The final day of our fortnightly series.
Towards a self-shrinking state
Reducing the demand for government asks a great deal of the British people.
For a start, it asks them to accept an admission of failure. Despite austerity, despite tax rises, despite our mounting national debt, we still find ourselves facing an uncertain future.
Most immediately, we need negotiate the rest of this decade without the ability to borrow our way out of trouble — let alone fund tax cuts and spending sprees on the never-never. As for the decades ahead, the fiscal outlook is even more troubling: a slow motion collision between the fundamentals of the welfare state and the remorseless ageing of the population. National bankruptcy beckons unless we make major changes to our public finances — and ultimately to society itself.
We must do more as a nation to become independent of the state. We must strengthen the family, revive civil society and tear down the barriers to work for all those capable of it..
It can be done, but it won’t be easy — which is why government must lead the way.
The civil service sets a bad example
Unfortunately, Whitehall has not led the way. Figures compiled by the Taxpayers’ Alliance show that “from March 2016 to March 2023, civil service employment increased from 418,340 to 519,780… the sharpest increase in at least 50 years.”
In that period, Brexit and Covid have placed exceptional demands on the civil service — hence the need for new recruits. However, since the end of the pandemic there’s been no unwind. A target set under Boris Johnson to return civil service numbers to 2016 levels (a reduction of 91,000) was scrapped by Rishi Sunak.
It’s also worth pointing out that the expansion of the civil service stands in contrast to the reduction of local government employment. From 1.3 million fulltime equivalent positions in England and Wales in 2012, the numbers dropped to 0.9 million in 2022. Central government has imposed disciplines on others that it won’t impose on itself.
This is an unsustainable state of affairs. We cannot expect the nation to reduce the demand for government, if government will not reduce the demand for itself.
The ever-expanding state
What explains the tendency of bureaucracies to grow in size?
The most cynical answer is that bureaucrats are merely serving their own vested interests. Those in charge of the government machine will naturally arrange matters as to funnel more public resources towards its inner workings — and indeed the post-2016 growth of the civil service is skewed towards its highest grades and away from frontline delivery.
A less cynical, though more fatalistic, explanation is that it is in the very nature of bureaucracies to grow. All systems are subject to entropy — and the natural response of a bureaucratic system is to manage the ensuing dysfunction with more bureaucracy.
As Oscar Wilde is supposed to have said, “the bureaucracy is expanding to serve the needs of the expanding bureaucracy.”
Baumol’s Cost Disease
Perhaps the biggest and most intractable problem is an economic phenomenon known as the Baumol Effect — or, more alarmingly, Baumol’s Cost Disease.
First described by William J Baumol in the 1960s, it explains why wages rise across all trades and professions, whether or not each occupation gets more productive over time.
Technological and organisational breakthroughs drive up the productivity and wages of jobs in manufacturing, retail and other fast-moving sectors. However, there are other occupations that are less changed by the passage of time, from care workers to solicitors. Because we still need them their wages can’t stay stuck in the past (otherwise who would do the work?).
Therefore, relative to their output, jobs of this kind — including most of those that make up the public sector — become evermore costly.
What about IT?
What we really need is a public sector productivity revolution — one that would allow us to reduce government headcount, while boosting the output of the personnel who remain.
This is what digital revolution was supposed to achieve. Indeed, there were those — including David Cameron in his 2010 TED talk who predicted a “post-bureaucratic age”. The theory was that information technology would allow power to be radically decentralised, thus transforming government out of all recognition.
Yet more than a decade later, the civil service is bigger than ever. Furthermore, the state bureaucracy isn’t just making work for itself — but also for other people, including frontline public service staff. It’s a problem that ministers freely admit to, for instance in a Department of Health and Social Care (DHSC) report whose title says it all: “Busting bureaucracy: empowering frontline staff by reducing excess bureaucracy in the health and care system in England”. By way of example, they mention that “around a third of a community-based clinician’s time is estimated to be spent on administration and patient coordination”.
What the theorists of the post-bureaucratic age had overlooked is that tech makes it easier, not harder, for bureaucracies to intensively monitor and micro-manage the public sector.
In short, what we’ve actually entered is the hyper-bureaucratic age. If we’re serious about reducing government’s demand for itself, then we shouldn’t bring a knife to a gun fight.
Hard constraints on bureaucratic impositions
Government plans for “busting bureaucracy” in the public sector are full of good intentions, but not effective action. The DHSC report set out some common sense principles for how the general problem can be addressed, but what public sector staff need is a guaranteed defence against the time demands generated by the government machine.
If time is money, then it should be budgeted accordingly. Just as government departments aren’t allowed to spend more money than they’re given, they shouldn’t be allowed to impose bureaucratic demands on frontline workers that go over a defined time limit. Once the limit is reached, the only way that a new bureaucratic requirement should be added is if an old one is removed.
This would force civil servant to prioritise. They must do more to assess the value of what they do — and what they force others to do.
A lean administration system
Toyota is famous for its lean manufacturing system — which is a process of continuous improvement designed to squeeze out waste and inefficiency.
Crucially this isn’t just the top-down responsibility of management. From the shop floor upwards, Toyota workers are empowered to literally stop the production line “to avoid generating problems that others would find in the future.”
The same principles should be applied to the civil service. While top-down efficiency drives can make useful changes at a macro level, no one is better able to identify the deeply embedded waste in a system than those whose duty it is to carry out pointless tasks.
Unfortunately, while Toyota workers are encouraged to volunteer such information, British civil servants are not. Firstly, they aren’t asked. Secondly, there’s the fear of putting themselves and their colleagues out of a job. And, thirdly, a challenging and innovative spirit does not rank highly among the virtues that Whitehall encourages among its staff.
The civil service therefore needs culture change. For a start, it should abolish the “360-degree feedback” system in which staff are regularly evaluated by their colleagues. Human Resources monitoring of this kind re-enforces conformity and punishes mavericks — especially those who raise awkward questions.
It should be replaced with a Toyota-style process of constant improvement in which staff are directly asked which tasks could be done differently or whether they need to be done at all. Far from fearing for their jobs, the ability to identify inefficiencies should boost their promotion prospects. Furthermore, managers should be rewarded for helping staff to bring forward their ideas — all the more so if these help to correct management mistakes.
The need for ministerial leadership
The ultimate goal of civil service reform is a self-shrinking state — one in which the tendency to bureaucratic expansion has been rewired to achieve the constant elimination of the unnecessary.
However, pushing through such a complete culture change will require political leadership. Indeed, the same goes for the entire goal of reducing the demand for government. Certainly the momentum will not be generated spontaneously.
In his contribution to this series, David Gauke proposed the creation of an Office for Spending Evaluation that would classify spending proposals according to how likely they are to produce long-term savings. This could go hand-in-hand with the other long-term programmes to reduce the demand for government — including civil service reform and a new wave of localisation around the principle of supporting independence.
Given its importance, this work should be the responsibility of a Cabinet minister — but not the Secretary of State of some gimmicky new department. That would just create another silo and we have enough of those. We therefore propose that the task coordinating a truly cross-departmental effort should constitute the job description of the Deputy Prime Minister.
As such, the DPM would also become the one member of the Cabinet not consumed by the urgencies of day-to-day politics — and thus a much needed link between the needs of the future and the potency of the present.
The challenge of reducing the demand for government is the work of decades, but the time to start is now.