Civil Service Reform

Lord Wallace of Saltaire Excerpts

Tuesday 19th June 2012 Lords Chamber

[Lord Wallace of Saltaire]

My Lords, with the leave of the House, I will repeat a Statement on the Civil Service.

“The British Civil Service plays a crucial role in modern British life. It is there to implement the policies of the Government of the day, whatever their political complexion, and its permanence and political impartiality enables exceptionally rapid transitions between Governments.

Most civil servants are dedicated and hard-working, with a deep-seated public service ethos, but like all organisations, the Civil Service needs continuous improvement. I want today to set out the first stage in a programme of practical actions for reform.

In 2010 we inherited one of the largest budget deficits in the developed world, and, despite success in improving Britain’s financial standing, we still face significant financial and economic challenges, as well as rapid and continuing social, technological and demographic changes. The Government have embarked upon a programme of radical reform of public services to improve quality and responsiveness for users and value for the taxpayer.

In order to succeed we need a Civil Service that is faster, more flexible, more innovative and more accountable. Our Civil Service is smaller today than at any time since the Second World War, and this has highlighted where there are weaknesses and strengthened the need to tackle them.

We need to build capabilities and skills where they are missing. We need to embrace new ways of delivering services. We need to be digital by default. We need to tie policy and implementation seamlessly together. We need greater accountability, and to require much better data and management information to drive decisions more closely. We need to transform performance management and career development.

Today Sir Bob Kerslake, the head of the Civil Service, and I are publishing a Civil Service reform plan, which clearly sets out a series of specific, practical actions to address long-standing weaknesses and build on existing strengths. Taken together, and properly implemented, these actions will deliver real change. They should be seen as the first step on a programme of continuing reform for the Civil Service.

This is not an attack on the Civil Service, and nor have civil servants been rigidly resistant to change. The demand for change does not come just from the public and from Ministers but from civil servants themselves, many of whom are deeply frustrated by a culture that is overly bureaucratic, hierarchical and focused on process rather than outcomes. This was revealed in the responses to our ‘Tell us How’ website, which aims to get fresh ideas from staff about how they could do their jobs better. Civil servants bemoaned a risk-averse culture, rampant gradism and poor performance management.

This action plan is based heavily on feedback from civil servants, drawing on what frustrates and motivates them, while many of the most substantive ideas in this paper have come out of work led by Permanent Secretaries themselves. Reform of the Civil Service never works if it feels like it is being imposed on civil servants by Ministers, and neither would it succeed if the Civil Service was simply left to reform itself. Because we want this to be change that lasts, we have discussed these proposals widely, including with former Ministers in the last Government to draw on their experiences and ideas.

The Civil Service of the future will be smaller, pacier, flatter, more digital, more accountable for effective implementation, more capable, and more unified, consistent and corporate. It must also be more satisfying to work for. These actions, therefore, must help to achieve this.

Under published plans, the Civil Service will shrink from around 500,000 to around 380,000 by 2015. It is already the smallest since World War II. Sharing services between departments will become the norm. This has been discussed for years—it is now time to make it happen.

Productivity also needs to improve. For too long, public sector productivity was at best static, while in the private services sector it improved by nearly 30%. Consumer expectations are rising, and there is, as we have been told, no money. The public increasingly expect to be able to access services quickly and conveniently, at times and in ways that suit them.

We are conducting a review with departments to decide which transactional and operational services can be delivered through alternative models. Services that can be delivered online should be delivered only online. Digital by default will become a reality, not just a buzz phrase.

We should no longer be the prisoner of the old binary choice between monolithic in-house provision and full-scale privatisation. We are now pursuing new models: joint ventures, employee-owned mutuals, and new partnerships with the private sector. MyCSP, which manages the Civil Service Pension Scheme, became the first joint venture mutual to spin out of government recently, and provides a model for future reforms.

The Civil Service culture can be slow-moving, hierarchical and focused on process rather than outcomes. Changing this would be very hard in any organisation. We can make a start by cutting the number of management layers. There should only exceptionally be more than eight layers between the top and the front line, and frequently many fewer. This helps to speed up decisions and empower those at more junior levels. Better performance management needs to change the emphasis in appraisals emphatically towards delivery outcomes, and to reward sensible initiative and innovation. We also need to sharpen accountability, which is closely linked to more effective delivery.

Management information in government is poor, as the NAO and the PAC, the Institute for Government and departmental non-executive board members have all vigorously pointed out. By October this year, therefore, we will put in place a robust and consistent cross-governmental management information system that will enable departments to be held to account by their boards, Parliament, the public and the centre of government.

We will make clearer the responsibilities of accounting officers for delivering major projects and programmes, including the expectation that former accounting officers can be called back to give evidence to the Public Accounts Committee.

The current arrangements, whereby Ministers answer to Parliament for the performance of their departments and for the implementation of their policy priorities, will not change. However, given this direct accountability to Parliament, we believe that Ministers should have a stronger role in the recruitment of a Permanent Secretary.

We will therefore consult the Civil Service Commission on how the role of the Secretary of State can be strengthened in the recruitment process of Permanent Secretaries. The current system allows the selection panel to submit only a single name to the Secretary of State. At other levels, appointments will normally be made from within the permanent Civil Service or by open recruitment. However, as now, where the expertise does not exist in the department, and it is not practicable to run a full open competition, we are making it clear that Ministers can ask their Permanent Secretaries to appoint a very limited number of senior officials for specified and time-limited executive and management roles.

By common agreement both inside and outside the Civil Service, there are some serious deficiencies in capability. Staff consistently say in surveys that their managers are not strong enough in leading and managing change. In future many more civil servants will need commercial and contracting skills as services move further towards the commissioning model. While finance departments have significantly improved their capabilities, many more civil servants need a higher level of financial knowledge. As set out elsewhere in the plan, the Civil Service needs to improve its policy skills, and to fill the serious gaps in digital and project management capability.

By autumn we will have for the first time a cross-Civil Service capabilities plan that identifies what skills are missing and how gaps will be filled. For the first time, therefore, leadership and potential leadership talent will be developed and deployed corporately.

In 1968, the Fulton commission identified that policy skills were consistently rated more highly than skills in operational delivery. This is still the case today. We will establish the expectation that Permanent Secretaries appointed to the five main delivery departments will have had at least two years’ experience in a commercial or operational role. We will move over time towards a more equal balance between those departmental Permanent Secretaries who have had a career primarily in operational management and those whose career has been primarily in policy advice and development.

A frequent complaint of civil servants themselves concerns performance management. They feel that exceptional performance is too often ignored and poor performance is not rigorously addressed. In the future, performance management will be strengthened by a Senior Civil Service appraisal system that identifies the top 25% and the bottom 10%, who will need to show real improvement if they are to remain in the service. Departments are already introducing similar appraisal systems for grades below the Senior Civil Service.

The Government are committed to ensuring that the Civil Service will be a good, modern employer and continues to be among the best employers in the country. Departments will undertake a review of terms and conditions to identify those that go beyond what a good, modern employer would provide. We will also ensure that staff get the IT and security they have been asking for so that they can do their jobs properly.

Another key goal is to improve and open up policy-making so that there is a clear focus on designing policies that can be implemented in practice. Too often in the past, policy has come from a narrow range of views. Whitehall does not have a monopoly on policy-making expertise and in the future open policy-making will become the default. We will create a central fund to pilot policy development commissioned from outside Whitehall.

I repeat that this plan is just the first stage in a programme of reform and continuous improvement. It responds to concerns expressed by Parliament, Ministers and former Ministers but, most importantly, civil servants themselves. None of the actions in the plan is in itself dramatic and none will matter unless it is properly implemented. But together, when implemented, they will represent real change. I will oversee the implementation of this plan. As the paper sets out, Sir Bob Kerslake, the head of the Civil Service, and Sir Jeremy Heywood, the Cabinet Secretary, will be accountable for its delivery through the Civil Service Board.

Change is essential if the Civil Service is to meet the challenges of a fast-moving country in a fast-changing world. I commend the plan to the House”.

My Lords, that concludes the Statement.

--- Later in debate ---

[Lord Wallace of Saltaire]

I thank the noble Baroness very much for her cross-party welcome for these proposals. Indeed, much in them builds on and extends the experience of the previous Government. As she will know from watching the exchanges in the Commons, a number of former Ministers also welcome the proposals and regretted that in one or two respects they did not go further. I shall do my best to answer her questions. The search for an effective and efficient Civil Service is constant, and one has to return to it every few years. The demands on the Civil Service are rapidly changing. The digital revolution is an enormous challenge for the Civil Service and for all of us. Those changes are part of what is driving this whole process.

Perhaps I may say as a former academic and think-tanker that outside advice from academics and think tanks comes far cheaper than management consultants. I say that partly with bitter regret at how cheaply I sold myself on occasions to government. However, that is part of what is intended. As the plan sets out, there is a preliminary budget of £1 million for piloting this access for outside advice. I assure the noble Baroness that we are thinking not so much about going back to the consultants who provided their extremely expensive advice but about drawing on outside think tanks and the wealth of academic advice that we have in this country and elsewhere. Again, the previous Government did a certain amount of this; indeed, in the Cabinet Office only yesterday I met an academic whom I know very well and who I know was actively engaged in advising the previous Government.

In terms of ideas and implementation, we are already piloting some delivery models and this is very much a process that we will be pursuing. Those following this will know that the idea of mutuals is being tested. There is already some evidence that it improves the morale and therefore the effectiveness of those involved, and it will be taken further if it proves successful.

Something that we are also always looking at is whether we are sufficiently staffed in the right places. Sometimes you find that you have too many staff in one area and not enough in another. Those of us familiar with the BSE scandal will remember that part of the problem was that not enough staff were left in place for the contingencies that took place. It is a constant problem.

On consultations, I simply repeat that there were very wide consultations inside the Civil Service. Some of us were a little frustrated that more civil servants appeared to have seen earlier drafts of this paper than we had. The extent to which senior and relatively junior civil servants had their views taken into account was very wide. That has very positive implications for morale because, if you are carried along with proposals for change, you feel that you are part of it.

As far as the diversity of the Civil Service is concerned, I think that our predecessors, the Labour Government, did extremely well with this, particularly regarding the number of highly talented women in the Civil Service. The departments that I am aware of also have a much higher number of people from different ethnic minorities. I asked a rather senior ethnic minority civil servant what he would say to a young woman of Chinese origin in the Civil Service—a former student of mine—who asked me whether there were any barriers to getting to the top. He said he had not noticed any. I compliment our predecessors on how far they moved on that and assure them that we are continuing very much along that line.

In terms of the budget for implementation, this plan builds in the promise that there will be at least five days of training per year for officials. Civil Service Learning is setting out how this will be done using a range of different providers inside and outside the Civil Service.

We are constantly looking for metrics and measures of success. Management information systems are of course best for measuring the achievement of success, and improving management information systems is a vital part of this.

Finally, I turn to the independence of and challenge for senior civil servants. I can only quote what a senior civil servant who is a very good friend of mine said to me many years ago. He said that at a certain level a competent senior civil servant should always have at the back of his mind that he could move before telling Ministers his thoughts. That was under the previous Government. I think that a number of senior civil servants would say the same but we are always looking for robust and independently minded civil servants who will express their thoughts to Ministers. Of course, the other side of that is that Ministers need to accept that their relationship with officials has to be on that basis.

[Baroness Turner of Camden]

My Lords, it so happens that this evening the Public and Commercial Services Union is holding its annual parliamentary reception in the Strangers’ Dining Room, so I went along to talk to its members. I found that they were very concerned because they believe there is the possibility of hundreds of redundancies and they do not seem to have had very much consultation or negotiation. I promised them that I would faithfully represent them as far as consultation is concerned.

Criticism in certain areas of public work has indicated a lack of public acceptance, but members pointed out that, rather than fewer public servants, in many instances there is a case for having more. They pointed out, for example, that at airports there were very long queues because there simply were not enough staff. That is true in many areas of public service where the union believes there should be more public servants rather than fewer.

Public service is very necessary to ordinary people. If you are very rich, you do not rely on public services, but if you are not very rich you do. Therefore, an effective public service is something that we expect the Government to provide. From what the officials of this union told me—and one must remember that they represent 280,000 public servants—it is quite clear that they do not feel they have been consulted or had the opportunity to negotiate on what is a very substantial plan. Is the Minister making arrangements for this union and other unions in the sector to be properly consulted and properly involved before we proceed with what seems to be a very large upheaval within the provision of public services?

[Lord Wallace of Saltaire]

My Lords, I can promise the noble Baroness that there is a constant dialogue with all the unions. I am sorry that the PCS feels it has not been consulted sufficiently but I am well aware that the dialogue goes on. I am also well aware that people in all sectors of society have contact with the public service. If the noble Baroness has read the Times today she will know that there are some rich people who prefer not to hear from HMRC, but HMRC is indeed determined that they should hear from it.

[Lord Shutt of Greetland]

My Lords, it is true that managing change and driving though radical policies can prove difficult. It is also true that there are areas where the private sector can and does deliver good-quality public services at competitive costs. We should not be opposed to moving the boundaries between public and private sector delivery of public services where it can be justified or in testing payment by results as a way of promoting greater efficiency and value for money for the taxpayer. However, for the past 140 years we have benefited from a public service selected on merit and political neutrality. As someone who stood down from government last month, I can say that I found civil servants civil, hard-working and helpful. Does the Minister agree that we should not approach public sector reform with a mindset of “public sector bad, private sector good”?

I do not think there is evidence that the public sector yet has in place the kind of legal, contractual and commissioning expertise to make sure that the taxpayer is going to be properly protected or the quality of service required guaranteed. Does the Minister agree that it is essential that the reforms have built into them full and proper systems of parliamentary accountability? We must ensure that, in commissioning externally sourced policy-making, we do not fall into the habit of commissioning external consultancy almost as an alternative to ministerial decision-making.

[Lord Wallace of Saltaire]

My Lords, as we all know, a number of processes are under way. This Government are also committed to decentralisation as far as possible, and one reason why the central Civil Service will shrink is that more decisions and areas of policy delivery are being put down to the local level. Some of this will be carried out through local authorities; some of it will be carried out through mutual and other agencies. The division between the public and private sectors is not entirely a binary one; there is also, as we all know, the third sector or voluntary sector. I think we all agree that, together with the decentralisation of the delivery of public services, some services are better delivered as a partnership between the public sector and the third or voluntary sector. All those processes are under way. Put together with the technological revolution that is pushing us towards a much greater dependence on digital services, this is part of the revolution we are facing.

On the question of parliamentary accountability, there is less in this plan on the details of accountability than there might otherwise be because there has been a deliberate decision to await the study of the House of Lords Constitution Committee on that very area. That will feed into further consultations on how we strengthen accountability to Parliament. However, noble Lords will be aware that the role of Commons parliamentary committees in particular in relation to the Civil Service has strengthened over the years. I was reading the Osmotherley Rules earlier today and began to look at how they may need to change further as part of this. That is the sort of thing that the Constitution Committee will be considering.

[Lord Butler of Brockwell]

My Lords, the Statement paid lip service to the quality of the Civil Service but it sounded to me—as, I am afraid, it will sound to many civil servants—like a litany of criticisms. Will the Minister accept from me that, while proposals for improved performance by the Civil Service are always necessary and welcome, it is essential to their success that the Civil Service should be led and not just driven—as the Statement said—and should not be reviled and unattributably dumped on when Ministers’ policies run into difficulties?

[Lord Wallace of Saltaire]

My Lords, I strongly agree with that. I am very conscious—again, I make a non-partisan remark—that there have been occasions under successive Governments over the past 50 years or more when some Ministers have occasionally wished to blame their civil servants for things not happening. I would be extremely upset if the noble Lord interpreted this plan as being an attack on the Civil Service. We have emphasised very strongly that that is not the case and that it has come out of a partnership between Ministers and the senior Civil Service with extensive consultation. We value the quality of leadership within the Civil Service. I am one of the many within government who have serving and former civil servants as close members of their family. It matters very much for the quality of our society, our public services and our country as a whole that we have the best-quality Civil Service working for government and the state as a whole. We very much hope that this plan strengthens that.

[Lord King of Bridgwater]

My Lords, I very much support much of what the noble Lord, Lord Butler, said. Although it is perhaps not a series of attacks, the Statement rather dodges along a line that opens it to that sort of criticism. With the Government talking as they are, perhaps I may repeat the phrase, “There are no bad men, only bad officers”. The need for leadership in the Civil Service is absolutely critical, and I very much support many of the practical measures in the Statement. The devil will be in the detail, but the figure that hits very hard is that there will be a 25% reduction in Civil Service numbers over the next three years. This has happened before and, in some cases, it has been achieved simply by transferring people to independent agencies and moving them out of the Civil Service. Can my noble friend give some indication of how those figures are to be achieved and to what extent it will be a case of smoke and mirrors or of a genuine reduction in Civil Service numbers? If local government is to take up some of the strain in areas that have been covered by the central Civil Service, will that involve an increase in numbers in local government?

[Lord Wallace of Saltaire]

My Lords, I merely repeat that this is not intended in any sense as an attack on the Civil Service and we very much value its quality. A certain amount will be achieved by putting more on to the digital level, and this is well under way. Members of this House may remember our discussions about universal benefits and the extent to which that scheme will enable us to provide those sorts of payments and services more efficiently with fewer staff. That is the sort of reduction that we see coming through. We plan for more services to be provided in partnership with local authorities and through third-sector organisations. We are already experimenting with that sort of model.

[Baroness Symons of Vernham Dean]

My Lords, perhaps I should remind the House that in a former life, quite a long time ago, I was the general secretary of the First Division Association, which represents senior civil servants.

In the Statement, the Minister said, “We need a Civil Service that is faster, more flexible, more innovative and more accountable”. No one could argue with that as a general statement, but the whole issue is about how that is to be achieved. I do not think that the Minister properly answered the question of the noble Lord, Lord King, about how you achieve a reduction of 120,000 civil servants in less than three years—only two and a half years. Is there going to be a system of compulsory redundancy and, if so, has that been costed? To what extent will there be a charge on the public purse for compulsory redundancies? Those are crucial questions when we are arguing about something that ought to be costing less money.

The real point at issue in the Statement arises in relation to the future appointment of senior civil servants. It stresses the importance of political impartiality but we are told that the role of Secretaries of State will be strengthened in the recruitment of Permanent Secretaries. It is the duty of civil servants to maintain the confidence in their impartiality not only of Ministers but of those who may become Ministers after a general election. How does the noble Lord reconcile the appointment process, which includes politically appointed Ministers, whereby politically impartial civil servants can pass over to a new set of Ministers? Will there be a requirement for Permanent Secretaries appointed in that way to resign at the time of an election? It is an important point about the confidence of the Opposition.

It was also said in the Statement that it may not be practical to run “full and open” competitions. When will it not be practical to do so? How will the diversity of the Civil Service and the opportunity for women and people from ethnic minorities to break into the Civil Service ranks be maintained in those circumstances? At the moment, they come in through open competition.

Lastly, the Statement says that, “Ministers can ask their Permanent Secretaries to appoint a very limited number of senior officials, for specified and time-limited executive and management roles”. This is an important point. There was such a fuss in 1997 when two politically appointed people were, under Privy Council terms, given executive and management roles. I have to say that the Conservative Party going into opposition went ballistic about it. What will be done about this? Will it be done under Privy Council terms, and will those contracts be terminated on a change of Government? Those are very specific questions.

[Lord Wallace of Saltaire]

My Lords, as the plan states, the proposals on the role of Secretaries of State in very senior appointments are to be discussed with the Civil Service Commission. The proposals have been discussed with former Labour Ministers, and there have been criticisms from former Labour Ministers in the other place that these proposals do not go far enough. We have not committed ourselves fully on this, and there is therefore a dialogue to be had about the future relationship between the appointment of permanent secretaries and the role of Secretaries of State. Jack Straw said in the other place that he did not find our proposals terribly surprising because on three occasions he had insisted on having an active role in the appointment of permanent secretaries. So although we are not entirely moving from one world to another, we are discussing how much further we should move along a continuum.

On the scale of reduction under way, departments are already engaged in processes which will reduce numbers without compulsory redundancies. I will write to the noble Baroness if substantial compulsory redundancies are on the way. However, seven out of 10 civil servants are involved in the big five delivery departments: the Ministry of Justice, the Home Office, HMRC, the Ministry of Defence and the UK Border Agency. Many of them turn over at a rate which I anticipate enables us to avoid very substantial compulsory redundancies, but if I am incorrectly briefed on this I will write to the noble Baroness afterwards.

[Baroness Browning]

I attended many courses at the National School of Government over the years, and I always reminded it that it was the best in the world. However, I recognise in the report today the need for change within the Civil Service, and I welcome it. Having had 15 years out of Government I returned last year to ministerial office, and I recognise some of the needs here, particularly in changing the culture. However, in making the changes that are needed, particularly in terms of management within the Civil Service and the skills needed by Ministers—because ultimately the buck stops at the Minister’s desk—it is very important to ensure that we do not confuse management systems that deliver competent management and those that lack the leadership skills that make the difference in culture. It is quite possible to be a competent manager at any level, but if you do not have the leadership skills you will get a culture as described in this document today—and again that applies as much to Ministers as it does to the Civil Service. I hope my noble friend will ensure that we do not miss out on what is a very important part of making these important changes.

[Lord Wallace of Saltaire]

My Lords, my noble friend is right to point out that a number of things fit together here. Extending the role of Parliament in holding the Government and the Civil Service to account, which is part of what the Constitutional Committee will be discussing, will be continuing with what has evolved over the last 20 years with the relevant Commons committees. The question of the management skills of Ministers is very much a cross-party thing that we all need to discuss a great deal more. We do not currently train Ministers. We also need to discuss the changing role of the Civil Service itself. One point I did not answer for the noble Baroness, Lady Symons, was the question of the impact of these proposals for ethnic minorities and women. I remind the noble Baroness that for the first time, some six months ago, we reached the point at which there were more women than men at the level of Permanent Secretary. That is a real breakthrough. We have also had our first ethnic minority Permanent Secretary. Having a close female relative rising up the Civil Service, I hope this is a trend which will go further.

[Lord Brooke of Alverthorpe]

I welcome parts of the Statement, and I welcome the conversion of the Minister who made the Statement in the other place. He was the man who was in charge of the Next Steps programme in the 1990s, which broke the Civil Service down into smaller pieces and split it up. He is now happily seeing the errors that were made, and bringing parts of it back together again.

I am concerned about the way in which we keep moving forward with changes in public service operations without actually speaking to the customers or the taxpayers. This is another example where the default position will be open policy making, where in fact the taxpayers and the citizens have not been involved one iota in this exercise. If they had been, we would have heard more complaints. I have a former connection with the Inland Revenue as I was the general secretary of the Inland Revenue Staff Federation. If you go online now, you do not necessarily get answers to internet inquiries; if you go on the telephone, as was recently published, you wait longer for a reply from the Revenue than you did two years ago; and if you come into the country, you queue longer at one and two o’clock in the morning. In so many areas of the departments the Minister has just mentioned the Civil Service is falling down. Now we are faced with a cut from 500,000 down to 380,000 civil servants within the space of three years, on top of the other changes already taking place. I think an awful lot of taxpayers are going to be very unhappy indeed with the services that they will get in the next few years, unless there can be a quite different approach to that which we have adopted so far.

I hope there will be a way in which we can look at how we measure efficiency. Take two building societies, A and B, and put them together. Get a new computer system, cut the number of staff employed, and you can say that you have increased the company’s efficiency. Invariably, in practice you find that the customer suffers and waits longer for services from that combined building society. We have tried to bring the same principles to bear within the Civil Service. I hope we can have a clearer definition of what efficiency means. I am not against changes, or reductions in numbers, provided that ultimately the service will be better. However, there is nothing in this statement to prove that it will be.

[Lord Wallace of Saltaire]

My Lords, I accept that challenge. The effectiveness of these proposals will indeed need to be challenged precisely in terms of how they impact on the quality, effectiveness and speed of delivery, and the satisfaction of the citizens who are receiving those services. Before we close, I remark that this is also part of a long process of change in the Civil Service. The proposals in the plan for bringing together some core services across Whitehall—the management of major projects, human resources, digitisation—are also part of trying to make a more economical and unified Civil Service. As I have observed in the five departments I have worked across since I joined the Government, there are real cultural differences between a number of departments across Whitehall, and we will benefit from bringing departments together, rather more into a single corps. We have also been looking at the estate of the Civil Service, and making a number of changes which make for more effective use of that estate. This will also provide a number of efficiencies and savings. However, I accept the challenge that a number of noble Lords around the House have made, which is that the impact of all of this will be seen in the quality of the services that are provided, we hope, with much greater productivity, efficiency and effectiveness in three to five years’ time.