape and size of central government. 

The inescapable logic of the budget deficit means that major savings have to be found, and the politicians have their eyes on the great departments of state. Labour promises a £100m reduction in the cost of the senior civil service, combined with cuts in spending on consultants and a rationalisation of arm’s-length bodies. The Conservatives say they will cut the cost of Whitehall policy, funding and regulation by a third, promising savings of £2bn a year. There is no way you can take out those kinds of numbers without re-examining the broader structures of government. It is worth remembering that Whitehall is not exactly huge by historical standards – it reached a post-war headcount low of 477,000 in 1999 and by early 2009 had grown by only 13,000.

The challenge for the next government is threefold: to reduce the headcount while preserving the existing civil service’s many strengths and simultaneously improving its performance in some vital areas. On the plus side, when the ­Institute for Government examined the evidence on Whitehall’s performance in our State of the service report, we found a great deal of pride and commitment, and we were impressed by the way that the Departmental ­Capability Reviews had started to drive improvement from within. The civil service is also trusted by the public and has a strong set of values.

But we were struck by the fact that, while much progress has been made, Whitehall still needs to get better at implementation. Some 60% of the 30 cross-cutting Public Service Agreement targets set in 2005 were not fully achieved. Joined-up targets requiring several ministries to work together seemed ­particularly hard to achieve.

We found that there was considerable scope to improve the quality of managerial leadership in departments, and we saw glimpses of an official culture that can still tend ­towards risk aversion.

Over the past 18 months, the Institute for Government has produced a wide body of research on how to rise to some of these challenges. It has come up with priorities for the next prime minister.

Our first recommendation is to strengthen the centre of government. The UK is a highly centralised country right up to the level of Whitehall but, despite political and media focus on the prime minister, central government itself is curiously decentralised. The corporate ­centre – Number 10, the Cabinet Office and the Treasury – has relatively limited powers to co-ordinate the work of strong departments.

Figures from the Organisation for ­Economic Co-operation & Development show that control over budgets and human resources management is largely devolved to ministries. While the centre of government does try to control outputs through the PSAs, in practice there are few penalties for ­missing a target.

This mix of strong ministries and relatively weak central departments might be sensible when money is plentiful and ­government does not have to make tough collective choices about which priorities to fund. But with real-terms spending cuts on the horizon, there is a case for stronger strategic leadership from the centre. By this we mean a more explicit and stronger role for the Cabinet Office and the Treasury in setting clear and shared priorities for the whole of government, linking those priorities to funding, collaborating with departments to draw up work plans, and performance ­managing the most ­important goals.

The next government should consider asking the Cabinet Office to support the Cabinet and prime minister in developing and implementing a clear, published ‘whole of government’ strategy for each parliamentary term. This would set out a small number of strategic goals – certainly no more than 20 and ideally fewer. Each goal would have a budget attached and departments would have to bid for the money by showing how they could contribute to the overall strategy.

This need not result in a centralised, top-down style of management. The main principle is that the Cabinet Office would lead the process of strategy development in partnership with departments. Once the goals and funding were agreed, departments would have the freedom to decide how they deliver. New Zealand strikes a good balance. Departments have to set out what outputs they will achieve each year, how much they will spend on each one, and how they link to the government’s overall goals. Departments have very high levels of freedom to manage their own business, but must link their deliverables to the government’s overall priorities. For instance, the Ministry of Social Development links its work on youth development to the government’s overarching priority of ‘getting troubled youth back on track’.

In principle, this provides a clear line of sight for how each departmental programme or service contributes to the government’s priorities – and of course, it also provides a way of spotting programmes that do not contribute effectively. This kind of collective agreement on how to manage the public finances will be critical if the next government is going to tackle the deficit effectively. Once ministers have developed their strategy, they will need to ­secure widespread support from Whitehall, public service providers and the public itself.

The second recommendation is to encourage more collaboration.
Spending cuts can prompt important and ­beneficial reforms in government, but they can also bring out the worst in a bureau­cracy. Departments and local service providers faced with cuts are likely to retreat to their silos and protect their core, traditional areas of spend.

That would be a mistake. As the Total Place local funding initiative is starting to show, some of the biggest efficiencies might come from breaking down silos, finding ways to simplify funding streams and redesigning services so that they meet public needs more effectively.

Taking a ‘total approach’ in Whitehall would require a significant cultural shift. In our recent report Shaping up, we surveyed 17 officials responsible for achieving the PSAs. These people are at the cutting edge of trying to make departments work together to tackle issues such as climate change and young people’s health. Most of them think Whitehall is getting better at collaboration but still has a long way to go.

Getting Whitehall to join up through culture change alone is simply not realistic. In a system of government where almost all the money and political authority flows through departments, rather than being allocated to themes or challenges, the structural barriers to joined-up ­government are too profound.

The next government cannot afford this. It should consider countering Whitehall silos with much greater use of pooled budgets, with departments bidding jointly to access the pooled money. This would force ministries to work together to develop convincing joint policies. The result should be to drive out waste and duplication, encourage innovative approaches to policy and simplify funding and policy relationships between Whitehall and the front line. The overriding idea is that government strategy should be developed by the Cabinet Office in partnership with departments and secretaries of state, so that there is ­genuine collective ownership.

Where the government has a ­particularly high-priority policy area, a pooled budget could be managed by an ‘outcome ministry’, sitting outside traditional structures. These new ministries would be time-limited, and would probably last for a single Parliament at the longest. They would have a permanent secretary and a small staff, but their real power would come from being led by a senior minister, having a significant commissioning budget to buy advice and the ability to use that budget in a contestable way. Policy thinking might not just come from departments, but from think-tanks, deliberative public forums and frontline service providers themselves.

Other reforms to encourage joining up should include making collaboration an integral part of performance management systems for both individuals and departments. This should be accompanied by a concerted effort to develop skills for collaborative working and efforts to reduce the transaction costs of collaboration. One way to do this would be to make it easier for joint units such as the Office for Criminal Justice Reform to set up their own distinct e-mail addresses and website, rather than ­relying on those of their parent departments.

The third reform should be to make ­departments more accountable for results. At the moment, the formal pressure to deliver comes from the PSA targets, but there are few sanctions when a target is missed. The doctrine of ministerial accountability – that ministers alone are responsible for the actions of their department – remains a barrier to holding civil servants publicly accountable for their work.

There are practical ways to improve matters. Our research suggests that the best departments are already developing a deeper performance culture through management boards, which bring together senior managers with a handful of non-executive directors. The best of these boards focus heavily on performance management and meet regularly with ministers to shape joint strategy.

There is room to go further and turn the board into a major forum for the ministerial team and senior managers to collectively set direction for the department. Whitehall should create new strategic boards, chaired by the secretaries of state, where ministers could discuss policy, check up on progress and, if necessary, challenge civil servants to do better.

This should be accompanied by a new regime for publishing data on departmental performance. At the moment, a member of the public who wanted to work out the effectiveness of the Ministry of Justice would have to wade through capability reviews, annual reports, staff survey data and a wide range of other documents.

Instead of this, departments should publish business plans setting out their main goals, their progress in achieving them and a selection of standardised performance data that would allow the public to make easy comparisons.

The push for accountability should be cascaded down from departments to their arm’s-length bodies. One option might be to introduce a form of capability review for the larger agencies and non-departmental public bodies.

Finally, the government needs to prepare Whitehall for the future. Reforming the way that central government works is not an end in itself. Our proposals might be about the way that a few ­thousand civil servants and politicians work together, but in a country as ­centralised as the UK, the actions of this tiny group can have a disproportionate effect on the lives of the British public.

Lack of co-ordination in Whitehall makes it hard for government to focus on the many problems that cross departmental boundaries, such as drug abuse. Silos at the centre all too easily replicate themselves on the ground, while a single target set in Whitehall can turn into ten by the time it reaches the front line.

Whitehall rightly faces calls for change. It will have to become smaller and more efficient, but it will also have to adapt to political demands for devolution to localities and citizens. We hope our proposals – for clear strategic priorities, greater collaboration, and clearer accountability – will help the civil service to emerge stronger still from the immense challenges that face the British state over the next Parliament.

Simon Parker is a fellow at the Institute for Government

Did you enjoy this article?