Public Administration CommitteeWritten evidence submitted by D H Owen (CSR 18)

Summary

In summary:

the Civil Service has strengths but needs radical reform, both because of new, tough challenges and because Britain deserves a Civil Service which is systematically, not sporadically excellent;

the Reform Plan offers action by those currently placed to act to address widely acknowledged issues: speed, innovation, performance management, openness and outcome focus;

cracking the hitherto intractable challenge of effective implementation is more important than improving the Plan;

implementation is a change management challenge requiring leadership, in particular focus and relentless communication;

the key element to develop is accountability, aligned with effective incentives; and

improved awareness of skills required, fostered by openness to a wider diversity of evidence and perspectives, is also necessary.

Why does the Civil Service need reform?

1. The scale of challenge arising from austerity and rising public expectations calls for fundamental reform. Past methods were not designed for this future. Moreover, just as it is now recognised that our children deserve better than “satisfactory” teaching, so all our public services should aim for excellence. And while the Reform Plan is right to refer to past strengths and successes, it is also right to identify persistent weaknesses.

What evidence is there that the performance or morale of the Civil Service needs addressing?

2. Morale is not disastrous. Leadership deserves some credit that “engagement” has not fallen in a context of contraction and uncertainty.

3. However engagement is lower than in high performing comparators. The Civil Service has natural advantages which should see it top of the league for morale. Its purpose is genuinely inspiring. The work is stimulating (even those given the most humdrum tasks should be encouraged to engage in the wider challenge of improving outcomes). Whether working close to ministers influencing national debate, or close to service users seeing direct impact on outcomes, scope for satisfaction is considerable.

4. Shortcomings in performance have been widely documented (see for example the NAO’s memorandum). The recent case of the West Coast Main Line franchise is a glaring example, which came to light only through external challenge.

5. Lack of systematic information on outcomes achieved and value for money itself indicates the likelihood of shortcomings in performance. Talent coupled with motivation has produced good outcomes, but sporadically. Key incentives are lacking to produce systematically excellent outcomes. Today’s approach is ill-placed when either ability or motivation are lacking.

6. Civil servants are likely to be more conscious of the risks of being pilloried for failing than the rewards of succeeding. It is a natural consequence if they tend to avoid innovative, untested or difficult options, even when the potential public benefits are high. Individuals are less likely to be blamed for failing to think strategically, for lapses in monitoring, evaluation or review or for not pulling out all the stops to influence third parties.

7. Evidence was made public last year of civil service advice being cautious to the point at which the minister was sceptical. Whether or not advice was overcautious, systems tending to create such scepticism are problematic.

How legitimate is ministers’ public criticism of the Civil Service?

8. Neither the Civil Service, nor individual civil servants, should be immune from criticism. Ministers in commenting publicly will want to balance the pros and cons of openness about the shortcomings of those on whom they depend to achieve their goals.

9. The West Coast Main Line example would appear to be one in which ministers had a legitimate case for complaining that civil servants had both given advice which some were in a position to know was inaccurate, and presided over a system which failed to detect an elementary analytical error of huge import.

10. Allowing that there is a public interest in exploring policy ideas in confidence, this should not prevent civil servants answering publicly on their effectiveness in delivery within the constraints of prevailing policy. Nor should it prevent them answering with regard to the evidence and analysis supporting policy advice, which (in theory) is publicly available through freedom of information legislation. A frank and open approach is likely to promote the good reputation of the Civil Service in the long term.

Does the Government’s Civil Service Reform Plan reflect the right approach to the Civil Service?

11. It is essential that any reform have the commitment of key decision makers. The Reform Plan is one approach to the Civil Service, which (one assumes) reflects the views of the government of the day. It has therefore the merit of being supported by those currently in a position to make it happen.

12. The Reform Plan subscribes to the long-held consensus on a Civil Service based on impartiality, objectivity, integrity and honesty.

13. The Reform Plan has the right approach in aiming for a Civil Service which is:

outcome-focused;

accountable;

effectively led;

more strategic and

avid in seeking out and following evidence.

What other reforms are necessary to improve responsiveness and performance in the Civil Service?

14. A common failing of ambitious reforms is seeking to do too much, thereby losing focus. The Committee should be wary of recommending any but the most essential additions to what is already a wide-ranging plan. Any recommendation, however constructive, likely to be out of sympathy with prevailing policy will be a distraction to a plan which could do some good.

15. Years of study of this question indicate that the most vital element of the Plan is incentives to become outcome-focused. The risk averse, process-focused culture the Plan seeks to address is a reflection of current incentives.

16. The issue of incentives is bound up with accountability. A system will not be outcome-focused if individuals are not held to account remorselessly for outcomes, with incentives aligned. Accountability for outcomes is already in the Plan; it does not need to be added, but what does need to be added is development of how this is to be achieved.

17. Accountability for outcomes poses challenges. Unlike activities, outcomes are rarely within an individual’s control. This is an argument against the mind-concentrating effects of too brutal a sanction for poor outcomes.

18. However, with all the powers of government available, outcomes are almost always open to influence, and even if not, plausible proxies will be. In such cases the account sought will be of efforts to influence the outcome. A proper outcome focus may shift attention from traditional activities (legislation, consultation) to more innovative approaches.

19. To tackle risk aversion, incentives must reward success, experimentation and learning, penalising repeated failure through lack of learning, and lack of experimentation, more than one-off errors.

What impact will the Government’s reforms have on the ability of the Civil Service to serve the needs of future administrations, in different economic or political circumstances?

20. The impact of reforms will depend on the extent to which they are delivered in practice.

21. The Plan does not preclude action by any future administration to reverse or change any aspect of it.

22. The Plan does not of necessity imply any destruction of capacity or reputation which would take time to reverse. Any risk that it is implemented so as to destroy capacity may be monitored.

How can corporate governance in the Civil Service be improved?

23. There has been a lack of effective internal accountability within the Civil Service. In theory the Head of the Civil Service holds to account an unfeasibly large number of Permanent Secretaries. In the past, minimal support was provided for this task. Minimal appropriate performance information was collected. The lack of impact of the conversations held was widely acknowledged. It is unclear that there has been improvement.

24. Ministers are consulted, but what impact this may have is opaque. Ministers do not appear to view this as an important part of the governance of departments. It is unclear that there is any systematic approach to clarifying expectations, priorities and how performance will be judged.

25. Departmental business plans are insufficiently outcome-focused, are not always recognised within departments as representing true priorities, and do not appear to be used actively to hold senior officials to account.

26. It is unsurprising that ministers have concerns about being held to account when they are in large part reliant on civil servants they do not appoint and have few overt levers over. An increased rôle in appointments as envisaged by the Reform Plan addresses this in part.

27. It has been widely reported that determined ministers have found ways to shift officials with whom there is a personality clash, or in whom they have lost confidence. It is desirable that ministers, if they are to be accountable, have some influence over officials not only when appointed, but at other times. There is a case for setting out how this should and should not work. Ministers are likely to need support from without the department in exercising this influence effectively.

28. A more formalised ministerial input into the performance management of senior officials may need as counterpart strengthened protection for civil servants in their rôle as guardians of propriety.

Can models of governance from the private sector be directly transferable to the public sector?

29. There is not an exact parallel in the private sector to the relationship between ministers and senior officials in government. Nor does the public sector have the single objective (however complex its components may be) of shareholder value. That is not to say that lessons, for example about focus, fit-for-purpose information or strong incentives cannot be transferred from effective private sector organisations.

30. It has rightly been said that the most effective relationships between ministers and senior officials are based on trust; this is also true of relationships between private sector leaders. It is not generally argued that in the interests of preserving trust, Chief Executives should not be robust in holding colleagues to account.

How can the Government ensure that management information is collated and used effectively?

31. Management information has frequently been identified as deficient in the past. To change this, Government must apply the basic lessons of change management. It must never tire from asking where information is, what is being done to improve it, when the next improvements will be available. It must put information in the spotlight. It must be prepared to make use of imperfect information, encouraging debate as to how it can be improved. It must be prepared to allocate sufficient resources to the collection and analysis of information.

32. Critically, Government must hold officials to account for the quality of information available. This combination has never been tried.

Are Non-Executive Directors on departmental boards being used effectively?

33. Lord Browne’s testimony indicates that there is further to go. To be used effectively, Non-Executive Directors should have clarity as to their rôle and what is expected of them.

To what extent does Civil Service Reform Plan affect the fundamental principles upon which the Civil Service has operated since the Northcote-Trevelyan report?

34. The Reform Plan is not represented as challenging the principle of appointment on merit. It will not do so in practice if the Civil Service Commission can be relied upon to vet appointments made outside open competition.

Are the Northcote-Trevelyan and Haldane principles for the Civil Service sustainable in the modern world, or should a different model be considered?

35. Nothing in the modern world rules out appointment on merit or a politically impartial Civil Service. That is not to say that political appointments (for example special advisers) do not have a useful part to play in meeting the proper objectives of government.

If policy-making is to be opened up to external organisations, what is the distinctive role of the Civil Service in the modern world?

36. Whether public policy objectives are delivered with optimal effectiveness is of greater import than worrying as to whether the Civil Service has a distinctive rôle or what that might be.

What are the advantages and disadvantages of a permanent and impartial Civil Service compared to a cabinet or spoils system with more political appointees?

37. A permanent Civil Service has the advantage of continuity, knowledge retention and speedy transition. Risks included inertia and lack of challenge. An impartial Civil Service should reduce risk of loss of confidence on a change of administration. Political appointments may lack objectivity and hence adapt slowly to evidence.

Do the Government’s proposed arrangements for “contestable” policy-making exercises do enough to prevent bias and conflicts of interest as well as encouraging experts to take part?

38. Yes. The Government should not be constrained in where it seeks advice. It will take its own view as to what to do about bias should it detect any. The public will judge the Government by the decisions it takes and their effects, more than by the advice received or how it was commissioned.

39. If Government wishes to encourage experts it may want to offer greater financial incentives, though many may be attracted be the opportunity to influence policy.

Can, or should, employment terms and conditions in the Civil Service ever be comparable with those for posts of similar seniority and responsibility in the private sector?

40. Terms and conditions at senior levels in the Civil Service should not in general be comparable with the private sector. It is an honour to have responsibility for public policy and its delivery, and it is in the taxpayer interest to exploit the willingness of those motivated by the public good to work at lower rates than they could achieve in the private sector. It is a positive advantage to employ those so motivated. Nevertheless flexibility to pay the market rate in individual cases may also serve the taxpayer interest.

How effective is the senior leadership of the Civil Service, and how does it compare to previous periods?

41. That the Civil Service can point to a range of impressive achievements is to the credit of its leaders. Equally its leaders must bear some responsibility for shortcomings.

42. Personal experience of senior Civil Service leaders has been that while they are generally pleasant people who command intellectual respect, only one stands out as a model leader: Michael Barber. One may debate his approach to public services; as a leader he had a clear vision compellingly and consistently communicated, he listened to everyone, was keen to learn, was eager to act decisively and rapidly in response to events and set a visible example in his enthusiasm and dedication (that Prof Barber combined these qualities is not to imply each is absent elsewhere).

43. Although Civil Service guidance refers frequently to the importance of leadership, this model of leadership has not been the tradition; there is little sense that either those who make judgements about appointments to leadership rôles, or staff in general, understand what is missing.

44. The tribunal finding this month that Treasury acted unfairly and unreasonably to an employee may be unusual, but is an example of top leaders failing to take account of evidence, and treating staff in way unlikely to get the best from them.

Do departmental permanent secretaries embody the correct balance of generalist skills and specialist knowledge and expertise?

45. It is not necessary for Permanent Secretaries to have specialist skills; they need to have the awareness of what skills are needed and how to acquire them, either personally or through the teams they appoint. Areas of Civil Service weakness indicate where past senior leaders have been lacking in the necessary awareness.

46. Factors which may contribute to lack of awareness are insufficient diversity of perspective, both within an organisation and amongst those with whom it regularly interacts, lack of transparency and lack of openness to challenge.

47. It is because leaders may lack awareness of the skills needed that strong accountability and incentives are insufficient to guarantee that the natural faculties of talented Civil Service leaders will find effective and innovative ways of delivering effective public policy.

What effect has the division of responsibilities between the Cabinet Secretary and the Head of the Civil Service had on the Civil Service and its effectiveness?

48. The formal division of responsibilities is less important than whether responsibilities are discharged effectively; structure may be a contributory factor but the ability of leaders is likely to be more important.

What are the strengths and weaknesses of the current federalised system of Whitehall departments?

49. There is no effective central strategy or oversight in the current system. Outcomes which require cross-cutting collaboration have proved particularly difficult to achieve.

Does the long-term future of the civil service require more comprehensive and deeper consideration and, if so, how should this be done?

50. There are advantages in focusing on securing practical benefits from the reforms proposed by the government of the day.

Background

51. An Operational Research professional by background, D H Owen began his career in the private sector before spending eighteen years as a civil servant in both policy and professional rôles, predominantly in HM Treasury. Posts included Business Director of the Government Operational Research Service; UK National Expert (Evaluation) at the European Commission; Project Leader, Public Services Productivity Panel; Joint Action Leader, Prime Minister’s Delivery Unit; Head of National Insurance Policy; Head of Operational Research, HM Treasury. He has a special interest in public sector performance management. His work has focused particularly on understanding and addressing the barriers to delivery of the priorities of the government of the day.

52. An employment tribunal recently ruled that Mr Owen’s dismissal from HM Treasury last year was unfair and unreasonable. Mr Owen believes this was atypical and hopes to return shortly to a Civil Service he believes eager to meet the challenges confronting it.

January 2013

Prepared 5th September 2013