Change in Government: the agenda for leadership - Public Administration Committee Contents

3  The new drivers for reform

35.  The new Government came into office with two main priorities: cutting the fiscal deficit and implementing its Big Society agenda (opening up public services to a wide range of providers, and devolving accountability to the lowest possible levels). These specific priorities are two new drivers for Civil Service reform, to add to the long-running concerns about the Whitehall performance we have outlined above. This amounts to a far more radical agenda for change than seen for many decades. Ian Watmore has said that to meet the demands placed on it, the Civil Service must "focus simultaneously on cutting costs as well as improving services and reforming the way things are done" adding that "it's that combination that will dictate whether the government is perceived to be successful".[58] This sets the Civil Service with a substantial challenge to reform radically and quickly.

Decentralisation and the Big Society

36.  In May 2009 David Cameron promised "a redistribution of power [which] will be felt throughout our politics with people in control of the things that matter to them, ... and power redistributed from the political elite to the man and woman in the street".[59] He talked about the need to address the challenge of the "post-bureaucratic age".[60] The consequences for the provision of public services were set out by the now Minister for Government Policy, Rt Hon Oliver Letwin MP, in a speech to the Institute for Government in January 2010. He argued that citizens expected to have a wide range of choices available and have those choices met, but that current service provision fails to deliver this. Mr Letwin advocated three principles: decentralisation, accountability and transparency.[61]

37.  Ian Watmore described the need for a "profound change" in the Civil Service to address the Big Society and post-bureaucratic age, but we have been given little indication of the practical terms of such a change.[62] Mr Watmore indicated that officials would be required to "work with communities at a very local level in different ways".[63] Sir Suma Chakrabarti, Permanent Secretary at the Ministry of Justice, told us that "... a new task for the Civil Service, or maybe a renewed task—is to ensure civil society does have the tools to ask the questions that it needs to."[64] Dame Helen Ghosh, Permanent Secretary at the Home Office, described the nature of the challenge as:

... both learning to let go, in terms of the levers of power, moving into those different kinds of world, and learning how to facilitate and ... helping support the capacity of local people to make decisions and form their own future.[65]

We have found little evidence of the detail of the specific changes which will be required in terms of roles, structure, accountability and training. We believe this is one reason why the Government's decentralisation and Big Society policies are perceived to be failing.

38.  For the Civil Service to commission services from a far more diverse provider base will require, as Professor Flinders told us, "a quite different set of skills to those traditionally cherished within the Civil Service".[66] Julian McCrae concurred:

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.[67]

Professor Kakabadse has identified what this new skill set or capability should be. In addition to the well established three "core" Civil Service capabilities of policy design and development, service delivery excellence and agency relationship management he identified a "fourth capability", namely stakeholder community support.[68]

39.  The main change of task, which will affect many but not all departments, will be the increase in commissioning and contracting. More onerous and time-consuming, however, will be monitoring the contracting process and dealing with problems and complaints arising. It must be recognised that the Government's obligation is to the service user, not the contractor. The mechanism by which this can be achieved by the affected departments, and the implications for their resources, does not seem to have been considered but is key to both success and accountability.

40.  Whitehall has traditionally performed three core roles: policy advice, the management of public services, and the supervision of public bodies. If the Civil Service is to connect with Ministers' ambitions for public service reform a fourth capability will need to be added to this trio: the ability to engage with groups from the voluntary and private sectors through the contracting and commissioning process. Every government department must focus on developing this fourth capability, and the Cabinet Office must ensure that this is embedded in the Civil Service change programme across government.

Spending cuts

41.  The 2010 Spending Review requires a 34% cut in administration budgets across the whole of Whitehall and its arms-length bodies with the aim of saving nearly £6 billion a year by 2014-15.[69] Dame Helen Ghosh explained the urgency of the funding situation, telling us that there was no question of the department not living within its means as "the money has simply disappeared from our budgets. This is not a theoretical exercise."[70]

42.  Sir Suma Chakrabarti told us that the scale of spending reductions of £500 million a year from his budget meant that his department had to make more than just incremental changes.[71] Such spending reductions could therefore not be achieved without structural reform to departments, as they go far beyond what could be achieved solely through recruitment freezes and natural wastage.[72] To achieve such savings, one of our witnesses, Julian McCrae, said that this would require a reform of the Civil Service different in type and scale from those carried out previously:

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.[73]

Professor Christopher Hood agreed:

... you are looking at reductions for which the nearest parallel would be what happened after 1945 in the demobilisation years. ... 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.[74]

43.  The Office of Budget Responsibility (OBR) in March 2011 forecast that the reduction in general government employment as a consequence of the Spending Review would be around 310,000 between 2010-11 and 2014-15.[75] While the full impact on each individual department is not yet clear, all departments have introduced voluntary redundancy schemes, and some have disclosed their predicted reduction in staff numbers. For example, the Ministry of Justice estimated they would "lose around 15,000 posts".[76]

44.  Recent analysis by the Institute for Government of the most recent Office for National Statistics data on Civil Service headcount shown that there has already been an "an overall headcount reduction of 4.2% in Whitehall since the spending review".[77] The main impact at this stage has been at the most senior levels: there has been a 14.5% reduction in top civil servants in Whitehall departments since the summer of 2010.[78]

45.  The decrease in staff numbers will make it impossible for Departments to deliver the same functions as previously. Instead, Departments must focus on the key functions only they can provide. Dame Helen Ghosh, Permanent Secretary at the Home Office, said:

We know we will have fewer staff and less financial resource at the centre, and what we need to focus on is doing the things that really make a difference.[79]

46.  Beyond such statements, we have seen no clear evidence of how staffing reductions will be achieved. The NAO reports that it is not clear how these reductions will be managed and what the potential effect will be on the business of government and on public service delivery.[80]

47.  We heard of the possible dangers of planning spending reductions without clear knowledge of the future role and functions of each department. Professor Kakabadse said that "the best way to damage a sophisticated structure is to have an unthinking across the board cost reduction exercise that takes out the good with the bad."[81] Similarly the Association of Chartered Certified Accountants warned Ministers to be "alert to the 'tipping point' where budget reductions go too far and adversely affect policy outcomes."[82]

48.  We were also advised by Martin Stanley, former Chief Executive of the Competition Commission and Principal Private Secretary at the Department for Trade and Industry, that reductions in spending should not happen without consideration of what the role and key functions of the department should be.[83] Instead our evidence recommended that the process of change should be "a deliberate transformation with a clear vision at the end of it"[84], creating a Civil Service "fit for present and future generations."[85]

49.  Voluntary redundancy programmes are being carried out in some departments without a thorough assessment of required roles and functions. We recommend that the Cabinet Office monitors individual departmental change programmes to ensure that redundancy programmes are conducted in accordance with departments' requirements to retain and develop the key skills required to maintain the core commitments and long-term performance of each department.

50.  The Civil Service has prided itself on reform through gradual change, building on past initiatives and adjusting to the priorities of each new government. We recognise that this is particularly challenging at a time of both an increase in requirements and a reduction in staff. We consider that incremental improvements of this sort will not be sufficient to meet the scale of change implied by both the decentralisation agenda and the structural impact of a reduction by one-third of the administration budget of Whitehall. This will require considerable structural organisational reform of the Civil Service.

58   "Profile: Ian Watmore", Civil Service World, 27 May 2011, Back

59   "David Cameron: A new politics: The post-bureaucratic age", The Guardian, 25 May 2009 Back

60   Ibid. Back

61   "Oliver Letwin: Bureaucratic Public Services: Proposals for Reform", Institute for Government,11 January 2010,  Back

62   Q 155 Back

63   Q 155 Back

64   Q 157 Back

65   Q 158 Back

66   Ev w23 Back

67   Q 42 Back

68   Ev 69 Back

69   HM Treasury, Spending Review 2010, Cm 7942, October 2010, p. 9 Back

70   Q 164 Back

71   Q 173 Back

72   Ev 60 Back

73   Q 37 Back

74   Q 17 Back

75   Office for Budgetary Responsibility, Economic and Fiscal Outlook, Cm 8036, 23rd March 2011 Back

76   Eleventh Report from the Public Administration Select Committee, Session 2010-12, Good Governance and Civil Service Reform: 'End of Term' report on Whitehall plans for structural reform, HC 901, p 10 Back

77   "Whitehall Monitor #7" Institute for Government , June 2011, Back

78   Ibid. Back

79   Q 167 Back

80   NAO, The Efficiency and Reform Group's role in improving public sector value for money, HC 887 (2010-2011) ,p 11 Back

81   Ev 69 Back

82   Ev w21 Back

83   Ev w10 Back

84   Ev w19 Back

85   Ev w20 Back

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Prepared 22 September 2011