At the end of last year, in the course of setting out Reform UK’s plans for Whitehall’s future, its leading intellectual Danny Kruger conjured a grim vision of its present state. A top-heavy bureaucracy, thickened with ever more layers of senior management, with policy trumping delivery in departments teeming with comms teams, but no clear goal. And all around, miserable, demoralised officials who want to get things done stuck “shovelling electronic paper around with nothing to show for it”. It’s a familiar story: since Labour came into office, it has been saying much the same. But then so did the Conservatives before them, and the Coalition, and New Labour, and the Thatcherites.
The British state seems to be several decades into a slow-motion nervous breakdown. It has somehow managed to centralise power while entangling itself in process, losing its capacity to act with alacrity even as parliament passes ever more laws. Its caution maddens the public, which makes it more risk-averse still. Yet take a walk down Whitehall and look at the buildings: the Georgian cliff of the Cabinet Office, the severe, neoclassical Ministry of Defence. Those stern facades do not say: “Oh dear oh dear, we don’t know what to do. Can someone phone McKinsey?” No – they say, “We are here to govern.” So what’s gone wrong?
In Power Failure, a new report for the Future Governance Forum think tank, I argue that this is not just down to overstaffing, but to deeply entrenched ideas. Long ago, these produced solutions to problems, but they have been pursued for so long, they’ve become problems themselves. For instance: since the 1980s, it has been conventional wisdom that compared to plodding government, business does things better. Some of the earlier reforms this prompted – from privatising British Telecom to outsourcing council maintenance – were perfectly sensible. But while a business can chase a single, measurable goal, the state cannot and should not. The fallacy that it should humbly yield the floor to business has now corroded its once-impressive capabilities.
Take housing. The Thatcher government compelled councils to sell the homes they had built, banned them from reinvesting the receipts – and even made them sell their land, cut-price, to property companies and developers. The state retained its power to block, but no longer trusts itself to build. Result: far fewer new houses. Likewise, our critical national infrastructure is now owned by private companies, and in some cases foreign states. Our state just provides the regulation – which was meant to fall away as free markets developed in industries like water, yet somehow never did.
Giant outsourcing companies benefit from long-term, poorly-monitored contracts to provide all kinds of public services. We’ve even outsourced children’s social care. Here too, the state is responsible when the model fails. Yet we never quite accept that this is because some public services just can’t be marketised. That would involve facing down “business-is-better” orthodoxy, and tackling the state’s lost capacity.
To carry out its own basic tasks, Whitehall turns to the big consultancies, with whom it maintains ongoing contracts. (Arranging a one-off contract risks getting stuck in risk-averse procurement processes.) As Rosie Collington and Mariana Mazzucato have argued, this too has worn down state capacity. The more Whitehall relies on private consultants, the less new expertise it accrues from the public money it spends. Worried social conservatives used to decry the “cycle of dependency”, whereby a benefits system intended to help claimants in temporary crisis ends up fostering permanent helplessness. For the benefits system, read consultancies; for benefit claimants, read Whitehall.
This critique is not peculiar to the left: some Conservatives were advancing it years ago. Here’s Jesse Norman in 2009, lambasting the way “a gigantic client state of consultants” had entrenched the overuse of market models in the public sector: “These have tried to apply the supposed lessons of lean manufacturing to government in a coercive and standardised way, by creating so-called ‘public service factories’. On this approach, services are specified from the centre; and departments split into front- and back-office functions, given targets, and made subject to inspection and compliance regimes… A mania for quantification and cost control suffuses the whole.”
No wonder being a civil servant is not the high-status job it once was. If you’re a smart, bullish graduate who wants to work in government, would you go and sit in Whitehall commissioning people from McKinsey to do the interesting stuff – or go to McKinsey, do it yourself – and be paid significantly more into the bargain?
To work out how to recover the assurance still discernible in those Whitehall facades, we need to look back to the emergence of the modern activist state, and the kind of figure who walked its corridors then.
Around the turn of the twentieth century, some in the establishment were glancing anxiously at rising powers like Germany and Japan. They worried that to maintain its status, Britain had to throw off laissez-faire Victorian complacency and modernise for a new era. The state would need to be much more interventionist, taking responsibility for the whole nation.
This view produced a broad “national efficiency movement”, which drew together frustrated modernisers all the way from the Fabian intellectuals Beatrice and Sidney Webb to Tory militarists like Leo Amery, via HG Wells. Their beliefs could be disturbing: they admired Bismarck’s briskly authoritarian school of social reform; Wells even seemed enamoured of the Samurai. They derided parliament as a hackneyed talking-shop, dreaming of a country led by a clear-sighted, efficient few. One of their bright ideas was a government of businessmen. And some yearned for the emergence of a visionary “statesman” who would rise above party, bind the country together, and lead it to renewal. Candidates included the ex-prime minister Lord Rosebery – the man behind a controversial new statue of Cromwell outside parliament – and the proto-demagogic David Lloyd George.
The movement was driven, however, by an insistence that the state should throw off its elegant languor and work hard for the benefit of the population as a whole. Whatever its fantasies, its real impact was often constructive.
The man singled out as national efficiency’s “foremost apostle” by its historian GR Searle was Richard Burdon Haldane. Here was the statesman as efficient progressive: not a Cromwell-in-waiting, but not burdened by inferiority complexes about businessmen either. As he once observed: “But for the State the capitalist classes could not have become what they are.” (When the Webbs and their Fabian allies set up a new magazine in 1913, it was Haldane’s friend Arthur Balfour who suggested calling it the Statesman; the “New” was added shortly afterwards.)
As his biographer John Campbell sets out, Haldane’s statesmanship lay in working quietly to expand, strengthen and modernise the government machine. He helped to lay the foundations of today’s national security state: MI5, MI6, the RAF, the British Expeditionary Force. He also had a hand in the creation of new universities like Imperial College and the LSE, and the elevation of the role of scientific expertise. He pushed for the state to work to better ordinary people’s lives, through enforcing decent pay and working conditions, reforming education – and building houses. And he championed not just the central state, but the local one.
In 1918, he led a committee examining how to improve the machinery of government. Its report warned that making its recommendations work would “depend upon the zeal and discretion with which they are applied from day to day by Parliament, by Ministers, and by the officers of Departments”. These people, after all, were “the living forces whose spirit is essential to any form of government that is more than a machine”.
In the decades that followed, businessmen did often enter government, but generally on the state’s terms. Lord Woolton may have gone from heading a Liverpool department store to serving in the wartime cabinet, but he used his skills to run the rationing system, without feeling the need to put anything out to tender.
That fevered old idea of throwing out the politicians in favour of a businessmen’s government occasionally lurched into view, but was much less successful. In the late 1960s, there was much muttering about how Harold Wilson’s struggling government should be replaced by a “Great Britain Limited” administration composed of industrialists. One of those suspected of involvement was the CBI’s John Davies. But when Edward Heath brought Davies’ management wizardry into government soon afterwards, he was visibly out of his depth. Statesmanship, it transpired, was harder than it looked. It was only after the crises of the 1970s that the idea that business knew how to run everything better finally won out, and the state’s confidence began to fall away.
Today, we have pursued this approach to the point that public trust in the democratically run state is falling apart. In my report, I trace how the orthodoxy of the last four decades developed, and set out ways to escape it, restoring the capacity of the state, and its reputation for being able to improve people’s lives. On housing, the government has begun to reverse the post-1980s norm that the state has the power to block, but it could do more to restore its ability to build, or at least to help make that happen. To hit its target of 1.5 million homes by 2029, it should turn the Ministry of Housing into a mission-driven task force, convening regular meetings with developers, utility companies and local authorities to identify and remove obstacles to delivering developments, and with ministers making bolder use of their existing powers. More broadly, civil servants should win status by delivering seeing projects through to successful completion, not by growing their team or budget.
In rail, energy and steel, the government has moved away from privatisation – but could pull this together into a clear rejection of that discredited old approach, and may finally need to apply that to water too. Government and councils alike are moving away from outsourcing towards bringing services back in-house, but could go further. The updated Whitehall Sourcing Playbook is a step forward – it’s no longer the Outsourcing Playbook – but it still sounds tentative. Where “insourcing” won’t work, Britain has a thriving, impressive social enterprise sector who could be given a bigger role as a partner of the state, as the National Procurement Policy Statement now encourages.
Rather than renewing open, ongoing contracts with generalist consultancies, the cost could be redirected in advance to rebuild civil service capacity, so new contracts are eventually unnecessary, so the state uses our taxes to make itself more effective. And as Jesse Norman’s critique from 17 years ago suggests, it’s past time to restore power to local government – and to restore trust in the professionals running our public services a little more, not hem them in by hopeless attempts to square off every risk in advance.
In its relations with business, the government should assert its power on behalf of the public, raising penalties for tax dodging, and clearly distinguishing between serving the established interests of big players, and intervening to maintain free markets. On regulation, rather than simply giving big business what it wants in the hope of desperately needed growth, it could make a bargain. The state sweeps away unnecessary complexity and risk aversion, in return for readier acceptance by firms of protections for consumers. It could use its considerable procurement budget more proactively to favour businesses that can demonstrate that they pay their taxes, and/or whose approach benefits the public by rejecting narrow shareholder primacy. And it could make it easier for our home-grown tech companies whose products have benefited from public research funding to bid for government contracts.
All of this carries risk, but the alternative is not a cosy status quo. If Labour don’t find a way to remake the case for the democratically-run state, Reform UK is gearing up to transform it in ways might look very different. True, Kruger has been invoking Haldane’s careful state-building, and his plans include sensible ideas, like eliminating duplication, and ending the widely-criticised policy of incentivising civil servants to change job every couple of years, so they don’t continually have to bin the subject expertise they’ve built up. But business remains the lodestar: more performance-related pay, and hard-wiring ‘measurable outcomes into promotion decisions’.
And it’s the less happy tradition emanating from the national efficiency movement – the dream of a businessmen’s government – that seems closer to Reform’s heart. At the party’s conference last September, the New Statesman watched its head of policy Zia Yusuf, ex-head of a luxury concierge company, give an “incredibly arrogant display of how easy politics is”, seemingly without “any clue what it’s going to be like”. The party has talked of emulating Trump’s destructive “Department of Government Efficiency”: the “businessman in government” as nightmare.
Haldane, meanwhile, concluded his illustrious career by joining Labour. If the party wants to follow him in proving that the state really can make life better, it needs inspire officials and politicians to pursue clear, compelling goals, with the zeal and discretion he recommended – without giving up and calling McKinsey. It needs to revive the idea that governing is so high-status and fulfilling, that it’s work you talk about with such verve, that it makes your friends regret going to work in the City. It needs to rediscover statesmanship anew.
Phil Tinline is the author of The Death of Consensus and Ghosts of Iron Mountain. His report for the Future Governance Forum, Power Failure: a new theory of power, is available to download here.
[Further reading: Bonfire of the bureaucrats]
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