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A smarter Whitehall? Sir Humphrey agrees

1 November 2012

Sir Gus O’Donnell

Tonight I am giving a seminar entitled “In Defence of Bureaucracy”. So “Sir Humphrey defends Mandarins” — where is the news in that?

But bureaucrats do find themselves in the news. Michael Heseltine’s report into growth yesterday makes clear that the Civil Service will be central to creating wealth. However, “the government machine needs to work in a fundamentally different way to deliver growth”, he argues. Whitehall must do less and do it better.

The Civil Service has already responded to the “less” message: it is now the smallest it has been since the Second World War, at a time when public spending is more than 45 per cent of GDP. Civil servants are getting better too — they are drawn from more diverse backgrounds and more have specific professional expertise.

I agree with a lot of what Lord Heseltine recommends. He is absolutely correct that if we want the right skills in government, particularly in areas such as procurement, then pay must be much closer to market rates. He is spot on in suggesting that the business experts who act as non-executive directors in each department should have a bigger role, including in the appointment of permanent secretaries. This has been happening for some time and is appreciated by the Civil Service. Having real experts who will be around for a long time and are politically impartial is invaluable in choosing the right candidates.

It is right, too, that departments should bring in expert knowledge on economic and policy issues. In my time I always emphasised the need for the civil service to operate with pace and professionalism, pride and passion. The best civil servants combine these traits with expertise while still preserving the traditional values of honesty, objectivity, integrity and impartiality.

I also agree with his call for a stronger central role to mastermind growth policies. Gordon Brown, established a National Economic Council that started to make all departments feel they were partly responsible for delivering faster growth. So the whole of Whitehall will welcome a National Growth Council, chaired by the Prime Minister. Let me repeat, all of Whitehall, including the Treasury. That will come as a surprise to many in other Whitehall departments and, I expect, to Lord Heseltine. But I believe it is true for the simple reason that faster growth will help to reduce the deficit — the Treasury’s No 1 objective.

If real progress on policy and delivery is to be made, ministers and civil servants will have to work closely together in a spirit of mutual trust and respect. Lord Heseltine’s idea of a shadow Growth Council, led by the Growth Minister, with permanent secretaries sitting on it, is an excellent proposal that mirrors other successful attempts to work together, such as the National Security Council.

But as Hezza rightly points out, this must extend beyond Whitehall and be accompanied by real devolution of power to cities and regions. Where I disagree is with his view that it will be resisted by Whitehall. This is not true. On a recent visit to Leeds, I saw what can be achieved by business and the various tiers of government working together. But we should not kid ourselves this is easy. Local business leaders focus on keeping their businesses alive and are somewhat cynical about initiatives that have in the past drizzled away.

I have argued passionately that we need a more devolved system, and that, most importantly, local areas must be responsible for collecting more of the revenue they spend. Alas, no party has been willing to take on this challenge despite numerous reports.

The first thing that the Government can do to help growth is to stop shooting itself in the foot. A big barrier to growth is an immigration policy that deprives the UK of skilled workers in certain disciplines. Lord Heseltine, while at pains to avoid criticising the Government, clearly sympathises with the difficulties that businesses face in recruiting these workers.

Some wrongly think that the Civil Service is a defender of excessive regulation. So it is good that Michael remembers asking businesses, when he was President of the Board of Trade, to tell him the changes they wanted to existing regulations. He did not get a single submission. That is why the coalition tried a more innovative, online approach to cutting red tape. Lots of proposals were received and civil servants have put them to their political masters; now let’s see if ministers bite the bullet.

In two areas I would have a different emphasis from Lord Heseltine. First, we cannot restate often enough that the UK has benefited from being an open economy which welcomes foreign investment. Second, we should beware measuring success by GDP growth. As the Prime Minister has said, there is much more to life than GDP. We need to create a more equal society with an emphasis on the wellbeing of its citizens.

So what does all this mean for the bureaucrats? We should drop the meaningless jargon of a “post-bureaucratic age” and concentrate on making our bureaucracy fit for the 21st century. In doing so we should leave “no stone unturned”.

Lord O’Donnell was Cabinet Secretary and head of the Home Civil Service, 2005-11

Article ©The Times 2012

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