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01.08.13

Governing on a shoestring

Source: Public Sector Executive July/Aug 2013

Chris Painter, emeritus professor of public policy and management at Birmingham City University, argues that recent evidence raises worrying questions about the capability of government agencies to act effectively in the public interest.

It has become fashionable, especially in times of austerity, to regard government as a bloated bureaucracy. Yet a counter-intuitive theme running through the political science literature has been the ‘hollowing out’ of the British central state. 

This partly reflects the changing realities of multi-level governance due to the supra-national powers of the European Union – notwithstanding current political turbulence over the terms of our continuing membership – and existence of sub-national devolved government within the UK since the late 1990s. The latter leads June Burnham and Sylvia Horton, in their recently published ‘Public Management in the United Kingdom’, to talk about ‘four-nation governance’ given the distinctive institutional structures that now exist in Northern Ireland, Scotland and Wales, making generalisations about patterns of public service delivery increasingly problematic. 

But hollowing out is also a consequence of underlying trends since the 1980s towards privatisation, contracting-out of public services, and accommodation of non-governmental special interests colonising policy networks and communities. 

However, the question that arises is whether this process has now reached the point where the very effectiveness and functionality of central government is called into question, compromising even its ‘steering’ capacity. 

Concern is borne out by a number of recent malfunctions in the central machinery of state.

Department for Education (DfE) 

A characteristic of education reform since Michael Gove became secretary of state in the Coalition Government is a programme of structural reform, centred on mass academisation and an ideologically-driven policy of ‘free’ schools. With local authorities constrained in the powers they can exercise over these independent publicly-funded institutions, synchronising the overall number of school places becomes even more difficult. But during Gove’s incumbency, the DfE has also unveiled a number of poorly formulated initiatives centred on the national curriculum and public examinations, therefore punctuated by associated policy reversals. 

This is in a department of state going through radical administrative upheaval, a test bed for a wider Whitehall template, including deploying civil service teams to time-limited projects. 

A review published in November 2012 revealed plans to axe more than a quarter of DfE’s workforce, as part of an ongoing cost-reduction programme; proportionately greater than the administrative cuts earmarked for many other departments. 

Indeed, it was envisaged that reductions in overall administrative costs of 50% would be achieved by 2016. Management consultants have been appointed to oversee the implementation of this ‘leaner’ administrative model.

It goes without saying that alarm bells were ringing about the implications for key skills of cutting that level of resource. 

Department for Environment, Food and Rural Affairs (Defra) and UK Food Standards Agency (FSA) 

Earlier this year Defra was caught up in a major scandal. There were revelations of widespread adulteration of beef products with horsemeat, signifying that incorrectly labelled products had entered the food chain. 

This was attributed partly to fall-out from the Coalition’s overhaul of the ‘quango state’. Scaling back of the scope of the food safety regulator diminished the likelihood of detecting such mislabelling. This was the verdict of Parliament’s environment, food and rural affairs select committee, bearing in mind FSA’s loss of staff and funding since 2010. Moreover, the agency’s investigatory powers were undermined by the split division of responsibilities between itself and Defra as a consequence of the post-2010 organisational changes.

The contamination crisis therefore raised alarm bells about the UK’s ability to identify and respond effectively to food safety issues, though it was by no means the only country caught off guard in this context. The restricted capacity of FSA to carry out inspections as part of a lighter-touch regulatory regime rendered future food crises all the more likely. 

Department for Transport (DfT) 

The embarrassment of the aborted West Coast Main Line franchise competition and costs that generated for the taxpayer drew trenchant criticism from the Commons public accounts committee (PAC). This franchising process was marred by basic errors, cuts in departmental staffing and in consultancy budgets having serious implications for the availability of key skills. 

There were stark comparisons between DfT expenditure and that of the train operating companies. The former devoted £1.9m to staff costs and external advisers in the franchise competition; a fraction of the estimated £10m each of the latter (First Group and Virgin Rail) spent on their bids.

Therefore reductions in departmental critical mass had proved spectacularly counter-productive in terms of loss of capability, leading to elementary mistakes being committed by overstretched civil servants, contributing in turn to a flawed process that imploded once exposed to legal challenge.

Department for Work and Pensions (DWP) 

The poor quality of consultation papers emanating from DWP has occasioned some surprise. This applied notably to proposed refinements in official definitions of child poverty and approaches to tackling its causes, pivotal to which was downgrading the importance of income. 

The paper in question drew particularly strong reaction from scholars specialising in the field, including those at Kent, Loughborough, Sheffield and York universities, along with the LSE, and numbered among which were fellows of the British Academy.

The proposals were criticised as confused, showing disregard for previous work and research, and for being at variance with international standards. 

An expert respondent described the child poverty consultation document as one of the worst government policy papers they had ever encountered, reading like something ‘plagiarised from a right-wing think tank tract’! 

So, in this case there were grave reservations about the quality and substance of policy work produced by a department of state. 

HM Revenue & Customs (HMRC) 

All too evident from domestic campaigning and ongoing international discussions, loss of revenue to the exchequer from corporate tax avoidance is one of the most politically charged issues currently facing HMRC. 

The challenges presented are compounded by the advice clients receive from the major accountancy firms – Deloitte, Ernst & Young, KPMG and PwC – on ‘efficient tax planning’. 

In another recent report from the PAC the disadvantages faced by HMRC in discharging their responsibilities were put into quantifiable form. Large accountancy firms are simply much better resourced. 

The problem is most tangible in the controversial area of transfer pricing, the practice whereby multinational companies organise their transactions so that taxable profits are transferred to lower tax jurisdictions. 

Here four times more staff worked for the largest accountancy firms than were employed by HMRC for this purpose. Once again there was less critical mass available to a government agency than that at the disposal of private organisations. 

Treasury 

The malaise even extends to the core executive. The PAC has again led the way, critiquing the Treasury for adopting too short-term a perspective on public expenditure cuts. 

Quick fixes have taken precedence over evaluation of social and economic impacts. 

At least departmental finance managers are beginning to show more foresight with their spending scenarios, given that conditions of austerity are expected to persist throughout the next Parliament, let alone the current one.

But the quality of information underpinning spending decisions leaves much to be desired even following decades of managerial reform designed to instil a focus on performance outcomes. 

There is, moreover, still too little of the joined-up thinking necessary for tackling cross-cutting issues, as well as frequent failure to identify spill-over effects from cuts in one area of programme expenditure to another. Nor is the cause of policy assessment well served by deficiencies in the Treasury’s own administrative infrastructure. 

Analytical skill gaps and high staff turnover raised serious questions about its capacity to adequately scrutinise programme budgets and their cost-effectiveness. 

Similar strictures apply to unprecedented cutbacks being experienced by local authorities. 

The Department for Communities and Local Government (DCLG) was taken to task by the PAC – though decision-making across Whitehall is culpable in this respect – for failing to holistically assess the consequences of funding reductions. 

For some councils  it may become unviable even to meet statutory service obligations or sustain basic community infrastructure. 

These fears about the cumulative effects of cuts were given further credence by the recent 2015-16 spending review. 

The hope is that local government will become a primary source of ideas for service delivery innovation – necessity being the mother of invention. 

But that requires not only an effectively functioning but also complementary reconfiguring of Whitehall. 

Largely directed at the overriding political goal of (ever-receding) deficit reduction, the June spending review was criticised for containing little by way of strategic coherence when judged against the criteria referred to earlier in this article, notwithstanding further token acknowledgement of the desirability of joined-up health and social care services. The respected Institute for Fiscal Studies lamented the poor quality of the documentation accompanying the review.

Government efficacy and legitimacy 

We should not underestimate ideological drivers behind the changing configuration of programme provision. 

The examples cited in this article nevertheless raise worrying issues about the critical mass available to central government departments and agencies, belying the importance Whitehall has attached to capability reviews. 

What is happening goes deeper than administrative efficiency savings. 

Most disturbing of all is the increasing number of situations where government agencies find themselves at a distinct disadvantage compared with better-resourced private organisations. 

A growing sense that the public interest is allowed to play second fiddle to private interests can only feed further scepticism about the efficacy of government action. 

In so doing, it threatens another twist to the crisis of democratic legitimacy in the UK that  many commentators already attribute to the succession of institutional failings we have  experienced since 2007-08.

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