This blog was originally published in September 2013. But ahead of the UK’s general election next month, many of the issues raised still seem relevant.
Regular readers of this blog will know that I have repeatedly highlighted the increasing likelihood of failure from Local Authorities relying on Shared Services programmes to achieve draconian cuts in budgets (mandated by the Coalition Government). Last week, I cautioned against spending another £5 Billion on capital investment, citing the Government’s capacity to avoid the next omnishambles. Most of this year, I have also been leading a campaign to get the Cabinet Office to reverse its Catch 22 policy which, in my view and that of many colleagues, is not in the national best interest. The Rt. Hon. Francis Maude MP, Minister for the Cabinet Office and Paymaster General has claimed that the Government’s Catch 22 controls over independent executives, consultants and contractors has saved circa £1 billion. Unfortunately, the reality, highlighted this week, is that the Catch 22 policy is a fatal own goal, with circa £3 billion plus of cost savings at increasing risk of delay, overspend and failing to meeting their policy objectives. The Government’s flagship welfare reform programme is just the latest casualty. Before examining welfare reform, let me highlight the likely consequences of Catch 22:
- Cost reduction targets by the Public Sector for innovation and processes improvement are likely to be missed, so that the swathing budget cuts will increasingly fall on front line services
- Opportunities to cut waste in benefits and other public services will be missed or delayed years, putting more pressure on tax payers
- Public Sector workers are increasingly likely to take industrial action, with its associated impact on service and quality
- The UK’s once proud and World beating independent executive and contingency labour sector is likely to be permanently weakened, with many top quality independent executives exiting the industry, retiring or going overseas. The same entrepreneurial independent executives could have helped the Government achieve both Public Sector Cost Reduction and Private Sector growth but sadly the opportunity is likely to be permanently lost.
Now let’s take a closer look at this week’s news about the Government flag-ship welfare reform programme:
- Public accounts committee’s question welfare reforms
- MPs blast dole-office-online plans
- New UK benefits structure depends on “high risk” IT projects
- MPs fear ‘train crash’ DWP cuts will fail
- Spending watchdog sniffs trouble with DWP’s flagship IT project
- George Osborne warned of disaster over welfare reform
- Reform of benefits “could fail because of staff cuts”
- The IT crowd
- George Osborne is warned of disaster over welfare reforms
If the Department of Works & Pensions (“DwP”) (which represents twenty-three percent of total public spending) is seriously at risk of not achieving targeted cost reductions what chance is there for the rest of the Public Sector? DwP is often heralded as one of the best-managed departments. Unfortunately, this time DwP is also critically dependent upon HMRC to deliver a new real-time system to an extremely tight time schedule. Why didn’t implementing an enormous, cross-departmental IT programme, at the same time as savage head-count reductions, plus Catch 22 sound alarm bells? Also why were simplistic assumptions about the number of claimants with access to the internet not independently validated?
At the moment, Chancellor Osborne’s A Plan is looking increasingly at risk. It seems that the Government’s reform agenda was never properly challenged by top class professionals, like independent executives. Without independent validation of bottom-up costings and risk assessment, such an ambitious reform agenda is like a run-away train – a crash waiting to happen. Of course, the Government still has many consultants in play (despite Catch 22) but their independence, objectivity and track record gives some room for concern. Let’s take a helicopter view of the emerging scenario:
- Public Sector cost reduction is increasingly likely to give way to cuts in front-line services, as reality replaces myths and risks crystalize
- Government policies to stimulate private sector growth have been far too weak and ineffectual. The Government has consistently failed to stimulate short-term demand, especially investment, as increasingly strongly advocated by the IMF and OECD.
- Increasing downside risk on global growth and from the Euro crisis has meant that Plan A’s assumptions are now increasingly buried in sand.
What will Chancellor George Osborne do next? Because of his relative inexperience prior to becoming Chancellor is he perhaps unduly sensitive to changing direction?
I suppose what worries me most is the absence of joined up thinking and holistic planning across the Coalition Government – surely this is both dysfunctional and wasteful (see the Cabinet Office’s update of pan-government plans)? For clarity, let me quickly recap on what I regard as the Public Sector reform life cycle (this is quite different to Best Practice in the Private Sector, as I have previously described):
- Outline reform agenda (manifesto, Coalition agreement)
- Outline policies (Green & White Papers)
- Define policies and provide way forward (Bills and Acts of Parliament)
- Define strategy
- Post implementation review
I struggle to understand the Government’s detailed strategy, especially on introducing innovation in the Public Sector. One of the Government’s senior strategy consultants is McKinsey. By chance I noticed that McKinsey were citing Kenya and Georgia as Best Practice exemplars for innovation in government, arguing that a willingness to take bold risks can make government services better and cheaper.
The Coalition Government are, of course, taking enormous risks but I am concerned with the effectiveness or robustness of risk mitigation – this is different to the pan-government risk register sponsored by the Cabinet Office and the Treasury.
My advise to the Government is simple. For cost-effective risk mitigation on Public Sector transformation programs, deploy independent executives client-side on both strategy formulation and delivery phases.