CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 714-i

HOUSE OF COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE THE

PUBLIC ADMINISTRATION COMMITTEE

GOOD GOVERNANCE AND CIVIL SERVICE REFORM

PROFESSOR CHRISTOPHER HOOD, DR MARTIN LODGE and PROFESSOR MARTIN SMITH

ANDREW HALDENBY, PROFESSOR ANDREW KAKABADSE and JULIAN MCCRAE

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Public Administration Committee

on Tuesday 25 January 2011

Members present:

Mr Bernard Jenkin (Chairman)

Nick de Bois

Charlie Elphicke

David Heyes

Kelvin Hopkins

Greg Mulholland

Lindsay Roy

Mr Charles Walker

Examination of Witnesses

Witnesses: Professor Christopher Hood, University of Oxford, Dr Martin Lodge, LSE and Professor Martin Smith, University of Sheffield.

Q1 Chair: I welcome you to this inquiry into Civil Service reform and the principles of good governance. Would you first of all introduce yourselves for the record?

Professor Smith: I am Professor Martin Smith from the Department of Politics at the University of Sheffield.

Professor Hood: I am Christopher Hood from the University of Oxford.

Dr Lodge: I am Martin Lodge from the Department of Government at the London School of Economics.

Q2 Chair: Thank you very much for being with us. I shall kick off with a general question.

Looking at a list of reforms or attempts to reform the Civil Service, they seem to come with increasing frequency down the years and have less and less impact. Why is there a perceived need to reform the Civil Service? Why does reform of the Civil Service seem to be something that is never dome?

Professor Smith: One of the reasons reform continually occurs is because when Ministers get into government they expect things to happen straight away. One of the problems is that things don’t happen straight away. Ministers then ask the question, "Why isn’t this happening straight away?" Sometimes they blame the Civil Service. There is a view that if you reform the Civil Service, you will be able to do the things that you want to do when you get into government. Part of the reason that that doesn’t happen is down to what civil servants do, how they are organised and what their role should be in implementing policy. The other difficulty is that there is a whole range of factors that prevent Ministers and civil servants from doing what Governments want to do, because the world is a difficult place to control. Governments therefore intend to do one thing, but often there is another outcome and the Civil Service is blamed. The reforms keep continuing partly because of that frustration, but partly because, in all of the debates on the reform of the Civil Service, there has never been an assessment of what the Civil Service should do.

Civil servants have very different roles. Some are involved in detailed delivery of policy through jobcentres, or wherever, and other civil servants work closely with Ministers on a day-to-day basis. Those two types of civil servant are completely different, and the relationship that a Minister has with those civil servants is completely different. Without thinking very clearly about what the Civil Service is, what it should do and what a good Civil Service would look like, it is very difficult to work out how to reform it.

Professor Hood: I do not think that there is anything particularly new about attempting to reform the Civil Service. That has been going on for a very long time, but the style or the way in which reform is done has changed. Going back to the days when I was an undergraduate in the 1960s, the preferred way of carrying out reform then, as well as in earlier times, was to set up a formal commission or independent committee full of worthy individuals and get it to ponder for some period of time and issue a report. We no longer do it that way. We do it in a different style. It has become a reform industry, as it were, and I suppose I am a minor part of it. There are people who are professionally continually engaged with the reform.

Dr Lodge: I would add that the reform industry consists of supply and demand. On the one hand, you have short-term career paths where people need to make an impression before they move on to a higher career destination, and therefore need to produce a document rather than seeing it through. Out of that, you add layer on layer of well-intentioned documents, where one does not know the importance in contrast to documents produced by a predecessor.

To highlight that, I would not say that all Civil Service reforms everywhere are useless or without effect. Look at the German federal bureaucracy, which is now much smaller than the West German federal bureaucracy was before unification. That was done by the iron rule that for every two jobs you could only have one back. That is clearly a Civil Service reform, which had a long-lasting impact and has stuck around for 30 years. The other point about the reform industry is that often these are reactions to previous reform attempts at the same time. We can see that in New Zealand, extensive reform proposals led to unintended consequences, which then led to responses to that.

Q3 Chair: What lessons should we learn from that? My experience is that if an organisation keeps being changed, it becomes more and more unstable and less and less effective. Is that is what has been happening to the Civil Service-that people have become punch-drunk with reform?

Professor Smith: It’s very difficult. One problem is that if things are changing all the time, you focus on the change rather than do your job. One change that has occurred-which has good parts and bad parts-is that civil servants have become much more concerned with internal management within their Department. In many ways, that is important, but if that is all they do, they are not doing the job they should be doing in developing various policy options. It goes back to the point I made earlier: nobody has ever asked the question of what we are trying to do with these reforms. They have said things, such as we are trying to make the Civil Service more efficient and more effective, and get better services. Those broad goals, though good, do not focus clearly on what the role of civil servants should be. One problem is that the role of civil servants is now diverse. Some of them are involved in policy advice, but a lot of them are involved in processes and management.

Q4 Nick de Bois: On that point, Professor Smith, is it not the role of the Civil Service to support the implementation of the policy of the Government? If the Government are saying that it should just be done more efficiently, is that not a fair statement, as opposed to one that seems slightly cynical?

Professor Smith: Of course that is a fair statement. The problem again goes down to all the different layers and what the particular constraints that different civil servants at different levels play. If you talk about the senior Civil Service, the role is not directly to implement Government policy; it is to advise Ministers which would be the most effective policy. When you go down through different organisations and into different agencies, you then see the role of civil servants in implementing Government policy and, of course, they should do that as efficiently as possible.

The problem arises if the goal of efficiency-doing things in the cheapest or most effective way you can-is not necessarily compatible with the policy. There may be a tension between delivering efficiency and a particular policy. If you take one example that is thrown about a lot, which is the idea of personalisation of social services, to do that properly is very expensive and time-consuming. If your main aim is efficiency, that conflicts with policies such as personalisation, which may need more people to deliver them effectively. Again, it is about thinking what the ends are.

Q5 Chair: I want to make a distinction between two things. One is the implementation of policies and changing policies. The other is that the organisation itself does not necessarily need to change for Government policy to change. The question at the heart of this whole discussion is whether the Civil Service needs to change or whether a period of stability and consistency in the conduct of the Civil Service would be more beneficial to effective government.

Dr Lodge: I think, referring to what Martin Smith said, that one of the problems with dealing with efficiency is that public administration everywhere deals not only with efficiency but with fairness, legality and so on, so you always have this field of tension. That is something to bear in mind.

To answer your question, it depends on what level of change you are interested in. If you are arguing about whether we need a constitutional reform to deal with the Civil Service, that is a different question from the kind of question of how we know what kind of skills are required in the Civil Service to deal with new technologies or different types of service deliveries. We have to separate out these discussions of change. I would say constitutional discussions are valuable, but I don’t think they are at the same level as discussions about what skills civil servants need and what kind of mediation requirements are needed for the modern Civil Service to deal with governance and collaboration, for example. I think we need to separate out those two. I would not say that all change is bad, or prohibit policy change.

Professor Hood: I think the Civil Service has to change because society and technology are changing now, as they always have been. That always means that there will be a demand in the Civil Service to adapt to whatever the prevailing demands are. It is in the business of doing so, just as private organisations are. You have raised a serious point, Chair, about the optimum speed of reorganisation, and it has been said by senior civil servants that they often need at least two years to adapt and cope with major structural changes. That may well be an underestimate. If the next one comes along within that two-year period, all their energies will be involved in that. You might draw from that the assumption that in some ideal world that speed of structural adaptation might be slower, but there are all kinds of reasons why that might not happen.

Q6 Lindsay Roy: Good morning, gentlemen. I am the front runner for what should be a range of questions from colleagues on the post-bureaucratic age. It is a very popular soundbite; in lay terms, what does the post-bureaucratic age mean to you and how is it reflected in society? In particular, what implications are there for the Civil Service?

Professor Hood: That’s a beguilingly simple question. This can never be an unambiguous term, because the word "bureaucracy" is not an unambiguous term. If post-bureaucracy is some kind of contrast with bureaucracy, that could only be a clear term if we knew what we meant by bureaucracy, and we don’t exactly. We tell our students that the term bureaucracy was invented in the 18th century by a French philosopher who put a Greek and an old French word together to mean "rule by officials." That is what Vincent de Gournay meant by it. If that is what you mean by bureaucracy and that is the original meaning of the term, post-bureaucracy would be rule by people other than officials. But of course in, as you say, popular discourse, the term bureaucracy has all sorts of other connotations. It is often used to mean muddle, inefficiency, high cost, and etcetera. That’s why there isn’t a single clear meaning of the term, but what I have tried to pick out in the paper that will be in your evidence are four kinds of things that are connoted by this term.

One is what is often called the subsidiarity principle, which also has a long history. It goes back to the 1890s as a doctrine of how welfare should be delivered, and the subsidiarity principle is the principle that public services and welfare services should be delivered at the most local level possible and, wherever feasible, by private and independent organisations. That is written into the constitutions of some countries. It is, for instance, written into the Italian constitution on education. Some of what is being connoted now is, in effect, the subsidiarity principle. It is a new spin on that idea.

A second notion is pulling public organisations out of delivering some kinds of services that they might once have delivered. I’m old enough to remember the days when rationing came to an end in the 1950s. It was good for me as a schoolboy, because I could just go out and buy sweets when previously I needed a ration book. That is a case of the Government pulling out of certain types of activities that they once did. Compulsory vaccinations were similarly abandoned in the 1940s.

A third meaning is conducting public services, whether by public organisations or by other kinds of organisations, with as much public participation as possible. Woodrow Wilson once said that Governments should be all outside and no inside, and that is the notion of making it all outside and bringing in as much public participation as possible.

The final meaning that I have identified in the little paper that I put in is organising and delivering your public services in such a way that you make as little use as possible of the specific legal powers of the state. What I mean by those are the state’s powers to compel, prohibit, punish and permit. Those are not powers that you and I have as ordinary individuals; they are powers that only the state has. It could be that post-bureaucracy might mean an attempt to govern and provide public services, as far as possible, without using those powers. Will that do for a start?

Q7Lindsay Roy: That’s most helpful. Dr Lodge, is there anything you want to add?

Dr Lodge: We wrote it together, so all I want to add is that our assumption would be that post-bureaucracy means different things in different policy domains. Therefore, what that means for a Civil Service means very different types of skills and competencies, and possibly reward understandings depending on what kind of understanding of post-bureaucracy dominates a particular domain. One single recipe won’t do.

Professor Smith: Can I add a couple of points? It is important to be very cautious about this term, partly for the reasons that Christopher outlined, but if you think about nearly every modern organisation, it is a bureaucracy. We live our lives through bureaucracies, so post-bureaucracy doesn’t mean that we’re going to have something other than bureaucracy in our lives; it’s just that those bureaucracies are going to be organised differently and probably in a more fragmented way.

The other thing, which goes back to the question of efficiency, is that the reason why modern organisations are based on bureaucracy is because bureaucracy is a very efficient way of getting things done. It assures us, at least at one level, that everybody is treated equally. Again, if you start to break down the principle of bureaucracy, it’s very difficult to see how a modern society would actually function.

Q8 Lindsay Roy: If it is done in a more fragmented way, is it not more difficult to achieve strategic outcomes? One of the criticisms of the Civil Service is that it has not been very effective at overall co-ordination and achieving core objectives.

Professor Smith: I think that this is one of the big issues. One of the biggest changes, as a result of what is now 30 years of reform, is that the delivery of public services has become incredibly fragmented. Yesterday, at something organised by Sheffield City Council, I was talking to some of the organisations involved in delivering services at a local level. There were hundreds of them, in fact. Delivering public policy now is not about saying the Department of Health or the Department of Social Security writes the policy and delivers it. What happens is a policy is developed, and in most areas, a very large range of organisations become involved in delivering such policies. If you move to a form of post-democracy, where you have democratic accountability-as the Government say, rather than bureaucratic accountability-and where services are delivered differently in different localities, you would find that you develop a very fragmented system of policy. Perhaps issues of equity would arise, as could issues of different areas producing different policies which had contradictory outcomes. A whole series of issues start to unravel or unwind, if you start to think about the way in which service delivery is now increasingly fragmented.

Lindsay Roy: If it is so fragmented-

Chair: May I interrupt? We are going to have to move much faster. If you could give sharper answers, it would help us to get through this much more quickly. We have another panel coming in after you.

Q9 Lindsay Roy: If it is so fragmented, is it not that much more difficult to gauge the success of outcomes?

Professor Smith: It depends on what your outcomes are; that is the issue. One of the big issues is finding a way to clearly define outcomes.

Q10 Chair: So, do we think that this is just a political-jargon phrase, without much policy attached to it? There are certain policies associated with this.

Dr Lodge: No. We would argue that the term has a multitude of implications. There is not just one implication; there are at least four. It very much depends on whether you believe it is about participation, or about third sector para-public organisations delivering service, or about the state abandoning particular domains. It is not only jargon without content; it is a term that is divided by contradictory meanings.

Q11 Chair: Do you have the sense that the Government have a clear idea of how to implement the post-bureaucratic age?

Professor Hood: I have no inside knowledge about that, sir. My impression is that we are seeing the smoke of a fire that is not yet kindled.

Q12 Charlie Elphicke: Professor Smith, don’t you think that the Civil Service works fine at the moment and that no change is needed at all?

Professor Smith: I think it does some things very well, and it does some things quite badly. As Members of Parliament, you will probably know better than me, but one of the things that the Civil Service does well is support Ministers. It provides an excellent comfort blanket for Ministers and it makes their lives work well. What the Civil Service is less good at-I don’t think that’s true, actually; it is only some parts of the Civil Service, because the Civil Service is a very large and diverse organisation-what it has been less good at, in some areas, is thinking about how policies created in Whitehall actually impact on the ground. I think there is some disconnect between civil servants in Whitehall and what happens in terms of policy delivery.

Chair: That sounds like an understatement to me.

Q13 Charlie Elphicke: Professor Hood, I want to pick up on that point. Professor Smith says that the Civil Service serves Ministers. A lot of us would like the Civil Service to serve we, the people, because we pay them, in our taxes. We have a reform agenda before us based on decentralisation, transparency, local accountability and other such things. Is that not just deckchair-shuffling, which won’t amount to anything really?

Professor Hood: We can’t tell at the moment. I described it as the smoke of a fire that has not yet kindled, and we don’t know whether the fire will kindle. We can certainly identify the challenges that would face the Civil Service if the fire does kindle.

In the paper I gave you, I drew a parallel with the development of care in the community. That started to happen from the 1950s, under Governments of both political parties, and it was driven by a notion that it was better for people in certain types of social care who had mental problems to come out of big institutions and be cared for more locally in community settings. That, however, meant a shift from what were basically NHS organisations to local government organisations. That transition required some movement between one organisation and another. However well-meaning that policy may have been, it created a lot of difficulties along the way. That is what, if we really mean something by these changes, a Civil Service will need to get to grips with.

Q14 Charlie Elphicke: Taking that example, surely it is substantially different from localism, which allows local communities to shape their services. Care in the community was different; it was a thrust from the centre saying, "This is what we’re going to do." It was pushed through from the centre without, as far as I can see, consulting local communities. It was by the by that the public were concerned that a number of axe murderers had appeared on the streets and had started doing what axe murderers do best, which is killing people. That was part of the reason that the policy didn’t work, but I would say that it is very different from localism; it was a national agenda pushed out by diktat, surely.

Professor Hood: I’m not saying that it’s an exact parallel. I’m saying that it’s a case in which complex service arrangements had to move from a central organisation to local organisations. I’m making the point, just as you’ve said, that it wasn’t just the axe murderers-not that there were actually many of them-but the people who fell through the cracks of the various organisations and ended up homeless on the streets. My point is simply that such a transition takes a lot of care and skill to manage effectively, and these are skills that would challenge even the ablest people, whether in the private sector or the public sector.

As we’ve already noted, and as your colleague has already pointed out, one of the classic complaints against bureaucracies is the problem of departmentalism-the difficulty of coping with multiple organisations and working across sectors. That was a complaint about bureaucracy in China 2,000 years ago. It goes with the beast, and it is always going to be a challenge for bureaucracy.

Q15 Charlie Elphicke: Professor Smith, I believe you are something of an expert in risk. Do you think going down this route is risky? Is it the right model in the current circumstances?

Professor Smith: There is a big problem for central Government in all of this, because if you really devolve power to localities, you face a big risk that those localities will do things that you don’t want them to do. In a way, we’ve been there in the past, which is one of the reasons that local government has been reformed so many times. So there is a risk that localities will do things that central Government does not like, and there is a risk that the localities produce outcomes that contradict the outcomes that the Government are trying to produce. There is an even bigger risk that policy will fail because you don’t control all the organisations that are involved in delivering policy at local level.

Q16 Charlie Elphicke: Finally, Dr Lodge, Professor Flinders talks about this model as "steering but not rowing". Do you agree with that description? What do you think it will entail in practice for the Civil Service? What sort of changes will we really see?

Dr Lodge: Steering and not rowing is something that became famous with a book that was part of the Al Gore agenda in the early ’90s, so it is also about 20 years old. The idea was that Government should be more businesslike and take on regulatory functions-strategic functions, one could say-while letting other bodies do the work. As I said before, that raises all those issues about how you maintain some form of collaboration and how you keep the balance between, on the one hand, the autonomy and the discretion of the rowers and, on the other hand, how much invasive power you give the steerers. That relates fundamentally to your question of risk and of risk to whom.

Q17 Nick de Bois: You’ll probably be able only to skim over this, but I’d like to ask the question anyway. Do you think the levels of reduction of about a third in the administrative budgets can be achieved without fundamental reform of the Whitehall Departments? We are talking about a lot of money compared to previous savings. It goes to one of the reasons I suspect that reform is happening. Do you think that level of reduction in admin budgets of about a third can be achieved without reform?

Professor Hood: I find it very difficult to see how it can be. Assuming these plans are carried out-and I refer again to the smoke of a fire that does not yet kindle-you are looking at reductions for which the nearest parallel would be what happened after 1945 in the demobilisation years. What happened then was that the Civil Service pulled right back from being a big delivery organisation controlling timber, milk and everything like that. It pulled right back into a policy role. In that case, you did see-not all at once but over time-a shift in the role of the Civil Service. If these levels of reduction are to be achieved, it can’t just be done in an incremental way.

Q18 Nick de Bois: May I ask you again specifically, Professor Hood-looking at your analogy of 1945-will the depth and level of cuts adversely affect the delivery of policy?

Professor Hood: It will inevitably mean that there is less in-house expertise. If the budgets have been cut, there may be less access to expertise externally. The danger is that you will get policy conducted with less expertise.

Q19 Greg Mulholland: Good morning, gentlemen. Turning to the issue of transparency and whether that will lead to greater accountability, which is the bold claim of the Government’s current reforms, is that a realistic aspiration? Do you think ordinary people really care that this information is going to be available to them, or will they frankly take little interest?

Professor Smith: Transparency is a good principle. Nobody can say that Government should not be open and produce information for people. The problem with the plans at the moment-and it is early days-is that large amounts of very crude data are being released. It is difficult to know, first, what ordinary citizens will make of the data and how they will be able to use them. Probably more importantly, what are the mechanisms of accountability that arise from the fact that the data are being released? It is fine to release lots of data and say, "This is what’s happening." However, what then happens? What is the feedback mechanism for citizens to say, "Clearly something is going wrong here. What is going to be done about it?" Those are the issues that arise out of the increased release of data.

Professor Hood: Transparency is one of those principles that seems to be unexceptionable: how could anyone be against it? For hundreds of years, people have argued that government should be conducted according to what Jeremy Bentham called the transparency principle. It has also been said that transparency is the best disinfectant in public affairs. I agree with all of that. The difficulty, when we come down to specific public services is, first, the point at which transparency comes up against issues of privacy and data protection, as would arise, for instance, over medical malpractice or things of that kind, which I imagine many people would be very interested to know about. So there are those trade-offs to manage. There’s also the issue that my colleagues mentioned about how you make sense of the data when you get them. Interestingly, when Bill Clinton went in for his heart surgery a few years ago, the hospital that he chose for that operation was not the one that had the lowest mortality rates for that particular operation, which he or his aides could have discovered if they had looked at it. If ex-Presidents behave like that, there must be questions about what the rest of us do.

Dr Lodge: I’d just add that it seems to assume we are all well informed and competent to exercise exit and voice. That might be applicable to many of us but possibly not to the most vulnerable, who are obviously mostly exposed to particular public services.

Q20 Greg Mulholland: To pick up on a comment that you made, Professor Smith, saying that no one could argue with transparency, whether that actually leads to increased accountability is another step. Professor Flinders has questioned that and said that although it is an unfashionable point to make, and one that swims against the general tide of public opinion, "too much accountability can be as problematic as too little." The Institute for Government also has noted that the Big Society proposals open up an increasingly complex web of accountability and that, as a consequence, "meeting the principle of accountability to Parliament without compromising the operational independence of decentralised services or constricting new sources of accountability will be a challenge." Is it possible to say that too much accountability could actually affect the ability of politicians and indeed civil servants to make decisions effectively?

Professor Smith: There is obviously a tension, because I think one of the principles behind various Governments’ reforms is that the people making decisions should have discretion. Of course, if they are always looking over their shoulders that discretion is very limited. I think at the other side it is absolutely clear that where there isn’t accountability and where lights don’t shine, very poor decisions are often made as well. I don’t think that if you get no accountability you get good decisions and if you get accountability you get bad decisions. You can get good and bad in both cases. I think one of the things-we probably haven’t got time, but we may go on to it-is the issue of ministerial responsibility.

Chair: We will come to that.

Professor Hood: I’d just say that transparency isn’t necessarily the same thing as accountability, as ordinarily understood. There can indeed be conflicts between those two things. It would be possible, for example, for your Committee to interview people in private if you were interviewing the security services or something.

Chair: We do.

Professor Hood: No doubt you do. That is accountability but not transparency, so the two things are not necessarily the same. Of course-again, I will not take up your time, Chair-you can distinguish between the kind of transparency that applies while something is happening, and transparency that occurs after the fact. Often judging the balance between those is a difficult thing as well.

Q21 Greg Mulholland: This is my final question-can I have a fairly brief answer please? We have had wonderful phrases from Ministers, such as "power shift" and "horizon shift" and all sorts of management-speak. Do you think there is any credibility in the ministerial claims that the new departmental business plans will lead to a power shift to local people, or will it just be a tick-box exercise of partners putting these together?

Professor Smith: I think it’s a very difficult thing to achieve and I wonder what the reaction of Ministers would be if there really was a power shift.

Professor Hood: I don’t think I’ve got anything to add to that.

Q22 David Heyes: This Committee is interested in the enhanced role of the Departmental Boards, and you have the Government bringing in non-executive directors with experience, for example, in the business world. If you have a view on this, what should the role of Departmental Boards be in the governance arrangements of Departments?

Professor Smith: On one side it can only be a good thing to get different forms of expertise informing other large organisations about how they may do things better. In that sense, it is difficult to see at one level that it’s problematic. The issue is that there has to be a recognition that public services are actually not the same as private services, so you won’t achieve the same things if you just impose the private sector view of the world on public sector organisations.

Dr Lodge: I think Departmental Boards are nothing new. They have always had this role between giving strategic advice and telling people what they thought about how the management of a Department is going, so there is a need to be clear about what they are supposed to do. The other key question, however, is whether you find-this applies to all organisations-that a supervisory board has enough time to vet particular approaches. Do you even appreciate that the supervisory board should be doing these kinds of things? When I looked at the documentation, it showed a supervisory board, and talked about "setting Departmental risk appetites." I am not quite sure whether it should be doing that kind of thing. Given that this is a public policy area where things happen quite quickly and agendas change very quickly, can a meeting once a month, or even once a quarter, deal with these kinds of aspects?

Professor Hood: The principle of boards in public organisations can work well. They can operate as critical friends, and I think that is often the term that is used. That is to provide a mixture of a challenge function and a support function. In principle, there is a lot to be said for that. The kinds of problems that have to be dealt with include, first of all, the conflict of interest problem if the people on the boards come from outside. Again, as Members of Parliament, you will be familiar with this kind of problem, and you have means of dealing with it. But that is something that has to be dealt with.

On the other hand, you want people with the best kind of experience in the area, which means the best people in the country and maybe in the world, and there may be a trade-off between the conflict of interest problem and getting the best people in the world. I believe that it is often the case in parliamentary debates that the people who have the most to say and those that are the most experienced are precisely the people who do have an interest. Then there is also the question of how to harness that kind of talent effectively given that events move quickly, that boards only meet occasionally and that people are very busy and it is hard to get things into their diaries.

Q23 Kelvin Hopkins: On the relationship between Ministers and civil servants, is there a need to re-examine the convention that Ministers remain accountable for the actions of their civil servants? I am reminded of two things. First, when I was very young it was automatic that a Minister retired if a civil servant had done something wrong-the Dugdale case and so on. Secondly, in the previous Parliament we had a Minister who actually publicly blamed a civil servant and got into serious trouble for doing so. The argument by the Opposition was that she should have taken personal responsibility.

Professor Smith: That is a very big question, which would take a long time to answer, because ministerial accountability shapes the whole process of politics in the British political system. There are reasons for changing it and rethinking it, because in lots of ways it means that decision making gets constantly drawn to the centre, and it’s one of reasons why the problem of localism is so difficult in the British political system. Actually rethinking it, however, would be about fundamentally changing the way that the British polity operates, and there are lots of arguments for why you may need to go there, particularly with the way that public services are changing, but actually getting there is extremely difficult.

Dr Lodge: Previous attempts to write down the relationships of who should do what and who is to blame when something goes wrong have made it extremely difficult, when something does go wrong, to allocate clearly where the responsibility for something lies. You can look at cases where people have tried to have performance agreements between Ministers and chief executives or leaders of Departments. So I think it is fundamentally extremely difficult to write down exactly who should be responsible for what.

Professor Hood: The heart of this issue is what is called the implicit bargain between civil servants-senior civil servants in particular-and the politicians. The bargain has traditionally been that civil servants enjoyed some element of anonymity, both in the good times and the bad. In return, they were expected to be politically neutral. The question that faces the Committee, when you are weighing this up, is that if you give up on the anonymity principle-so that you make it possible for civil servants to be routinely blamed for policies they may not have initiated-can you also maintain the political neutrality principle? Can you make one change without the other?

Q24 Kelvin Hopkins: I shall run two questions together. The first is whether the convention would benefit from better explanation and codification, and then, what the code should be. That is one approach, which would be moderate. A much more radical suggestion has been proposed by Reform, saying that Ministers should be allowed to appoint senior civil servants.

Professor Hood: That second point picks up exactly on what I just said to you: if you give up on the anonymity principle, does it mean that you give up on the political neutrality principle? I think that that’s a big challenge, and I am presuming that is why Reform has made that suggestion.

All I would say on the first point, about writing it all down, is that these relationships are very subtle, and I would personally be sceptical about the ability of any contractual statement to capture all the difficulties or potential subtleties.

Professor Smith: The convention of ministerial responsibility was written when things were done mainly in Whitehall and Westminster. Now that things are done all over the place, there is a need to, at least, restate what the principle should be in a very different context.

Q25 Chair: Does that require a new code? Do we need to codify the relationship between Ministers and the Civil Service?

Professor Smith: In my view, it needs to be made explicit in some way. At the moment, the rules of ministerial accountability and responsibility are largely implicit, and they are often redefined case by case, which is why Ministers can often change their position on ministerial responsibility and accountability.

Q26 Lindsay Roy: There seems to be a high expectation of transformational change. How significant a transformational programme does the Civil Service face, and who should drive that through? Should it be civil servants or Ministers?

Professor Hood: On the latter point, it is impossible to imagine a transformational programme succeeding unless both Ministers and civil servants are working together. To return to the question that we were asked at the beginning, about succeeding waves of Civil Service reform, from my experience they only work when the reform themes go with the grain of where the Civil Service wants to go.

Dr Lodge: There are examples that would support that.

Q27 Chair: Our objective, in this inquiry, is to try and come up with a set of key principles of good governance. In the evidence we have received, there is a fair amount of stick and criticism about what we have come up with and the inconsistency involved in it. What do you think about that objective, and do you think it is achievable? Principally, it is as a guide to scrutiny as much as anything else, rather as the Committee on Standards in Public Life guide their scrutiny of public life with a set of principles.

Professor Hood: Yes, many organisations have done that. The Parliamentary Commissioner for Administration, who I believe reports to you, has a series of principles of good administration. I am not sure whether you put them into your framework, but that would merit some attention. I would only say that people have been enunciating principles of good governance at least since Confucius, who thought that the best kind of Government was one that didn’t appear to govern-I think that’s the wu-wei principle, which doesn’t feature in your list, I see.

Q28 Chair: I’m sure it’s a gleam in Oliver Letwin’s eye.

Professor Hood: The problem, as mentioned in the memo that Dr Lodge and I put in, is that it’s not difficult to come up with principles prima facie of things that it would be nice for Government to do. The problem arises in handling the trade-offs between them, even going back to Confucius. He believed that good government was strong government, but was also government that wasn’t too obvious-governing without appearing to govern. What do you do when those principles come into conflict? The difficulty with most catalogues of principles of good government-good regulation, good administration-is that they don’t tell you what to do at that point. That seems to be the difficulty.

Q29 Chair: We know good government when we see it, don’t we?

Professor Smith: I think it relates back to the question of data. In one way, some of the principles about good governance could relate to what sort of information is released and how that is used, in terms of making sure that Government is accountable. Good governance could be more clearly related to broad sets of outcomes. That is what the Government want to do in terms of policy. There’s no reason why the Government as a whole should not have to face a set of outcomes that can be determined in relation to good governance.

Q30 Chair: But when you start measuring outcomes then they game the outcomes. Dr Lodge?

Dr Lodge: Well, yes, and I think that relates to at what level of good governance you want to have good governance.

Q31 Chair: All levels.

Dr Lodge: You could say that if we are World Bank watchers who want to study the overall health of a political system, we wouldn’t look at use of IT, for example, as a standard for good governance. We would look at legality, rule of law, freedom of the press and so on. The Civil Service would feature within that.

Q32 Chair: If we don’t get the IT right, nothing works in the modern age, does it? Look at the Rural Payments Agency or the Child Support Agency.

Dr Lodge: That is true but I may not want to compare the standards of governance in setting up a business in particular countries and so on. The role of corruption, for example, in terms of payment for access to public services is arguably a bigger issue for good governance at that constitutional level-the legality in which certain services are provided.

Q33 Chair: So you think we are in a muddle.

Dr Lodge: I think it is important to highlight at what level you want good governance. If you want good governance in terms of a departmental issue, one could have all sorts of plans, competency and leadership frameworks and so on. Then you get exactly the side effects you mentioned: the more we measure, the more we get gaming and all sorts of unintended effects. Or one could say-and that would be a post-bureaucratic idea of all four versions that we heard earlier-that it should be good governance within that policy domain. It would be more about collaboration; it would be about achieving negotiated outcomes. In many ways, you can’t really measure whether someone has successfully mediated a conflict between different people. When we did research on competence within the Civil Service, one of the key arguments was that performance pay clashes with ideas, when you have an extremely conflicted field and the main Civil Service function is to bring those hostile, adversarial parties together. How do you measure or reward that?

Q34 Chair: But our main focus on this Committee is about process. We do get concerned when the Government do not set clear outcomes, but that is not what we are concerned with. We are concerned about the process of setting outcomes and how they are achieved. Can we formulate a set of principles around that, or do you think we have made a good stab at it?

Professor Hood: I think there are certainly things here that are positive. I referred earlier to the Parliamentary Commissioner for Administration who, on the basis of decades of work dealing with complaints from MPs such as yourselves for all the multitudinous things that go wrong in Government, has come up with a set of principles: accuracy; consumer focus; openness and accountability; fairness and proportionality; effective remediation of mistakes and errors; and continuous improvement. That is not something just picked out of a hat. It is the result of decades of experience of dealing with the complaints that you MPs send to that body as coming from your constituents. I would have thought that is a process of experience to which it would maybe be worth paying a little more attention.

Chair: Thank you very much indeed, gentlemen, for your evidence. Please send further thoughts if you have them. This inquiry will run for a month or two yet, so I would be very grateful to you for giving us your thoughts.

Examination of Witnesses

Witnesses: Andrew Haldenby, Reform, Professor Andrew Kakabadse, Cranfield School of Management and Julian McCrae, Institute for Government.

Q35 Chair: For the record, could you each please identify yourself?

Andrew Haldenby: Andrew Haldenby. I am the Director of the independent think-tank Reform.

Professor Kakabadse: Andrew Kakabadse. I am a Professor at Cranfield School of Management.

Julian McCrae: I am Julian McCrae. I am the Director of Research at the Institute for Government.

Q36 Chair: I think you have the altogether unfair advantage of having listened to the previous evidence session, so we don’t need to repeat what has already been said. We would like you to add to it, but we are going to go over broadly the same agenda. Our first question is about why Civil Service reform has remained on the agenda. There seems to be an increasingly unsatisfied craving for reform, yet the Government’s programme for government is relatively silent on the question. What is your reaction to that?

Professor Kakabadse: This is nothing new. You will find exactly the same in the private sector. The need or urge for reform is really very prominent when there is a change of chairman or chief executive, and so also when there is a change of Administration. Why the disappointment? From all of my research, any change programme that is deep takes at least three to five years to bed in. There is a difference between political time and organisational time. We could be talking about Microsoft or a bank, or we could be talking about the Abu Dhabi Government, which is where I am involved right now. There seems to be no change in terms of the time frames.

The added issue is that, whatever the original intentions of the change programme, if the people who are implementing the change feel that what they were told to do is out of keeping with what they are actually finding, there is resistance, and there is resistance the nearer they are to service provision, to the customer or the community. Five years could extend into seven years. You can get something called change fatigue.

Q37 Chair: Has change become a political objective in itself? It’s certainly a very attractive word that politicians use because they think that the public like the idea of change. I’m not sure about that, because I’m a Conservative, and I like things to stay the same. Has it become an end in itself?

Julian McCrae: I think we have something that is very different now from the historical approaches to Civil Service reform. The spending review settlement forces change upon Whitehall in a way that we haven’t had before. Taking a third out of the administrative budgets, on the time line that the Treasury has set out, means that if you are going to have functioning organisations at the other end of that, you are forced into a transformational approach to change. The nearest post-second world war comparator is the early 1980s where-the metric is very difficult to compare exactly-10% was taken out compared with more than a third now. That is roughly the scale that you should be thinking about.

Q38 Chair: There was more fat.

Julian McCrae: There may have been. I haven’t seen a detailed analysis of fat then versus fat now.

Q39 Chair: Look at how much it has expanded.

Julian McCrae: I think the interesting question on this is the time line and pace, because doing this would be an extreme stretch for any organisation. It is not easy stuff. If you look at what Andrew was saying about pace, you will see that some Departments really started thinking about this quite systematically a year or more ago, and they have moved themselves into a position where they are thinking about what the Department should be now. There is a set of Departments that are moving very fast on a cost-out element.

The Department for Communities and Local Government has reduced its top Civil Service postings by 30% or 40%, and most of the civil servants in that Department are reapplying for their jobs and a lot of them face redundancy. So you’re seeing an approach from the Civil Service that is now taking on the problem. Psychologically, these things are important. Does it think there’s a way around this? No, the money will be going, so the Civil Service must adapt and change. The big question at the moment, the bit that’s missing from this puzzle, is what does the Civil Service look like in three or four years’ time, which is the length of time that this will take? What’s the blueprint that people can aim for, so they know whether they are on the right course? That seems to me to me the big question at the moment-articulating that.

Q40 Chair: That was a very full answer. You must try to be a bit briefer. Could you answer that question, Mr Haldenby?

Andrew Haldenby: To put it in historical context, the last Government became very interested in Civil Service reform because they became very concerned about the competence of the Civil Service. That was before the financial crisis. It is very instructive to compare, for example, the speeches of Tony Blair on the subject in 1998 and 2004. In 1998 he came in with a hymn of praise to the Civil Service; in 2004 he said that if he had known then what he knew now, he would have embraced reform with much greater urgency and called for a smaller and very different kind of Civil Service. There is also the evidence of the capability reviews, which are extremely important and identify clear problems in the Civil Service, particularly its ability to change. I don’t need to go into all of the reports issued by the National Audit Office, but they clearly show real problems in financial management and on the procurement side.

This is not an abstract or academic question; there is a real problem. The last Government lost their innocence about Civil Service reform and came to the sense that Civil Service reform had to be done. I have included in my written evidence what I think is an important quote from Alan Milburn in 2007: "Whitehall is the one part of the public services that has largely escaped Tony Blair’s reforming zeal. It should do so no longer." Those reforming Ministers came to the realisation, which I think is the right realisation, that you can’t drive a reform programme without Whitehall reform. So I would include that among the reasons for Civil Service reform, too.

Q41 Chair: But off the record there are anecdotal comments from Ministers saying that their private offices don’t work as they used to. Their private offices can’t spell, do grammar or write letters properly. Some Ministers say that they are spending an inordinate amount of time redrafting letters, which they never needed to do in the past. Has the Civil Service lost its professionalism?

Andrew Haldenby: The capability reviews looked at the question in more high-level terms-the leadership of the Civil Service, processes within Departments and ability to deliver-and they found significant problems in each of those. The National Audit Office, as I said, has looked more at the financial management and procurement side. Those reports are indicative of a problem now, but I’m not sure how that compares with previous years.

Q42 Chair: But coming back to the key question, does the Civil Service need to have its core values, its hierarchy and its stability restored to get back to what we used to have-Ministers used to talk about the enveloping Rolls-Royce machine that looked after them-or do we carry on with what might be described as the creative destruction of a great public service in the name of this great Post-bureaucratic Age of decentralisation and transparency? Are those two visions compatible?

Julian McCrae: If you look at where the Government are going with some of their reform agenda, it implies a different set of professional skills for the Civil Service. So the set of professional skills that you might have had in the Sir Humphrey era won’t be the set of skills that can run disaggregated market provision with outcome-based contracts, for example. You need to know a lot about how to write a contract if you are going to do that kind of policy, which probably puts less weight on drafting.

Q43 Chair: I appreciate that, but that’s a skills issue. Are the problems in the Civil Service basically just about skills, so civil servants can do what they do better, in which case the Civil Service can reform itself if it’s left to get on with it, and better if the politicians leave it alone? Or does the Civil Service need to be reformed by a new political drive? The Government would seem to be coming in with a new political drive albeit, in Civil Service reforms terms, it’s not expressed as Civil Service reform.

Professor Kakabadse: If you have a reform programme that basically is a decentralisation-look to the community, deliver on service-it’s not just skills. It’s a fundamental change of mindset. That change of mindset has bedevilled many an organisation, and the investment that many organisations have put in to facilitate that change of mindset has been extensive. I should also say that if you take other organisations such as large entities, with that mindset change has been some considerable redundancy. The reason for that is that many people do not wish to, or cannot, or are at a particular age where that mindset change is now too expensive to engineer. So if you do want that, you are going to have a very different Civil Service with a very different set of values. If you don’t want that, you could look at what cost-cutting is doing to the existing skill base and the motivation of people. By and large, you either have one or the other.

Q44 Chair: Do we think we know what the Government want? Are the Government clear about what they want?

Andrew Haldenby: I would say no because I think it is to some extent contradictory. One the one hand Francis Maude, the Minister for the Civil Service, has set out with absolute clarity his defence for what he has called the traditional Civil Service. I won’t read it out at great length, but this is the speech he made at a Reform conference in July, which the Chair of this Committee spoke at, where he says things like, "I am a big fan of the Civil Service…I do worship at the shrine of Northcote-Trevelyan". He goes on to say that he is going to make civil servants feel better about themselves by getting rid of management consultants and so on, to give civil servants more-

Q45 Chair: But is that just what you say when you’re going to beat somebody up?

Andrew Haldenby: Well-no, because they have cut back on the use of external consultants, so that is a defence of the traditional Civil Service vision. On the other hand, they have talked about Departmental Boards, which the Committee has already mentioned. Taken to its logical conclusion-Francis Maude himself has said this-those Departmental Boards would be able to hold permanent secretaries to account to the extent of moving them on if their competence wasn’t seen to be high enough. So those are two conflicting ideas, it seems to me.

Q46 Chair: Do we need to add to that answer?

Julian McCrae: Very briefly on Civil Service reform: is this something that has to be done to the Civil Service or something the Civil Service has to do to itself? I think hugely it’s about the Civil Service must do it. On the scale of change we are talking about, it has to believe that this is the right thing to do for itself, because the people involved have to believe that. But that includes Ministers and includes the wider political infrastructure with which the Civil Service relates. So if there isn’t a clear blueprint that everyone is agreed on, there will be real problems in taking this forward.

Q47 Chair: And there should be?

Julian McCrae: I think there has to be on the scale of change we are doing; you have to know what you’re trying to achieve if you’re going to-

Q48 Chair: I am seized of this notion that there have to be enough people around the top who believe in an objective for that objective to be achieved. Professor Kakabadse?

Professor Kakabadse: The words are clear. It’s a massive change. My database-a quite extensive one-of public service and top teams across the world, with its almost 14,000 organisations, indicates that you’re not going to get that. Because a third of most top management either in the public service or the private sector-their own colleagues don’t agree with what’s happening. The vision and mission statements that I’ve heard indicate massive change; the reality is it will falter. About a third of the major change programmes that I have seen succeed, and there is one fundamental reason: the top is pulling together. I do not see that here.

Q49 Charlie Elphicke: Mr Haldenby, I will just briefly pick up on your comments about the Cabinet Office Minister worshipping at the shrine of Northcote-Trevelyan. You may recall that you wrote a report back in March 2009 exploring this area, and you said in that report that the Civil Service reform and Whitehall reform should be a priority for the first 100 days. Do you think that the change put forward by the Cabinet Office Minister has been substantially radical, or do you think it should be faster, deeper and wider?

Andrew Haldenby: No. What has been done? There was a change to the redundancy packages, but that’s not a major change-it doesn’t change the structure of the Civil Service-and the Departmental Boards are still all to be seen. Otherwise, as I say, things like cutting out the management consultants actually strengthen the position of the existing Civil Service. To be absolutely frank, it does seem to me that the Government have got a problem. They want to achieve the radical decentralisation of power that we are talking about. The last Government came to the conclusion that you have to reform Whitehall to do that, and this Government are not going to take that step. That is the problem.

Q50 Charlie Elphicke: Very briefly, in view of what you have just said: do you think broadly that the current Government are simply deckchair-shuffling on this matter? If so, should they adopt a more radical agenda, and what would you make the three key priorities of such a radical agenda of reform?

Chair: Very briefly, because we do come to this a bit later.

Andrew Haldenby: Well, I don’t think that what they are doing is in any way radical. We can talk about it later, but the principle of accountability is the fundamental one. The idea of ministerial responsibility that the Committee has already talked about does centralise power, does obscure the accountability of individual civil servants and does give the impression to Whitehall that it is in charge of public services. That is completely out of line with what the Government are doing.

Chair: We will come back to that.

Q51 Lindsay Roy: Is the term "post-bureaucratic age" really about a fundamental change in mindset? In terms of delivery, can you expand on what you said before?

Andrew Haldenby: I think the "post-bureaucratic age" is a David Cameron phrase. It is a phrase he has used to talk about his reforms. It is very similar to the Blairite vision of decentralising power. I won’t read it at any length, but here is David Cameron on 8 July 2010: "We want to replace the old system of bureaucratic accountability with a new system of democratic accountability…We want to turn government on its head, taking power away from Whitehall and putting it into the hands of people and communities." That is a vision of greater choice in public services, greater powers for local councils and so on. Tony Blair could have said something similar.

A bit later, Cameron said: "A couple of centuries ago this country was in a pre-bureaucratic age". There was slow transport and communication. Then came the steam engine and the telegraph. Now we have the internet, so we are in the Post-bureaucratic Age. There is this sense of a decentralisation of information, meaning that we are all much more empowered.

Q52 Lindsay Roy: So the vision is the same, but the key transformational change is in terms of delivery.

Andrew Haldenby: I think the post-bureaucratic age also involves a smaller Government. Government are doing less because we are much more informed.

Q53 Lindsay Roy: So the Government are more strategic?

Andrew Haldenby: Yes, more strategic and not delivering as much or much at all. Government are commissioning rather than providing.

Q54 Lindsay Roy: So other people are rowing the boat.

Andrew Haldenby: Government still have considerable control over where the money goes, and there is probably less money. Government are spending less in that world than the current one, and the people providing services are not Government people in most cases.

Professor Kakabadse: May I comment on that? The last panel talked about the post-bureaucracy period starting with the Chinese, which is true. In the current phase, if you go back to the management literature you will find that in the 1960s there were already books written and references made to the post-bureaucratic age. This is nothing new for Government; it is really old for the private sector.

Q55 Chair: But isn’t that an argument in favour of it?

Professor Kakabadse: Well, that is interesting because it was never meant to be strategic. It was meant to relate to delivery of service, so that we would get a better delivery of service. The assumption was that because we have highly capable people, who will be able to look after the customers’ needs, the community needs, and be flexible, there would be a top management that has such a skill that the vision, mission and strategy are all held together, while all these little guys over here are running all over the place providing service. That has been an abysmal failure.

Q56 Chair: The armed forces call it delegated mission command. Why can’t we have that in the public sector?

Professor Kakabadse: Because in the armed services-I say this from a study I’ve just completed-they work so hard on investigating exactly what goes wrong with delegated mission command. When I don’t like my boss and I know he has made a wrong decision, there is a training programme that helps bosses listen.

Q57 Chair: So it is a core skills and core management programme.

Professor Kakabadse: It is a core skills and core management programme. It’s a lot of investment. There’s a lot of resistance to change. It involves the changing of mindsets. It involves people who have not been told before what they should be doing now listening to that.

Q58 Chair: What is the scale of training required in order to implement the Post-bureaucratic Age? Is there any sign of it?

Professor Kakabadse: From my experience, if you have an organisation of say 300,000, such as HSBC or Citigroup, you will train 5,000 people, it will take you two or three years, and you will probably spend £10 million to £12 million doing it.

Q59 Chair: That’s not much money in the scheme of things.

Professor Kakabadse: It is not much money. The question is whether the bosses will follow through, whether you will have the consultants or the coaching and whether you will have the on-the-job activities. If you have cut external services from your provision, you train and we all go back to doing what we did before.

Julian McCrae: It goes back to the points that Andrew made about the top team pulling together here. You can put in all the training and skills that you like, but if your organisation isn’t focused on the mission to change, you are in trouble.

Just thinking about the post-bureaucratic age, there are two levels on which the Civil Service in Whitehall is engaging with it. One is in their role of policy advisers to Ministers and thinking about what this means for the public service as a whole. The second is in their actual day job as civil servants in Departments that will be affected and in the types of things that those Departments are doing and, therefore, at the most basic level, whether they have jobs. Those are the questions that they are asking at a personal level. In that second space, the Civil Service can quite easily deal with abstract concepts such as the post-bureaucratic age, and it operates very well in that space. In the space of "What happens to my job?" and "Am I going to have a job in six or 12 months’ time? What am I going to be doing?" you need a lot more clarity. That goes back to the blueprint point, which is that it’s fine for abstract discussions, political discussions and policy advice, but it’s not fine for the organisational change of the Departments themselves. They need something far more specific.

Q60 Mr Walker: Do you think it is helpful when politicians come up with these phrases that say everything but mean absolutely nothing?

Professor Kakabadse: It is irritating.

Q61 Chair: Do you see it happening now?

Professor Kakabadse: Yes, unfortunately.

Q62 Chair: Do all our witnesses agree with that?

Andrew Haldenby: I don’t agree with that at all. I think that that is very unfair. The Prime Minister has made speech after speech on the subject, which have set out his ambitions for public services in considerable detail. They are internally consistent and, after all, very similar to the previous Government’s. I don’t think it’s at all true to say that it doesn’t mean anything.

Q63 Mr Walker: But of course we are going to have a bureaucracy. It might be a slightly smaller bureaucracy, but we’re going to have a bureaucracy. We’re not going to be living in a Post-bureaucratic Age; we’re going to be living in a slightly different bureaucratic age.

Andrew Haldenby: He is not saying that there is going to be no bureaucracy. He sets out, quite clearly, the kind of Government that he envisages.

Q64 Mr Walker: He does. He says it’s post-bureaucratic, which means after bureaucracy. What comes after bureaucracy?

Andrew Haldenby: The Post-bureaucratic Age.

Q65 Mr Walker: But that’s bureaucracy. I don’t understand. I know that I’m a bear of very little brain, but I just don’t think that this is helpful. I just wish that politicians could get on with doing things quietly and effectively without building expectations with things such as the Big Society. Is that the Post-bureaucratic Age? Are the two mutually exclusive? What is the Big Society?

Andrew Haldenby: It’s the same thing.

Q66 Mr Walker: Fine. This is the point that I wanted to make. You talked about people in the public sector not doing the work and people in the private sector doing it, but they’re still getting public money, and they’ll still have their own bureaucracy. BP and Capita, for example, are enormous bureaucracies. Why is that any different? At the end of the day, it’s still public money being paid to a large group of highly paid managers. We have chief executives of local councils, some of whom are very effective, earning £200,000, and we seem to find that objectionable, which it may be, but we don’t see anything wrong with giving Capita billions of pounds of taxpayers’ money and its chief executive earning millions. I notice Professor Andrew Kakabadse nodding in agreement.

Chair: Okay. I want Professor Kakabadse to say something on that.

Professor Kakabadse: The whole point of the Post-bureaucratic Age as a phrase is to then specify what sort of bureaucracy you want afterwards. Andrew was quite right. I was somewhat unfair in that there is a statement concerning locality, community and Big Society. The problem is that you then have to specify how you are going to achieve it.

I know we will come to this later, but I would like you to imagine a massive car manufacturer that says, "I’m going to give the best service to my customers," and then does nothing about the dealer network. So, we have a great car, which goes to these people who don’t even look at their customers and treat them badly, so then we have a bad car. In any sort of change structure, where you have a mission, it is so important to specify where your investment will go. If it is in locality, I would like to see the same level of professionalism at a local level, to deal with these issues, as we have in the Civil Service. I do not see that, and I do not see it coming at all.

Q67 Chair: Mr Haldenby, did you want to add something?

Andrew Haldenby: Very quickly, on the differences between bureaucracy and management: the hope is that the Capitas of this world are managed and have managers, but they are not bureaucratic-in that sense-in their operations, so they are more productive. The Office for National Statistics has the numbers on the comparisons between public sector and private sector productivity over the past 10 years, and they show that the private sector does much better. So, that’s the hope. It’s not anti-management; some people are anti-management, but it’s not that. It is, however, anti-bureaucratic, in that sense.

Q68 Chair: In terms of where you plan to spend your money, are you talking about on your organisation or on your services, Professor Kakabadse?

Professor Kakabadse: Usually, it should be both, because if you are going to deliver this service over here, you spend your money on the management that delivers it-the management you need to support the guys who deliver the service. The principles are very simple. If, fundamentally, you are changing and reducing your management but doing nothing about it at the service delivery point-you are not making substantial changes there-what you have done to yourself is that, as Charles Walker has said, you are now going to give this service to a third party. We call that outsourcing, or public-private partnerships, or Capita. These guys then hold you to ransom by contract. You sort out that contract and if you want a slight change, it will cost you more money. On the day, their delivery of service may be just as good as yours was, but by gum, you have a debt for the future, which you really do not want.

Q69 Charlie Elphicke: Very briefly, you said that they hold you to ransom by contract; do you mean that there might be more cases where we have contracts for aircraft carriers that we can’t get out of, which would cost the country billions and billions? Is that the future?

Professor Kakabadse: I cannot answer that question, because it is at a much bigger level. However, if we decide that we will outsource taxation-or the administration of taxation-certain parameters will be set, but as you start working on it, you find that you need to do something additional, such as a new service, or a new way of doing things. The contract is so tight that you originally started with a budget of x, but you find that you have to make a number of change provisions, which will cost you more. If you have contracted yourself for seven years to deliver a service, and you are trying to update that service, you will find, every year, that you pay more and more money, which you never accounted for.

Whether you will then have aircraft carriers that you can’t sell, buy or do anything with is a second question. However, it is more about how you will build your aircraft carrier; that is the point I am making. You have given that responsibility to somebody else, and they will hold you to their contract, because that’s how they make money. If you work with outsourcing companies, they want you to walk into that situation naively, because they make more money on additional contracts and not on the basic contracts.

Q70 Kelvin Hopkins: I agree very strongly with Charles Walker, and with what the Chair said at the beginning, about recreating the Rolls-Royce Civil Service. How many of our problems now have been a result of zealous reformers, like Blair, driving through agendas that actually make the Civil Service less efficient and less competent? There is the case that civil servants can’t write letters, can’t spell and are not grammatical-apparently. When I was a student, the best and most able students got into the administrative class. It was seen as a privilege. We had an élite of the best minds-if one likes-who were dedicated to public service. That model seems to have been smashed. Would it not be sensible to try and recreate it?

Professor Kakabadse: From what I see, the idea of élite brains in the Civil Service is still there. I see outstanding capacity. Having taught on a programme called the top management programme, which brings in chief executives, chairmen, managing directors, as well as the top civil servants, at the end of the programme, the ones who are most humbled, by far, are the ones from the private sector. So, I do not see the brains drain that much.

On the idea of a Minister not managing his office well, I conducted a study last year that showed that one of the biggest problems is that Ministers can’t manage their office. It wasn’t the fact that we have poor people who can’t write or spell.

The following question was on the Rolls-Royce nature of the Civil Service. Please recognise that what is happening in the Civil Service is the absolutely standard private sector practice of continuous cost efficiency without there necessarily being enhanced service effectiveness. Has the Civil Service been continuously reduced in terms of cost, and is there the message that you can do more with less? Yes. Does that mean that you at the receiving end get a better service? No. We are in an era of service delivery based on a cost equation that runs from the City to the Government and to every company I know. Is the Civil Service doing that quite well? Yes. Do we have a political problem in defending the Civil Service against such thinking and practice? Yes. You cannot blame the civil servant for that; it lies with the political process, not the civil servant.

Q71 Chair: Mr Haldenby, you were shaking your head. I will then come to Mr McCrae, but after that we must move on more quickly.

Andrew Haldenby: To disagree with the Professor, the idea that the Civil Service is geared up for efficiency and will make the cuts in the right way is not borne out by the evidence of things such as the capability reviews and the National Audit Office, which I have already mentioned. The one thing that you would not rely on is the Civil Service being financially well managed or astute, and so on. Government is, of course, a partnership between Ministers and the Civil Service, but there is a lot of evidence that suggests that the Civil Service has to shape up on its targeting of the equation.

Julian McCrae: There’s a trap that you can fall into of saying that there is one Civil Service and then there’s a reformed Civil Service. The most important thing at the moment is to start being very explicit about what we want the Civil Service to do, and that draws you into some of the important factors that a Civil Service must do, but which are not the function of the private sector. It has to support Ministers, it has to be answerable to Parliament and it has particular forms of accountability, but it also has various functions that are much closer to things you will find in the private sector. If Government reform objectives move in that direction, things such as contracts and management markets will become far more important. We need to be explicit about what we want the Civil Service to do, so that people can think about how we create an organisation capable of doing all those different things to a high standard. If you run into it being one thing and not the other, you very quickly get into a dialogue that says there was a golden age and if we go back there everything will be fine. At the moment I don’t think that is a helpful thing for the Civil Service, which has political imperatives. Ministers are setting a direction and it has to follow it.

Chair: Moving on. We have touched on some of the subjects that we are about to raise, so please be as quick as possible.

Q72 Charlie Elphicke: Professor, you’ve talked a lot about the governance issues surrounding the Civil Service. If, as you say, the central Civil Service is so good and local councils are so rubbish, why is productivity so low compared with the private sector?

Professor Kakabadse: I didn’t say that local councils are rubbish. I said that you have to invest there if you want to achieve the objectives that you have now. Again, I would have to ask what you mean by productivity.

Q73 Charlie Elphicke: ONS produced a series on public sector productivity that shows that public sector productivity is far lower than the private sector. If your governance is so great, why is that the case?

Professor Kakabadse: If you look to HSBC, you will find exactly the same as if you looked to Goldman Sachs, because it is a massive organisation. One of the accusations made against HSBC is of how it can be so conservative. It is one of the classical world-class banks that does what it does very well. My concern in answering your question is what is it that we are particularly talking about? If the central Civil Service role is to provide advice and policy inputs to the Minister, I find that particular skill excellent. If we are then concerned about introducing continuous cost efficiencies-

Q74 Charlie Elphicke: Let me stop you there, because you are not answering the question. The question is why is public sector productivity lower than the private sector?

Chair: I think the professor is saying that it depends on what the output is.

Professor Kakabadse: It depends on what the output is.

Chair: If the output is policy and guidance.

Professor Kakabadse: If the output is policy and guidance, fine; if the output is selling a whole number of widgets, how could the Civil Service even compare? So I would like to know the context in which you make that statement. I could then answer your question appropriately.

Q75 Charlie Elphicke: In that case, do we need to have a leaner centre, and to have more outsourcing of things that are more processed?

Professor Kakabadse: According to what the present Government are saying, you will have to introduce that if you are going to exercise that. Because you are going to have a structure that is commonly called portfolio. We have a small centre with a large number of services. The centre has low cost and it basically trusts the people who are there delivering-the various agencies-to deliver on that service. If that is what you mean by productivity, in the context that you outline, I have no doubt that productivity will increase. The question is, is that what you really want, because you have a massive change?

Julian McCrae: There is a big question about productivity for the central Civil Service that advises Ministers. The figures I think you are referring to are the ONS figures on public sector productivity. They are largely driven by the health service and education system. There is a subset that deals with the work that the Department for Work and Pensions does in the administration of the benefits system, which actually showed productivity starting to increase in the late 2000s. But there is nothing that is a serious attempt to look at the productivity of Whitehall itself, which goes back to, "Can we specify what Whitehall is supposed to be doing, and then can we start to measure that?"

Q76 Charlie Elphicke: When it comes to what Whitehall is meant to be doing, there seems to be the issue that civil servants serve Ministers and not the wider people. Is there any way to change it so that there is more of a sense of serving the people rather than doing what the Minister wants?

Julian McCrae: I think you will find that takes us on to questions that I feel we might come to later. Stop me if I end up there.

Chair: I think we will pull you on that one, actually. Does anybody want to add further on this question?

Q77 Charlie Elphicke: May I ask Mr Haldenby a follow-up? The professor says that the Big Society and the post-bureaucratic age is all just glorified outsourcing. Do you agree with that, or do you think there is something more to the post-bureaucratic age agenda than that?

Andrew Haldenby: Yes, it is partly about outsourcing but it is also about Government doing less. If one thinks about, for example, the Department for Education, there are teams of people who think long and hard and at cost about things such as the content of the national curriculum-a huge activity of Government. Under the logic of the Government’s city academies proposals, that function of Government stops. The curriculum is done by teachers. Similarly, the Secretary of State for Health has said that he wants the health service to become the largest social enterprise in the world, so it is going to be completely decentralised, paid for by Government, but delivered by lots of different organisations. So that work force planning part of the work of Richmond house-a huge historic operation-goes. So it is not just about outsourcing; it is also about those activities being taken on by, as it were, the Big Society below Government.

Q78 Chair: This goes to the heart of the existential question about what the Civil Service is. Is it a thinking, planning, strategic machine, that decides on objectives and tries to direct ends, ways and means to other agencies-be they public sector agencies or parts of the public service or private sector-or is it a management organisation? Professor Kakabadse, it seems that you are saying it is quite good at one bit but very bad at another bit. What should we be training the senior Civil Service to do? At the moment it is being asked to do a great many things, some of which it does badly and some well. What is the Civil Service?

Julian McCrae: If you look at a Department such as the Ministry of Justice, that is a combination. It has a policy advice function to Ministers on sentencing and legal aid issues, which is vital. It procures in a market of lawyers, spending about £2 billion on that. It runs the prisons and probation service and the courts-so it has operations. The only way effectively to run something like that is to have a set of skills and a team of people who understand and are skilled in each of those things. They work together for a collective aim, which is how to achieve what Ministers want to be achieved and, hopefully, beyond that the public, for traditional forms of accountability. I don’t think you can divide the policy off any more from the operations.

Q79 Chair: So, the idea is "steering not rowing", as it was put to us by Professor Flinders. There is not a tenable way of looking at it.

Julian McCrae: Can I clarify? If the permanent secretary is attempting to do the prison governor’s job-as in, he is rowing the prison-you are in trouble.

Q80 Chair: We had a Home Secretary like that.

Julian McCrae: If he is steering the organisation that is capable of having people who can run prisons, that is the right way to go.

Q81 Mr Walker: Briefly, what is a social enterprise? What do you believe a social enterprise to be?

Chair: That is going to be a very brief answer, please.

Mr Walker: Very brief. What is the definition of social enterprise?

Andrew Haldenby: An organisation selling services into the public sector, typically owned by employees, sometimes charitable and sometimes for profit.

Professor Kakabadse: A social enterprise is one that has either ownership or management disciplines of a business, but for social purposes.

Q82 Nick de Bois: Professor Kakabadse, I just want to return and link the question of efficiencies and funding to something you said earlier about change and resistance to change. In my experience of it, you need three qualities. You need buy-in; you need, above all, stamina; and you need motivation to do that. Do you think that one motivation that might give us a glimmer of success here is the massive reductions of up to about a third in departmental budgets, which will almost be cart-before-horse and drive reform of Whitehall Departments? I am assuming you would agree you can achieve the savings without any reform, so would you increase that level of success of change because of the dramatic cuts in the budgets?

Professor Kakabadse: Any change like that on its own, from my experience, is unlikely to work. You are likely to seriously question the stamina issue that you brought up, and you’re likely to get all sorts of concerns over burn-out, possibly disagreement with what’s happening, starting with resistance. If on top of that you do not have a management who are trained in how to motivate people during such dramatic change programmes, you are likely just to get individuals doing the basics.

Q83 Nick de Bois: You have by implication answered one of my other questions. Can I turn specifically to the spending cuts following your analogy here? By implication do you agree then you are actually going to impact on the delivery of the service as a result of the spending cuts, and of course as a result of what you have identified as demotivation for one reason or another?

Professor Kakabadse: I have not seen any organisation, private or public, that will not have the negative effects that you are talking about with this degree of cut.

Q84 Nick de Bois: Mr Haldenby, can I ask you a very similar question, bearing in mind the change management programme? With the level of cuts that have been talked about, would you agree that reform is vital to get them? Do you, however, see an effect through the pace and depth of what we are doing with the cuts that they will definitely or otherwise not affect delivery of service?

Andrew Haldenby: I think that the level of inefficiency across public services and in Whitehall is considerable. I don’t know and no one knows exactly how high.

Q85 Nick de Bois: You can’t quantify it.

Andrew Haldenby: But it is considerable. I will just give two examples. We have had a series of seminars with civil servants on the response to the cuts, and at one of those sessions one of the civil servants said that she had come in from outside the Government and she was interested by this concept of self-tasking that she discovered in the Civil Service. That is civil servants not having a clear direction of what to do so they would basically invent their own job. Another one said that there were no exit strategies for Government programmes, so if a civil servant was working on a programme, it would apparently come to an end-the Minister would say that that was enough-but the team would carry on and be in place and be paid for a long time. Those are just two little, anecdotal examples of the extent of inefficiency that has to be taken out before we can start being worried about any impact on services.

On the services, the professor says he hasn’t come across examples of people who have delivered more for less, but I have. If you go to the Merseyside Fire and Rescue Service you will discover an organisation that over the past 10 years has halved the number of fire deaths in Liverpool, and the number of fires, while reducing the number of full-time fire-fighters from 1,500 to 850. The reason they have done that is that they have changed the way that fire and rescue service operates. Instead of waiting for a fire to happen and to go and put it out, they have turned it on its head, sent out their fire-fighters to all parts of the community, putting up smoke alarms and transformed the fire safety of the region. In that sense, the cuts and the crises are the great opportunity to rethink matters and establish ways of working that have previously been inefficient.

Professor Kakabadse: If you do that, you will do exactly as my colleague has said. You will go to a service and identify that you want x number of people fewer, that you want the practices to change, that you want fewer fire engines and smaller smoke alarms. You will go into a level of detail and then replicate that by Department, by Department, by Department. I was asked whether I would affect service, if I took a third out of my costs. The answer is yes.

If I were told that people were going to take a third out of their costs and that they now have a plan Department by Department, that each permanent secretary already has an initiative or guide to how they would reposition all of it and that there is a training programme behind it, my colleague would be right. The question is whether you have that. Here, the devil is in the detail. If you do not have the detail that you have just heard, from my experience I do not know of a change programme that has succeeded.

Q86 Chair: Mr Haldenby, I need you to answer that.

Andrew Haldenby: What happened in Merseyside was not an initiative of the Home Office or the Department for Local Government, whatever its name was then. It was the initiative of a team of public service managers. I will not go on, but two things happened: one, they discovered that they were going to have falling budgets for a number of years to come for various reasons and, two, they had a particularly terrible fire where a young girl died. They did everything right. They got the fire engine there within seven minutes. But the young girl died, and they thought that they had to change. It was not a Civil Service initiative.

Q87 Chair: But it seems that the people on the ground and at the local service delivery had the skills and the authority to make the necessary decisions, and were allowed to take the initiative and had the means of taking it. Is that not rather rare in the public sector?

Andrew Haldenby: Well-

Q88 Chair: No?

Andrew Haldenby: The public sector is composed of units, which could all do that, but the way of organisation tends to stifle their individual initiative.

Q89 Chair: I do not understand why you are being so negative. Professor Kakabadse?

Professor Kakabadse: If you start with a top-down change programme, without specifying exactly what you want Department by Department and recognising that each Department has a different task, a different history and a different set of outcomes, each one of those outcomes in the reform process you want will be different from some sort of generic statement, and you will have the success that you want. What is being described now is a local initiative from people who saw a local problem. They felt the local problem, and there was motivation to do something about it. I do not hear that in the question that you have asked me.

Q90 Chair: Do you hear that in the reforms that the Government are trying to implement?

Professor Kakabadse: I do not hear that. I hear what could happen. I understand what could happen. It could be a tremendous opportunity, but I would now like to hear some sort of detailed view.

Q91 Chair: How should we make it happen?

Julian McCrae: I am deciding on the nuance to what is happening in Whitehall.

Q92 Chair: This discussion is very helpful for us.

Julian McCrae: There are 18 ministerial Departments in Whitehall at the moment. They are all taking different approaches to dealing with the issue because they are all in slightly different situations, both in a political context and an organisational context. Some Departments have really been engaging with the issues that Andrew is talking about for quite a long time. The Ministry of Justice had been working on a programme for how it will reform itself and the wider justice system for 18 months in the run-up to the election.

At the DCLG, there was a very sharp change in political direction at the time of the election and it is moving very fast to orientate itself around that change. I will not go through other Departments, but some are probably on a bit of a slower curve than that. They are taking their time to figure out where exactly they lie.

An extremely interesting question goes back to the Chair’s point at the start: which approach to the end point of better public services to change in Whitehall will prove to be the right one? Is it the one that takes this change on up front, is very explicit about it and articulates exactly what it is doing or is it the one that says, "Let us try and leave this for a little while. We can hide some of those administrative cuts in the budget. We have a finance director who is brilliant at doing that, who we have in Whitehall, and I shall try to change the rest of the system without changing myself"?

The private sector literature and Andrew’s research will tell you that the first of those should be, in principle, the right way to go about it, but we will see. It is also very risky.

Q93 Chair: Do you all agree that the first case is the way to go about this?

Professor Kakabadse: Only if you take what Julian said and apply that to every Department with exactly the degree of effort and rigour that he described. We have a permanent secretary in the team who is totally behind this. On top of that, we have a Minister who is totally behind it. Ministers talk to one another about the reality of making change work and they will defend their Departments. We have a change programme.

Q94 Chair: Isn’t that the role of the Cabinet Office, Andrew?

Andrew Haldenby: I don’t think so; the Cabinet Office sits outside the spending Departments.

Q95 Chair: But isn’t the role to make sure that Departments have a coherent change programme?

Andrew Haldenby: No, the question is who is accountable for the change. In the end, that is Ministers working with their individual permanent secretaries.

I do not disagree with my colleague, but the point about Merseyside is that you do not need grand action plans; the point of the post-bureaucratic age is the Government’s aim to get away from those. Of course we want to have a structure and an understanding, but we want to let this local initiative happen. Let’s not wait for another round of grandly organised Cabinet Office initiatives on change programmes, which we have had many times before.

Professor Kakabadse: On the question of the Cabinet Office being held accountable, if you want a good change programme, the Executive are held accountable; if you want a good change programme, the board is held accountable; if you want a bad change programme, we will have a change officer here and he will take full responsibility.

If a Cabinet is not held accountable, please tell me where the body is. I do not know of a body where we get together the top management, the top ministerial group, and the permanent secretaries. That is the body of people that will drive this and discuss the reality of what will happen three years from now when we come across problems. They will hold themselves to account, which is the whole purpose of having that top Executive. If that group does not hold itself to account, we do not have a change programme.

Chair: Right. We shall have some short questions from Mr Hopkins, Mr Roy, and then Mr Mulholland.

Q96 Kelvin Hopkins: Just one quick counter-example to what Andrew Haldenby said: Stafford hospital, which cut finance and cut personnel, and there were 400 extra and unnecessary deaths. That is the danger.

Andrew Haldenby: Well, clearly it is possible to make the cuts in the wrong way, but the example of Merseyside indicates that it is possible to make them in the right way. I would be confident that one would see many more of those positive opportunities than the ones such as you mentioned.

Q97 Lindsay Roy: In essence, we are discussing cultural change. It is about empowering and engaging with people who are working together towards a common purpose. In that way, the plans could be driven through. I hear, however, that there is still a lack of coherent direction in terms of people working together with a common purpose towards a common end.

Professor Kakabadse: The current programme is concentrated on communities and localities, and we call it Big Society decentralisation. If you could show that there is a coherent structure that displays the same degree of professionalism as the Civil Service currently has, the chances of this change programme working would be high.

It is a bit like your car manufacturer and your dealers-dealers are the people out there whom you cannot control, but if you bring them on board, you have something that works. I do not hear that.

Julian McCrae: Briefly, the people wanting this are at the heart of it. The danger for the Civil Service is that it often confuses process with dealing with the reality of people and relationships, and the substitute. The Cabinet Office has some role, but to say that there is a Cabinet Office process to make it happen will not work. It is about the group of leaders at the top of Departments, motivating their staff-that is what must happen.

Q98 Greg Mulholland: We have been talking about accountability in some of its forms. It seems that the great thrust of the current proposals is to splurge as much information as possible on the internet about how policies are made, about figures, and about costs-and we will therefore have transparency and accountability. Do you think that that works or are the Government being naive?

Andrew Haldenby: No, I agree with the previous witnesses. It will not in itself transform people’s understanding, but our work on the power of information informs us that it is not always about the consumer; it is about people managing the service. People managing public services have to be held to account for their performance. That has to be done through information. The greater amount of information-including the safety side in the health service-enables managers to hold other managers to account and chairmen to hold chief executives to account. In that sense, it might not lead to a huge culture change in our country, where we all talk about the public sector, but this transparency, which is in its early days, should lead to better public service performance.

Professor Kakabadse: I feel there are two separate processes-transparency and accountability-and they have to be handled completely separately. Of course transparency is great, but let me give you an example. There is a movement called the corporate social responsibility movement to basically humanise the corporation. What did that do? We now have CSR activities reported in the annual accounts. Let me assure you-absolutely nothing has changed. The 5% to 6% of companies that were corporately and socially responsible, from India to Aberdeen, still are. In the other 93% to 94%, nothing has changed. CSR is being used as a wonderful marketing tool to make you look better, until the next scandal comes up. If you want to hold anybody to account for something in CSR terms, you basically say, "You misreported on the finance-you’ll go to prison. You misreported on the CSR-you’ll go to prison." I do not see any manager willing to go to prison because they misreported on CSR. So, it is very clear-transparency makes things transparent. It has nothing to do with accountability. Accountability basically means, "Why are these people responsible for these activities?" We can make 100 things transparent, but you may only wish to hold them accountable for one. The logic behind that is the most critical issue.

Chair: That is very clear.

Julian McCrae: I agree with Andrew-accountability is at the centre of decentralised Government. The real key to accountability is moving the power along with accountability. If the two disconnect from each other, accountability will never shift. It will just work its way back to the centre, so it is a very big issue for Government.

Q99 David Heyes: Just a brief word from each of you on Departmental Boards. On the attempts to enhance them by bringing in non-executive directors, the Institute for Government has queried whether the reforms will improve the effectiveness of Departmental Boards.

Julian McCrae: What we are saying is that you need to be very clear about what the role of the board is and the individual responsibilities within that. If you have ambiguity, you will produce something that simply has tension, which goes back to the human points of structures. While the experience coming in is very important, you have to bring that to bear in a way that people understand and that respects the accountabilities of Ministers and the role of the permanent secretary as accounting officer. We are hopeful that this will improve the governance of Departments, but it needs careful thought and planning

Professor Kakabadse: We are going back to the pre-bureaucratic age. Any skilful chairman shifts from one company to another. The first thing they will do if they are any good is rethink the purpose of the board. The reason they will do that is because they will look at competence. What is it about this organisation that requires this and this that the board can either deliver or not? One of the worst things to do is to confuse a board with a committee. I know of nowhere in the private sector that creates boards where committees should be. You may have a multinational with different businesses, and each one of them has a board, but it is not a department. It is a quite separate organisation. You do not get Microsoft having boards halfway down the structure looking after the same sort of thing with external people. You have working parties, committees and flexibility-

Q100 Chair: So what you are saying is that department boards will reinforce silo mentality.

Professor Kakabadse: I think it will not only reinforce silo mentality but create irritation with external non-executive directors, because they will find they are helpless. Their hands are tied. I think you will make things worse.

Q101 David Heyes: Do you agree?

Andrew Haldenby: Last year, I spoke at a conference of non-executive directors in the public sector, and the consensus of the handful of people to whom I spoke was that they would not put themselves forward to go on to the Departmental Boards, because they felt that it would be a fruitless exercise.

Chair: Very interesting. Thank you. Moving on to ministerial accountability, Mr Hopkins.

Q102 Kelvin Hopkins: I asked a question before about whether civil servant responsibility is now a thing of the past and whether civil servants should be not only accountable through their Minister, but publicly accountable. I used the example earlier of how, in the past, Ministers would resign automatically if something went wrong. In the previous Labour Government-I was critical of this-one Minister actually publicly blamed the civil servant and was in serious trouble for that and rightly so. Are we moving into a new age or are we going to reinforce the tradition of ministerial responsibility?

Professor Kakabadse: Unless you come up with a structure that absolutely and clearly displays how the civil servant is going to be held accountable, you must keep what you have now, because we have people who are elected by the people to look after this service, which we are basically paying for with our taxes. If you’re an investor, you do not expect your chairman, whom you have appointed to the board to look after all the wealth, to then publicly criticise the chief executive and say, "It wasn’t my fault." In that case, what are they doing there? Either you have a mechanism that shows that the Civil Service is publicly accountable and that all of us have some sort of access to it, or you start looking at the quality of your Ministers and the quality of the relationship between the Ministers and the public servants. That is where the problem lies as far as I can see.

Chair: Mr McCrae, you are looking pained.

Julian McCrae: I have a slight nuance on that.

Chair: Disagreement.

Julian McCrae: For an organisation that has a top, you can’t have a difference in accountability; there is this person at the top. A lot of the public services that we deal with, however, are real systems. They have a lot of people who have a lot of responsibilities. Some of whom, for arm’s length bodies, we deliberately try and keep Ministers away from, because there are quite legitimate concerns about their independence, and the IFG has written on that.

Understanding how you can place the accountabilities for those things, the details of which you do not actually want the Minister to be responsible for-he may be responsible for the overall system-in a way that works and produces genuine accountability, because you genuinely move power, is a detailed question. It is one that we want to look at in a lot of detail, but I do not think it will just come back to the Minister being responsible for everything. If you take seriously the notion that you are attempting to localise and decentralise power, you have to localise and decentralise accountability within that whole system.

Professor Kakabadse: The whole of our governance is based on private sector practice. Can you imagine the chairman of HSBC, which has 360,000 people and is bigger than Monaco, holding himself or herself not accountable for some activity that took place, for all I know, in a backstreet in Shanghai? The whole point is that you create a structure whereby the top management, and those that are brought in to represent particular interests, trust the structure. You have invested in the structure and the people. Of course things will go wrong. That will not stop that. But the principle of how we make accountability work is not by creating rules; it is by ensuring that that you have invested in the leadership.

Please understand that the one thing that has come out of governance the most is that it has always emerged from a bad practice. It is one of the biggest myths to think that good governance means that you run a well-run corporation. The Cadbury report was created because directors were siphoning off funds for third and fourth homes. Enron was responsible for the Sarbanes-Oxley Act. Governance has always followed somebody doing a bad thing. We now create rules so that nobody else does the bad thing again. That doesn’t mean to say that this place runs because of good leadership.

Chair: Mr Haldenby, briefly, and then I have one final question, because I am afraid that we are running out of time.

Andrew Haldenby: Very quickly. One of the consistent findings of research on the Civil Service is the failure of individual civil servants to perform. The point about accountability is that personal accountability would increase the performance of those individuals. It’s not a binary thing. Of course, people at the top of the organisation will always have overall responsibility, but our Civil Service tries not to focus on the individual performance of those people within it. That is a consistent finding of the capability reviews and so on. That is why the doctrine of ministerial responsibility is a big problem-it has made the performance of individual civil servants invisible which is obviously not true. Obviously, some people do better than others, and some can do better. That is why it needs to be reviewed.

Q103 Chair: Finally, we have got these proposed principles of good governance. Is this a good avenue to pursue? Do you have comments on what we have put out in draft so far?

Andrew Haldenby: Perhaps there is a fear-fears expressed in Committee-that this might be a bit of a wild goose chase. One could get a bit lost in the search for these principles, rather than focusing on the nuts and bolts of the problem before us.

On the principles that you set out, the first one is accountability. What does that mean? It means, purely in the case of the Civil Service, the Civil Service being held accountable for getting on with their jobs. You then have a series of process things, such as IT, which seem to me to be contradictory to the first principle. If you are going to hold civil servants accountable for the delivery of public services-or for the policy of public services, and so on-it is up to them what IT they use. This Committee does not know which IT they should use-it is up to them, if they can then be held to account for their overall performance, regardless of the type of staffing or IT, or whatever.

Professor Kakabadse: What you are trying to do is excellent. There are three issues: first, the context of why you are doing it; secondly, what the principles are; and, thirdly, the leadership that will make those principles work.

If the context is that we have internal inefficiencies and that is clear, the principles will emerge as clear. If the context is, fundamentally, we have to cut costs and this country is suffering because we have no money, but you go to the City of London and there is £450 billion in spare cash waiting to be invested, you are therefore making civil servants redundant while bankers are getting bonuses and have the money to invest and sort out our problems right now.

Chair: That sounds a bit Bennite.

Professor Kakabadse: Well, we have a political situation. If your context is that, and yet you don’t look at the reality of our financial structure as a nation, you are basically saying that we need good principles of efficiency, but we have something else happening in the background, so the principles won’t work. If the context is clear, and your principles fit with the prime purpose that you are trying to achieve, and then you build a leadership that can exercise-

Q104 Chair: So, all you are saying is that you have to have a coherent narrative about the £450 billion in the City and the public sector cuts?

Professor Kakabadse: Absolutely.

Chair: In order to be able to lead effectively.

Professor Kakabadse: Absolutely.

Q105 Chair: Okay, I understand that. Mr McCrae?

Julian McCrae: You have to have values and principles inside anything you are doing, but the question that strikes me is who can articulate. Can the Civil Service and Ministers jointly articulate what this Civil Service or this Department will look like in four years’ time, then answer the subsequent questions of what that actually means? How do you get there? What are you doing about investment in your staff, skills, and so on? Thirdly, can you point to the things and the numbers-the figures you are looking at-telling you that you are definitely on track to do that? If people cannot answer those types of questions that means that they might be able to talk a lot about principles but they are probably not on track to meeting the challenges faced by the Civil Service. Such questions occur to my mind, but I would not say they are any more valuable than that.

Chair: I hope you will excuse me for feeling that this is some of the most difficult stuff that we have dealt with so far. I am finding it very difficult to get my brain around it. I am grateful for my Committee’s indulgence for the time running over quite substantially, probably reflecting my confusion. However, you have been very helpful to us. Please continue to contribute your thoughts to our inquiry as we go along. I am very grateful to you for coming and giving your evidence today. Thank you very much indeed.