Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence


Memorandum by John Napier (RG 76)

  This is a difficult subject to constructively comment on without defining what is meant by Regional Government. The perception of the electorate in Yorkshire, Humber and the North East, was that it involved two broad aspects:

  1.  The devolution of more decision making power and influence to the Regions.

  2.  Some form of increased political Regional accountability via an additional elected representational agency.

  There was clearly widespread general scepticism about the first aspect and rejection of the specific proposals, even by those in favour of Regionalisation, because of the limited powers transferred.

  The main downside of linking the two points above, is that it obscured the fundamental economic efficiency, service gains and improved decision making that could be obtained from a greater degree of decentralisation in the management and provision of Government services, and related improved decision making in Central Government.

  In discussing this opinion, a model is used that focuses on the improvements in cost and efficiency and in service delivery that could be achieved and are available to National Government, without requiring a change in political processes at a Regional level, ie it is in the control of Government.

THE MODEL

  The model assumes:

    —    There is a National Government that controls the National legislature and determines policies and legislation in all areas, legitimised by a General Election. It normally attempts to implement a detailed programme or a manifesto on which it feels it is mandated.

    —    That the implementation of policy and National Government decisions, including the delivery of related outputs and services, is achieved via Departments of State, managed and operated by the Civil Service, permanently responsible for the administration and executive management and the performance of the relevant Department of State.

    —    That the required organisation of any Department of State should depend on the nature of the activity and the type of service outputs it delivers and an ongoing management responsibility to achieve continuous improvements in performance.

THE RANGE OF GOVERNMENT SERVICES OR OUTPUTS

  The range of Government services and outputs can be broadly grouped as follows:

  Type 1:  Those that are principally involved with the collection of tax and other major revenues and/or with the transfer of cash to individual citizens on a continuous and regular basis.

      Examples of such Departments are the newly combined Tax and Excise Department and welfare payments.

  Type 2:  Those that provide actual physical services involving employing specialised skills in dedicated premises where service needs are on a "free" or demand basis.

      Examples of outputs here are Education and Health

  Type 3:  Those that interface with other non-National Government Bodies eg Local Authorities and non-Government private sector organisations and involve either advisory and discretionary services or significant strategic infrastructure and resource decisions, eg Transport, Housing and DTI, and ODPM.

THE USE OF REGIONAL OR DECENTRALISED ORGANISATIONS

  A key question becomes to what extent there is use of effective Regional or Decentralised management structures within the relevant Departments of State. Each Department type for this purpose is considered separately.

Type 1

  The essential activity of these types of Department are the collection and allocations of monies from or to individuals and organisations, or to other Government Departments or directly to individuals. It also involves the management of the Treasury and finance functions, cash flow and cash management as well as the measurement, financial management and control of the government itself and managing and forecasting the total economy.

  Such Departments are expected to be heavily centralised, apply strict guidelines on collection and payments and are suitable for large scale computer operations. The service they deal with is essentially money. They should be and are centralised.

Type 2

  There are invariably a number of essentially common characteristics in this category

    —    They provide real services involving the organisation of people and premises and other financial inputs to provide services to families and individuals on a "free" on demand basis.

    These services are delivered across the country in free standing locations, largely distributed on a population basis.

    —    They involve elements of "expertise scarcity" and research needs but have a very significant core of standard activities and outputs.

    —    They are of significant scale, measured by total resource and are a large employer of people.

    —    Outputs can be time critical or subject to significant quality factors. All outputs have high public awareness and failures can have a very high reputational impact.

  The type or organisational structures which would be best suited from an efficiency and service outlook would include:

  A tightly controlled central function which dealt with

    —    Strategic planning to avoid duplication of scarce knowledge and optimum use of capital and technological resources.

    —    The identification of research needs and provision in-house or from the market.

    —    Financial planning and budgeting

    —    Policy interface with any external regulatory reporting and requirement

    —    The setting of internal policy standards and key performance indicators

    —    Consolidated National reporting performance on:

    —  Budget and financial outcomes,

    —  Cost and output standards, and

    —  Compliance where relevant to policy standards.

  The actual operational performance would be devolved into a Regional management structure which would have the responsibility for, and capacity to, be fully empowered to deliver the required results. It would also feed into the Centre:

    —    Regional inputs into strategic planning of specialised resources.

    —    Standardised information and financial reports on key outputs related to cost and efficiency and quality of service.

    —    The corrective action taken to remedy performance failures in individual units.

  In addition the Centre would have available to it, through time, a rich set of comparative data which would be sufficient to assess the performance of the decentralised management functions and make senior management fully accountable. The Centre would not attempt to directly manage individual units.

  The benefits to this type or organisational approach would be very significant, given the scale of the NHS. For instance, no private sector Corporate could effectively manage the NHS scale in any other way than that proposed above. A Regional Manager would have a job size commensurate with a Footsie 250 company. The National Heath Service would have effectively not one high calibre Chief Executive but nine or 10. The impact of people of this calibre, allowed to manage should not be understated.

  It is possible to estimate, from experience, that the benefits of greater Regional identity and decentralised real accountability, working with inter-regional data comparators could provide:

    —    An average 20% reduction in labour and management costs.

    —    A 10% increase in the volume of existing outputs and increases in the quality of outputs.

  It is an extreme organisational paradox that the two Departments of State, that deliver such key services on a City, Town and Regional basis, are so heavily over centralised.

  The focus on unit performance and information is correct, but the attempt to manage from centre to individual unit is always likely to be seriously sub-optimum. It cannot identify and define the real issues early enough and it is always going to be deficient in applying sustainable remedies on a timely basis.

  It also leads to a massive expansion and proliferation of IT requirements and exposes units to the distraction of many competing Central initiatives and controls.

  In the private sector the increases in output and performance that would arise, would translate to a loss of employment, if services and sales could not be expanded. In the Public Sector, given the trend of demand for Health and Educational services and known deficits in average standards, such improvements could be transformed into additional services and outputs within current budget limits. It would require a radical management and organisational rethink.

  The current constraint to these organisations is not people and capital resources. There is already evidence of significant marginal declines in output from increasing capital and labour inputs. The constraint is organisational, managerial and motivational.

  The third type of Department of State is more complex:

    —    Services provided are more intermittent and can have a longer time span eg a transport plan.

    —    Outputs are difficult to define and measure eg business support.

    —    There can be significant Regional differences in what is required eg housing and transport.

    —    Strategic conditions can be subject to external events eg energy supply and price, sudden emergencies.

    —    Decision options tend to be constrained by Central Departmental planning and policy guidelines which are not sufficiently flexible to accommodate different Regional requirements eg affordable housing.

    —    Consultative arrangements with private and public companies and bodies can be complex and inconsistently applied.

    —    Special fit for purpose bodies and NDPB's are created, prove to be effective or fail may be superceded but continue to exist in a reduced form, thereby increasing confusion and complexity.

    —    The role of the Regional Government Office remains ambiguous and under developed with some Departments of State embedded in a common location but retaining a more separate ambassadorial rather than a regional role with Regional authority to decide.

  The dominant form of organisation should therefore be central as these Departments have a larger strategic element and consider decisions over longer periods of time. They should however, have more well defined structures for getting strategic information and input from Regions and a disposition to share strategic and other essential information and decision making with Government agencies in the Regions, particularly RGO's and RDA's.

  As an example the RDA Regional Economic Planning process has become better informed on housing and transport information, but the transport elements still exclude inputs and advice on major road schemes and prioritises rail and airport projects. Housing allocations are centrally pre-allocated. Other Departments of State have less Regional awareness.

  Transport planning should be much more Regional. The recent "Northern Way" Initiative has value as a wider regional transport infrastructure planning concept. It would be better informed and more effective had it been based on an existing inclusive Regional transport planning activity. There is a danger the "Northern Way" concept will be extended to other less appropriate areas and cause confusion and inhibit a first priority recommendation of increased Regional Government within the Civil Service, namely a more defined and strengthened role for Regional Government Offices with some surrender of policy and power to those offices. This initiative should be lead by the ODTPM and DTI. There should also be a review of Regional effectiveness within each Department of State.

  In general more care is required to adopting the "isms" of the moment. In particular words like "sustainable development" have different interpretations within Departments and are a cause of communication confusion and have the potential to significantly distort decision making eg DEFRA, the DTI, Housing and Transport, may have quite different interpretations of "sustainability".

WHY IS NOT REGIONAL GOVERNMENT MORE PREVALENT IN DEPARTMENTS OF STATE

  Given the benefits to strategic decision making and operational performance in terms of efficient delivery of public service outputs that could arise from improved Regional Government as defined in this memorandum, the question has to be asked "why is it not more proactively championed and achieved". The Civil Service in particular contains a great number of very able people, both seem biased against regional or decentralised management concepts. Why is that? My view is that factors include:

1.  The Historic Legacy

    —    Growth of Government activity in society at a national level with national policy initiatives.

    —    Transfer of finance and responsibility for key services like Health and Education from Local Authorities to Department of State.

    —    Experience of poor Regional delivery from Local Authority Departments more dependent on reallocated finance from general taxation.

2.  Cultural Aspects

    —    The current doctrine and Ministerial accountability tends to reinforce the centralising tendencies of information gathering and attempting management of operations from the Centre.

    —    Their historic excellence is in administration rather than in operations and the delivery of physical services.

    —    A reluctance to prioritise new Regional initiatives when reduced and failing Regional Delivery Agencies are still involved on a Regional basis.

    —    Senior Civil Service career opportunities are seen nationally across Government rather than vertically within a particular Department. The Civil Service Executive is more structured in this direction.

    —    The attractions of London culture and being at the "heart of things".

3.  Technology

    —    Information, technology and computing power has increased and made it more possible to centrally administer and manage remote units.

    —    Supports increased functionalism and a wider decision making involvement via emails.

    —    More dependent upon large scale information system providers and external consultants than is normal in private industry.

4.  Role of Secretary of State

    —    A Secretary of State, with his roles as constituency MP, Member of the National Government, introducer of legislation in Parliament, has very limited time to interest himself in long term policy aspects of the efficient operation of the Department for which he is responsible for.

    —    The short time of average tenure in office in a particular Department of State.

HOW DO WE CHANGE THE SITUATION

  1.  The relative under performance of Type 2 Departments, given the insignificant increase in investment may lead to:

    —    More analysis of the reasons.

    —    More challenge of the status quo.

    —    More use of an external review process.

  2.  In the Type 3 area a more active role for the DTI and ODPM is proposed in promoting more Regional considerations within all Government Departments and extending the role and powers of Regional Government Offices.

  3.  Regional Government will not increase without effective champions within National Government and in the Departments of State.

  4.  There is need of a culture change in the Civil Service.

  5.  There should be a more independent third party measurement of the real economic and efficiency performance of Government Departments. Note: If the data does not exist within a Department to facilitate this, it is a "classic" indicator that this is an area that receives very limited attention, therefore needs urgent attention.

  6.  That we expand Regional government concepts within the existing Departments of State as a first priority.

  7.  We minimise further confusion by ensuring Central initiatives like the "Northern Way" are closely defined in scope as fit for purpose specified outputs, ie transport infrastructures and strengthen the role of Regional Government Offices.

  8.  We make efficiency, cost and quality of outputs a much higher general priority.





 
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