You can study the awesome debt statistics for as long as you want but, to those who remember the great frauds of the 1990s, nothing announces that a slump is coming as loudly as the news that the guardians of Britain's economy have embraced the management techniques of the dotcom bubble.
You should know by now that the Treasury's private finance initiative is nothing but a version of the old "off-balance-sheet financing" scam, where debts are hidden in shell companies and shareholders fooled into believing they have invested in a roaring success. The Treasury works its public sector variant by keeping the inflated costs of private consortiums' new hospitals and schools off the books. They're not classed as government projects for accounting purposes, even though the public will have to pay through the nose for them. An exasperated John Ashworth, who is presiding over the £1.9bn rebuilding of the Royal London Hospital, put it best when he exclaimed the other day: "This is what got Enron into trouble - it's all off the balance sheet. It's cloud-cuckoo-land, Alice-in-Wonderland stuff."
The few people who care about the integrity of public finances have been worrying about the Treasury's adoption of Enron's accounting practices for years. What's new is that the Bank of England is following Enron's personnel policy. "Rank and yank" or "tag 'em and bag 'em" was the devious invention of the human resources departments of the 1990s. Employees were graded into three or five levels. The top performers received lavish rewards. Those assigned to the bottom level were fired at once, or warned they must improve immediately or be dispensed with later.
Jack Welch, the grandiloquent former chief executive of General Electric, came up with the management-speak phrase "vitality curve" to describe the system. The top 20 per cent of the workforce was the most productive, he explained. They are "filled with passion", they have "runway ahead of them", and the "edge" to "make things happen". They must be rewarded with share options and merit rises. Below them was the middling 70 per cent who were reliable but lacked "vision". At the bottom of the heap were the "C players" who "enervated rather than energised" and had to go. As an incentive to his managers, he warned that those among them who failed to recognise "C players" would be classed as "C players" themselves and fired.
Ranking and yanking is being brought to the Bank of England by its new head of human resources, Louise Redmond. She has experience of the bubble world. Previously, she was head of human resources at GlaxoSmithKline, where the chief executive, Jean-Pierre Garnier, was on a beggarly salary of £7m and had the promise of a pay-off of £22m if the board found he wasn't up to the job.
Redmond has announced that the best of the bank's 1,800 staff will get merit rises. Those at the bottom will be warned that if they don't meet targets they will be out. Perhaps inspired by the old Fleet Street saying "Never work for a liberal newspaper, they'll sack you on Christmas Eve", she has decreed that the assessment will begin just before Christmas. A bank spokesman told me there wouldn't be a fixed quota. Maybe 5 per cent would be passed the black spot, maybe 10.
For sure, only militant trade unionists insist that incompetent workers should never be fired. No one likes to carry passengers, and there's something especially galling about freeloaders in the public services. Why shouldn't a rational management decide who should go?
The trouble is that supposedly rational managers can create havoc. I looked at the collapse of Enron in 2001 for my book Pretty Straight Guys and found that thoughtful workers blamed the biggest bankruptcy in history on the assessments drawn up by Enron's performance review committee (PRC).
They explained that to secure their bonuses and avoid dismissal they engaged in ferocious office politics. They lied about fellow workers, formed cliques to isolate them and, on occasion, hacked into their files to wreck their work. "It was a pit of vipers," said one. "You can't believe how brutal that process could be," said a second. "You had people attacking other people's integrity, morality and values." It was war to the knife.
The assessment process all but guaranteed fraud. Brian Cruver, a young manager, learned how telling the truth could get him fired. He had to please the bosses by puffing up deals. "The reality of the magnificent Enron was that if people wanted to survive the PRC process and meet personal bonus targets, then they often needed to inflate the deal value," he said. "With the inflated deal value, they could deliver bigger earnings to senior management who in turn could deliver them to Wall Street and investors."
I'm not saying that the bank's economists will run off with the gold reserves. It's not the honesty of civil servants' actions I worry about so much as the honesty of their advice. Civil service independence rests on the belief that public servants are free to speak candidly to their masters without fear of the consequences. The ideal is already hard enough to live up to. A dominant minister or prime minister promotes civil servants who don't say things such as: "The war in Iraq is going to be harder than you think" or "Your NHS reforms are going to create chaos".
It was for this reason that the civil service watered down "ranking and yanking" when Sir Michael Bichard, then permanent secretary at the Department for Education, proposed it at the height of the dotcom bubble.
Now it's back and is about to be imposed on one of Britain's oldest institutions. Nothing, it seems, can discredit a bad idea in Whitehall if it's a bad idea which has come from the private sector. I'm sure its proponents won't be following the directors of Enron to prison, but I'm equally sure that, like Enron, the economy they manage is about to crash.