News that the Cabinet Office's 'nudge unit' is being turned into a mutual is likely to herald many more sell-offs of Whitehall services. Ministers need to be aware of the implications
It’s easy to see why civil servants in successful Whitehall units might want to ‘spin out’ their operations into ‘mutuals’, government owned enterprises or joint ventures.
Some of these units, including the Cabinet Office's Behavioural Insights Team - commonly known as the 'nudge unit' - have built strong reputations for achieving a tangible impact and might well succeed in a commercial environment, taking on more work internationally, in local government and even in business.
They could well see benefits in no longer being caught by some of the restrictions imposed by a civil service operating environment – for example, on headcount and salary - and on needing to get central approval for quite small items of spending. Several NHS spin-outs have prospered in the private market.
However, the government needs to be really clear about its own rationale for spinning out successful units. Unless civil service rules and procedures are getting in the way of recruiting and retaining staff or are radically stifling productivity, the case may not be obvious.
The government may, after all, discover that the spin-out prefers providing services overseas, depriving government of its services, or becomes so popular that it can raise its prices significantly. It might find too that having to write a contract each time the spin-out does a piece of new work is not the most efficient way of doing business.
Of course, it’s not impossible that government will make money and avoid all these risks – but it’s not entirely clear why spinning out success stories would be the priority for change, given all the civil service problems that need fixing.
When it comes to spinning out other functions, the government needs to be very clear on what it is trying to achieve. IT and HR have been mentioned as areas ripe for spin-outs. This makes sense if you think it’s better for government to buy these services in than to have them performed by your own staff. And this is very likely to be true in transactional services like payroll administration.
However, as the government itself recognises, previous governments got themselves into trouble when they outsourced too many IT personnel and lost their ability to understand how much they should be paying for services.
Spin-outs are a step en-route to outsourced service provision – so it’s very important that the government thinks about the end-game and is confident that it retains the skills to write and monitor any contractual arrangements that it sets up.
Tom Gash is director of research at the Institute for Government
