Public Administration CommitteeWritten evidence submitted by Derek Jones, Permanent Secretary, Welsh Government (CSR 31)

Thank you for the opportunity to contribute to this important inquiry at what is a particularly significant time—both for devolution generally and for what it means to be part of a UK Civil Service serving three distinct governments.

Context

2. Wales is an old country but, in terms of its own institutions of government, a young democracy. In 1997, the people of Wales narrowly returned a “yes” vote for devolution. Following the referendum, the 1998 Government of Wales Act led to the creation of the National Assembly for Wales, made up of 60 elected Assembly Members.

3. With the second Government of Wales Act (2006), the National Assembly obtained powers to seek permission to create legislation on devolved issues in the form of Assembly Measures.

4. The 2006 Act also established the Welsh (Assembly) Government in its own right, separate from the legislature. Led by the First Minister, the Welsh Government currently includes 11 Cabinet Ministers and Deputy Ministers. It is the pre-eminent policy-maker for most aspects of day-to-day life in Wales, such as health, economic development, education, transport and local government.

5. On 3 March 2011 a further referendum was held and the people of Wales voted in favour of expanded (ie primary) legislative powers for the National Assembly not by a narrow margin but by 63%: a vote which marked a profound increase in public support for devolution over the fourteen years since the first referendum.

6. The years since devolution have also represented a significant journey for the Civil Service that supports the Welsh Government. It was a major professional challenge for those of us who were involved in the period 1997–99 to create a new democratic institution from scratch, and help it to work effectively from the outset. The years since then have posed many other challenges, including a radical “bonfire of the quangos” that required major organisational redevelopment as formerly arms-length bodies were brought into the devolved government. But the Welsh Government Civil Service is now well established and increasingly self-confident: a no-frills administration that has learned to focus on delivery.

7. The traditional, core strengths of the British Civil Service—political neutrality, efficient administration, robust governance and sound management of public funds—have provided a solid foundation that has enabled us to build the organisation that now supports government in Wales. An additional factor, for Wales, is the extent to which staff are also well-grounded; they live in, know and understand the communities they serve.

8. Welsh Government Civil Servants are accountable to Welsh Ministers and this is explicit in our Civil Service Code. The growing confidence of the Welsh public that devolution will deliver better solutions for their country may reflect, at least in part, trust and confidence in the Civil Service as well as in its political leadership.

9. Further factual information on the Welsh Government is annexed.

“How would you describe the working relationship of the Welsh Government Civil Service with the rest of the UK Civil Service?”

10. I would describe these relationships as professional, business-like, constructive, numerous, complex and sometimes frustrating. The watchwords are good communication and mutual respect, recognising that we each serve different administrations, but strive to collaborate to take forward government business and serve our citizens.

11. At the most senior level, I work with the Head of the Home Civil Service and attend the weekly meeting of Permanent Secretaries in London. This has been valuable in developing good and constructive relationships with my colleagues in Whitehall and the other devolved administrations. These relationships assist mutual understanding of what the devolution settlement means in practice, as well as giving us the opportunity to resolve issues and explore opportunities. I also maintain direct contact with the Wales Office.

12. At a department-to-department level, relationships are, perhaps not surprisingly, variable and sometimes testing. Awareness of devolved responsibilities and the implications of those on policy-making and operational delivery is patchy—although there are some very strong examples of understanding and mutual cooperation between our policy departments and their Whitehall equivalents that have seen beneficial results for both Governments.

13. In terms of our formal inter-Governmental relationships, these are often bilateral with (individual Departments of) the UK Government, and in the nature of our business these will be the most active. But we also engage bilaterally with the other devolved administrations, as well as collectively under the aegis of the Joint Ministerial Committee and the other formal inter-governmental machinery. I will deal first with our relationships with the UK Government and then with the other devolved administrations.

Relationship with the UK Civil Service

14. This is a critical relationship for us because there are so many areas where the responsibilities of the two governments overlap. For example, in each Queen’s Speech there will be reference to UK Bills whose provisions require the consent of the Assembly. Equally, in the Welsh Government’s Legislative Programme there are Bills with provisions requiring the consent of UK Government Ministers. For all this to progress smoothly there needs to be early and ongoing engagement between officials so that the Parliamentary and Assembly timetables can be met.

15. Looking beyond legislation, there is a very wide range of issues where the two Governments need to work together, covering both devolved and non-devolved matters. At any one time, Welsh Government Civil Servants will be engaging with a wide range of Civil Servants in different UK Government Departments on issues ranging from the mundane to the highly complex and strategic. It is these intergovernmental relationships which drive the main working relationships between the Welsh Government and the wider UK Civil Service.

16. The nature of the Welsh devolution settlement adds an element of complexity to these relationships. The Government of Wales Act leaves many areas of uncertainty, so there is scope for officials in Cardiff and London to disagree about what may or may not be within our respective powers or competence. This is one of the reasons why the Welsh Government is recommending that the settlement be restructured on the “Reserved Powers” model—to provide greater clarity and reduce the scope for disagreement.

17. Generally, these official relationships are businesslike and constructive. Frustrations arise on those occasions—still, in our view, too frequent—where the handling of business by colleagues in UK Government Departments seems not well informed by a complete understanding of the constitutional make-up of the UK. The Welsh Government has a small team whose role is to promote effective relations with Whitehall, with both an internal and external focus. The priority is strong communication on both sides. The internal focus is geared to making sure that we play our part in sharing information about policy and legislation, maintaining up to date contacts, inviting UK Government colleagues to Wales and contributing to events in Whitehall. We pursue this through formal training and informal development events so that our staff are equipped to engage confidently with Whitehall. We also embed this in routine risk management and governance processes.

18. The external focus is designed to strengthen understanding in Whitehall of our devolution settlement and what we are trying to do here in Wales. This is a very big challenge because of the nature of Whitehall, the numbers of staff involved and the extent of staff turnover. Nevertheless, we take opportunities to promote awareness and understanding both of devolution and of our distinctive policy approaches. For example, last year we hosted in Cardiff a major conference for civil service fast streamers which gave us an opportunity to help future civil service leaders gain a fuller understanding of devolution and its implications for the UK Government’s own work.

Bilateral relationships with the other devolved administrations

19. The focus here is on a two way exchange of information and learning, as opposed to the business-driven interaction and negotiation which characterises our relationship with the UK Government. Welsh Government departments will engage with their counterparts in Edinburgh or Belfast on a case by case basis to help drive forward a particular policy or respond to a particular problem. This is not something we see a need to monitor centrally, but simply encourage as part of being a learning organisation.

Relationships within the Inter-Governmental Machinery Framework

20. The Committee will be aware of the formal machinery which exists to support inter-governmental relationships within the devolution settlement. This is principally the Memorandum of Understanding (MoU) and the Joint Ministerial Committee (JMC) established by the MoU, together with bilateral Concordats with individual UK Government Departments and the Devolution Guidance Notes.

21. This machinery provides the context for effective relationships between officials, as well as Ministers, together with processes for resolving inter-governmental disagreements and disputes where these arise. The machinery is important for us and we engage positively with it. We nevertheless consider that some aspects of the process are not as active as they could be. For example, there is no active strategy or forum in place that builds on the formal machinery by bringing together officials from UK Government Departments and the devolved administrations to consider current issues that impact on governance across the UK.

22. That said, we recognise the pressures in Whitehall and we get on with doing what we can to promote engagement that is constructive and adds value for all the four administrations. There are good informal contacts and arrangements at senior levels, not least among Permanent Secretaries. In May, we will host in Cardiff an awayday for the officials from the four administrations who provide the secretariat support for the JMC. The focus will be on sharing experience and promoting effective communication at official and Ministerial levels in relation to both the JMC and wider inter-governmental relations.

Civil Service Issues

23. In relation to civil service staffing matters, we have a productive and professional relationship with colleagues in Whitehall and with the Cabinet Office in particular. We continue to contribute to initiatives such as Civil Service Learning and we are active members on the HR Leaders Council and so well- sighted on the Civil Service Reform agenda and potential implications for the Welsh Government. The fact that we have an aligned but distinctive approach to Civil Service Reform, responsive to the particular needs of a Civil Service supporting a devolved Government, was helpfully recognised when the original Reform Plan was announced.

24. As this relationship has matured, there has been a growing appreciation that we are a Government as distinct from a Department although, on occasion, it is still necessary to remind colleagues of the different political leadership and accountabilities and so, for example, strands of the Civil Service Reform agenda designed in Whitehall are not necessarily suitable in Wales.

25. We undoubtedly share many common goals, including the need to build our capability across the Civil Service by investing in high-value skill areas such as digital, finance, procurement, programme and project management. We also share a common framework for core competencies and were one of the first organisations to introduce the 9 Box Grid for end year conversations about performance and potential.

26. However, there are strands within the Civil Service Reform Plan which do not apply in the Welsh Government Civil Service because of the Welsh Cabinet’s very different position to that of the coalition government. For example, Welsh Ministers have been forthright on their opposition to regional pay. The Welsh Government’s belief in the value of public service delivery also determines a different approach to delivery models than that enshrined in the UK Plan.

27. Decisions on pay and terms and conditions for Welsh Government Civil Servants are devolved, with the exception of the Senior Civil Service. Over the past decade we have designed a pay system which is based around core Welsh Government priorities such as equal pay and tackling low pay. The system is underpinned by the Job Evaluation and Grading System (JEGS) used across the Civil Service, but is noticeably different in terms of the short length of pay scales and pay progression arrangements.

28. The pay system for Senior Civil Servants in the Welsh Government continues to be based on the UK Government’s response to the annual report of the Senior Salaries Review Body. Whilst we have some flexibility and discretion to apply individual pay awards within the parameters set out by Cabinet Office, this can create some issues. The focus on variable pay or bonus payments in particular has been an issue, with—traditionally—very little flexibility for the Welsh Government to take a different approach. This is now improving.

29. As part of the UK Civil Service, the Welsh Government continues to recruit in line with the principles of fair and open competition and appointment on merit. We work closely with the Civil Service Commission to uphold these principles both in the design of recruitment schemes and also in providing regular returns on the operation of our recruitment arrangements for scrutiny by the Commission.

“What do you see as the main challenges facing the Welsh Government Civil Service?”

30. Looking ahead, the main challenge will be how effectively our Civil Service can support Welsh Ministers through the next stage of the devolution journey. Retaining the confidence of our Ministers and the public will be particularly important in the event of greater devolved responsibilities accruing to Wales as a result of the Silk Commission; and doing so while maintaining the current focus on delivering better outcomes for people and communities.

31. For the foreseeable future, these challenges will be sharpened by the conditions of austerity budgeting and, inevitably, the wider economic position and UK-level decisions on policies such as welfare reform will have an impact on Wales in a way that will have to be managed, rather than controlled.

32. The First Minister and Welsh Cabinet provide unambiguous political direction and priorities—seeking investment and jobs, and tackling poverty and inequality. These are our Government’s priorities and they are therefore my priorities as Permanent Secretary, and of the Welsh Government Civil Service as a whole. This is clearly understood and acted upon across the organisation.

33. As well as the challenge, there is opportunity, since devolved government on this scale has the ability to tailor programmes to the specific circumstances of Wales, without losing the benefits of being part of the wider UK. If the conclusion of the Silk Commission process results in more devolved powers accruing to Welsh Government, we will have even greater flexibility to tailor policy options and delivery models specifically to Welsh circumstances.

34. Internal research shows that Welsh Government employees are motivated by the opportunity to achieve results for the communities they come from and live in. Morale within the organisation is relatively high by most measures. Although the financial pressures of the past few years have made the operating environment extremely tough—including a rapid downsizing—Welsh Government employee engagement scores have risen rather than declined.

35. From a management perspective, our ability to meet the challenges ahead will depend on maximising the organisation’s agility, connectedness and focus on delivery. An engaged and committed workforce is essential to that task.

“How will the Welsh Government Civil service need to change to respond to these challenges?”

36. Over the past three years, the Welsh Government has undertaken a significant downsizing, with staff numbers reduced by around 20%. Perhaps inevitably, the downside of managing such reductions by voluntary severance is that the organisation is left with gaps in capability and capacity. One of my early priorities as Permanent Secretary was therefore to commission three reviews to check whether Civil Service resources are sufficiently aligned to government priorities; whether we have the skills and capabilities we need for the future; and how we can reduce bureaucracy and complexity and free up time to focus on delivery.

37. As a result, we are now implementing action to strengthen the organisation’s capability to deliver the Programme for Government. Perhaps most significantly, we are reducing the proportion of the civil service that is employed in central support services by around a further 20% over the coming year. We already have in place a well-developed model for shared services across Welsh Government departments. Consistent with the Welsh Cabinet’s commitment to workforce partnership, this resource realignment will be achieved primarily through redeployment of staff currently working within central service areas to policy and delivery priorities, supported by investment in learning and development.

38. I have also focused the organisation on tackling complexity and reducing bureaucracy wherever possible. Since returning to Government service last year, I have drawn on my experience as a customer/client of the Welsh Government and listened to our staff, to Ministers and our stakeholders. Although people have been complimentary about our strengths, they have also been candid about the complexity in our systems and controls and the way this can slow decision-making and hinder agile delivery.

39. In simplifying systems and releasing controls, my aim is also to sharpen accountability and make decision-making more transparent. This will require some practical changes in our processes and approval mechanisms, but also some substantial behaviour change on the part of managers and individuals. This will not be achieved overnight. We will need a continuous effort to challenge unnecessary complexity and prevent it accreting in future.

40. In common with other parts of the UK Civil Service, there are capabilities and skills that the Welsh Government Civil Service needs to grow for the future and that the organisation does not have in sufficient supply now. We are fortunate to have a solid foundation of core civil service skills to build on, but the challenges of delivering to citizens in the modern age means there are areas where investment is needed. Not least, we face the challenge of serving a bilingual community with specific needs for bilingual services. From an organisational standpoint, we are making good progress on the technologies needed to help us work more flexibly. With regard to citizens and digital services we are also making progress, but with careful regard to the geographical challenges of Wales and the digital exclusion experienced by some people in some of our communities.

41. In common with the UK and the other devolved administrations, we are developing a capability plan for the organisation, identifying skills gaps and ensuring we invest to fill them. The organisation will need to build its capability in digital, business-facing and contracting expertise.

42. As a relatively new government service with recently enhanced law-making responsibilities, the Welsh Government Civil Service has had to run very fast to develop the specialist capacity and capability needed to deliver an ambitious legislative programme. This is an area the organisation will need to continue to develop, making it a fundamental part of the way we manage the business of government. If, as now seems likely, the first part of the Silk Commission process results in taxation and borrowing powers being devolved to Wales, there will need to be created appropriate capability and we are beginning to plan the expertise needed to manage such a new area of work skilfully and prudently.

“What should be the core tasks of the Civil Service in Wales?”

43. The Welsh Government Civil Service is fortunate now to have the confidence of Ministers and to be their supplier of choice for policy advice and for delivery. But this cannot be a cause for complacency.

44. The development and provision of policy advice to government is central to the role of the Welsh Government Civil Service. But it is not an inalienable right. My organisation must continually earn the trust of Ministers by demonstrating its capability for high-quality policy analysis and options generation. It must also demonstrate that it has in place the most efficient and economical machinery for implementation of policy: for delivery.

45. Although the Civil Service is best placed to be the primary provider of evidence-based policy advice to the Welsh Government, that does not mean working in isolation. The advantage of a relatively small government service is that it can not only capture the advantages of close internal contacts, but also be well networked, knowledgeable of its clients, customers and partners with a high level of understanding on both sides. The Welsh Government’s Programme for Government also includes a specific commitment to set up a Public Policy Institute for Wales to capture innovative ideas from outside the Civil Service. (A tendering exercise has been completed and we expect this to be operational by autumn.)

46. Being open to innovation alongside a collaborative, partnership-led approach almost always results in better quality policy development with a higher chance of real outcomes and lasting results. It is the job of the Civil Service to involve the right people at the right time, to work with partners and stakeholders and to ensure that opportunities to be more than the sum of our parts are maximised wherever possible.

47. With recently expanded legislative powers, the role of the organisation in supporting Ministers on the development of Welsh laws from conception through to statute is increasingly important. Further devolution is likely to require us to develop new capabilities, including the Treasury-type functions that will enable us to administer taxation and borrow prudently.

48. Finally, the Welsh Government Civil Service has a responsibility to communicate effectively with the public, explaining the Government’s aims, objectives and policies.

“What lessons could be taken from the Welsh Government Civil Service for the UK Civil Service as a whole?”

49. Our ambition is to make the Welsh Government Civil Service an exemplar small country administration from which other countries will want to learn.

50. The clear direction and shared sense of endeavour between Welsh Government Ministers and the Civil Service that supports them is a powerful alignment and drives improved performance to achieve better results for people in Wales. This in turn is supported by staff who combine the traditional Civil Service values with a strong sense of place. Perhaps our greatest strength and opportunity as an organisation is the combination of embedded traditional Civil Service skills and values, with the ability to be grounded and knowledgeable about the communities we serve.

51. The fact that we are operating in a very difficult global financial environment that we have only a very limited ability to influence, makes it even more important that the organisation focuses clearly on what it can do to support Ministers most effectively and harnesses everyone in the organisation to that task.

52. Politically, the Welsh Government is clear in its support for the United Kingdom. The UK Civil Service is part of the glue that helps that union to function. For that to continue being effective, Civil Service colleagues across governments need a good understanding of the developing constitutional make-up of the UK; of what devolution means in practice; and of the approach required to acknowledge difference and readily serve three governments from one unified, but flexible, Service.

53. I think there is much here that we can debate and share within the UK Civil Service and I would like to thank the Committee again for the opportunity to submit this evidence.

May 2013

Annex

POLICY AREAS DEVOLVED TO THE WELSH GOVERNMENT

Education and training

Health, health services and food and food safety

Local government and housing

Highways and transport

Town and country planning

Economic development

Social welfare, including social services, protection and well-being of children, and care of young adults, vulnerable and older persons

Welsh language, culture, ancient monuments and historic buildings

Tourism, sport and recreation

Environment, water and flood defence

Agriculture, fisheries and rural affairs

Aspects of some of these areas are not devolved, for example certain aspects of transport and highways policy, such as road traffic and rail regulation; and while sport and recreational activities are devolved, betting, gaming and lotteries are not. The Welsh Government has executive responsibilities in these areas. Since May 2011, the National Assembly for Wales also has powers to pass Assembly Bills in the devolved areas, so that the Welsh Government can now take forward its own programme of primary legislation in the areas for which it is responsible.

Budgets

Welsh Government Budgets

The UK Government’s Spending Review set the Welsh Government budget for the period 2011–12 to 2014–15 and represented the most difficult settlement for Wales since devolution. In real terms, by the end of the Spending Review period the total DEL budget will be £1.4 billion lower than in 2010–11.

The Welsh Government’s Final Budget 2013–14 set out spending plans for the next two years and included funding allocations to Welsh Government Departments of £14.9 billion in 2013–14. The budget allocations to Ministerial portfolios were as follows:

Health, Social Services and Children

£6.3bn

Education and Skills

£1.9bn

Business, Enterprise, Technology and Science

£295m

Local Government and Communities

£5.2bn

Environment and Sustainable development

£327m

Housing, Regeneration and Heritage

£556m

Central Services and Administration

£349m

These allocations will shortly be restated in a Supplementary Budget which will reflect changes to Ministerial portfolios resulting from the Cabinet reshuffle in March.

Since the Final Budget 2013–14 was approved by the Assembly in December 2012, the UK Government’s Autumn Statement and March Budget announced further revenue reductions to the Welsh Government budget of £32 million in 2013–14 and £81 million in 2014–15.

Running Costs Budgets

The Running Cost and administrative budget has decreased each year since 2009–10. The current total is £308 million (excluding central programmes £39 million)

Costs have been reduced by severance programmes in September 2010 and March/April 2011. These removed 1,000 posts, representing some 20% of total staffing.

Offices around Wales

The Welsh Government has a significant presence across Wales; details are shown in the table below.

Location

Properties

Staff

North Wales

8

516

Mid Wales

6

489

SE Wales

10

1306

SW Wales

8

444

Cardiff

11

2628

Total in Wales

43

5383

London

1

6

Overall total

44

5389

Prepared 5th September 2013