“You too can quango”

We are lucky today to have a copy of Dame Lucy’s reply to Dr Spendlove:

Dr Roy Spendlove

Division for Miscellaneous Projects

Whitehall SW1

Dear Roy,

             Thank you for your letter. You seem to be doing excellent work to ensure full compliance with best practice and world procurement standards. I do think you are right to wish to introduce real terms adjustments into your appraisal of past apparent cost overruns on projects. I am glad to say Whitehall thinking has pressed on rapidly in the last few months in this very area.

          Firstly, you should study carefully the improved presentation we adopted for total current public spending. As you know, some outside commentators  have foolishly suggested the overall apparent cash increase of 15% or £92.5 billion a year is the significant figure over the five years. Ministers have been right to equate this to 25% cuts, taking year 5 compared to year1 and adjusting it for public sector forecast inflation and concentrating on DEL spending rather than AME spending. They were also right to exclude the ring fenced areas of Health, EU,  Overseas Aid and Pensions. Leaving in areas of spending that are going up as a result of policy decisions would clearly distort the overall figures, especially when they are large areas.  I think we may have underdone the inflation factor, but we had to allow for a possible pay freeze in years 2 and 3.  We also assume, of course, that the pay freeze relates only to rates and will still permit seniority and responsibility enhancements to avoid the bad effect on morale of an actual  cash freeze in  pay. We may also need to tweak the bonus system for presentational reasons, but keep it to reflect all the extra stress and work the cuts impose.

          Secondly, you are right that capital projects have their own extra inflationary pressures. I like your idea of linking the true price to  SDRs to get away from the weaker pound. Linking to gold might be even more helpful and realistic, given the recent performance of the gold price as a true store of value in a world of depreciating paper currencies. Ministers might like a gold base, as some outside might unfairly remember the previous government’s gold sales, but that of course is not a proper consideration for us and should not be used in emails or public  correspondence.

          I think it most important that you include the Contingency allocation in the base cost, as that was always there to allow for the very drift you are concerned about. It may also be necessary to adjust Contingencies upwards. Indeed I would ask your Division to review all Contingencies retrospectively and suggest to Ministers upgrading them all to avoid future embarrassment. I am sure no Minister in this climate would want to report a cost overrun to Parliament, and with the new transparency rules the overruns may be clearer sooner should they occur.

          I will be shortly sending out further guidance to all departments on Quangos. As you know there has been some suggestion we have too many. I do not think we should fight this notion. There is a lot to be said for assimilating more of them into Whitehall. It will give us more direct control, and will allow more flexibility over job titles and remuneration levels than we have been used to in the core service. We should willingly help implement a policy of fewer quangos whilst ensuring the much good work they do is retained. I hope improving our grip over quangos will also allow more of the honours that were kept for quango Chairmen to be available for hard working senior officials who have undertaken to do this work. It will also make it easier to justify pay comparable to private sector levels for tasks that previously were performed by quango heads. We should tell Minsiters to claim that the aim of the reform is improved accountability, which we can deliver to our own special standards through taking possession of the information.

            I think you also study the rear end loading of some of the cuts in public spending. There are some which we advised against which ended up in the 2013-15 period in the final figures. I have always found that past governments become less keen on fiscal stringency the closer an election comes. I strongly suggest that anything you need to sacrifice should be surrendered for the outer years of the five year plan. That will leave Ministers more time to come to see the advantges of what we do and how we do it in good time before any irreparable damage is done.

           I am finding that this new approach is very helpful insofar as I have much less to do recruiting more people for additional quangos. I fear you are right we will need more translators for our Overseas Aid and Trade strategy. I will see if I can spare a few people to work out a proposal for a new capital projects tender translation service to support your excellent work.

          You should also remember that the EU is our friend and longstop. There is usually a Directive or Council requirement to cover most of the things we need to do and keep. We are under a duty to report non compliance to Brussels for enforcement. You should of course warn Ministers when they are in danger of straying outside their permitted area of decision that there could be infraction proceedings. I think you should anyway check the question of tender documentation with UKREP to make sure we have not slipped up and to stress to Ministers the very real constraints we work under.

Yours

Lucy

Dame Lucy Doolittle

Director

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12 Comments

  1. lifelogic
    Posted November 6, 2010 at 7:21 am | Permalink

    This might be funny if it were not so depressingly close to reality. The truth of the matter is that the only way time state UK spending will actually be reduced is when it gets to such a point that it is killing the private sector whose sap it steals (and it cannot borrow any more either).

    The UK is thus condemned to be like a small, withering tree with a huge fungus growth sucking nearly all the life from it. A position made even worse by endless tree leaf size directives, branch hight and diameter directive and restriction thereof. The voting system and the EU has rendered voters virtually powerless to change matters.

  2. norman
    Posted November 6, 2010 at 7:44 am | Permalink

    These missives (I do realise they are not based on actual letters but must have been influenced by an experience of many years spent in the highest levels of government) really do show the difference between spending other peoples money and spending your own.

    We all primarily look at how we can save money in straitened times; the attitude presented here is the exact opposite – how to protect, and even increase, the money available to spend.

    Let’s hope the current crop of ministers have the skills to actually see proposed cuts become reality.

  3. Bill
    Posted November 6, 2010 at 9:04 am | Permalink

    brilliant!

  4. StrongholdBarricades
    Posted November 6, 2010 at 10:13 am | Permalink

    Meanwhile in the real world the politics of the last decade are still awaiting final settlement.

    There is much talk in the markets, after the last round of intervention by Ms Merkel, that the lower PIIGS are about to default.

    I am left wondering what economic impact that this will directly have upon the UK with a very thin border between it and one of the possible defaulters. The fallout has already reduced economic prosperity in Ireland, and the differences between North and South are once again stark.

    It has been said that these PIIGS need to “exit” the euro.

    Is there a way that the UK can intervene with Ireland’s debt that allows it to continue to function within its european identity, but also dump the euro? Will this minimise any social unrest and economic migration that is highly likely if the Irish economy is truely “flushed away”.

  5. Acorn
    Posted November 6, 2010 at 10:17 am | Permalink

    Excellent JR; more of this style of commentary please.

    Please may I stretch your editorial policy a little? A couple of posts back, I mentioned that we should not confuse “solvency” with “liquidity”. Particularly in terms of the affects of quantitative easing. The following link is the best explanation of the “Keynesian Liquidity Trap” I have read and makes it obvious why all Socialists eventually fall into this trap.
    http://www.hussmanfunds.com/wmc/wmc101025.htm

  6. Magnolia
    Posted November 6, 2010 at 10:25 am | Permalink

    Dame Lucy’s not quite up to speed on the frozen pay bonus enhancements practice because this year The Advisory Committe on Clinical Excellence Awards (ACCEA), which operates under “fair and uniform criteria” has approved only 317 awards compared to 601 the previous year and approximately 550 for each of the previous three years, because of “less retirees and Department of Health financial constraints”.
    The noble Dame will be shocked to learn that it is therefore likely that doctors who failed to gain an award this year will be working alongside collegues (at a similar or lower level of performance) who will nevertheless be paid perhaps tens of thousands of pounds more each year because said collegues were lucky enough to apply for clinical excellence awards in bountiful years. It will confirm her belief in ‘more of the same’ being preferable to ham fisted scissor policy.
    She might also like to ponder on the protected pay rights of those bonus enhanced state employees who no longer ‘work their bac***des off’ but rather sit on said ‘rumps’ in the private hospitals working for others (themselves) while at the same time being very properly and legally rewarded for their ‘expertise’ by our fine government.
    She might conclude that here is an opportunity to keep on spending on health spending ‘in the interests of fairness and to comply with EU and national employment law’ and it would be a wasted opportunity for ‘doing little’ to let such useless concepts as common sense and moral hazard to get in the way of any chance to just ‘carry on with carrying on’ particularly as it would be most shocking and upsetting to ‘just scrap it all and start again’ and moreover too costly (to her and the government) in these ‘financially stretched’ times.

  7. Brigham
    Posted November 6, 2010 at 10:58 am | Permalink

    Both pseudo letters should be required reading at the next cabinet meeting. You had better tell them that they are not real, as you might get a call from plod to see how you obtained the leak. I say that because anyone that thinks they can get away with putting personal staff on the country’s payroll, and thinks that an increase of 2 odd% to an organization that has not had it’s finances signed off by it’s auditors for 10 years or more, is a victory, is not fit to hold any position of power. How can our government get so out of touch in such a short time.

  8. JimF
    Posted November 6, 2010 at 1:28 pm | Permalink

    Yes perhaps your correspondent might consider linking her currency to the supply of paper of sufficient quality to print £50 notes, or if feeling competent in the digital world, to the number of digits available on HMG money transfer monitors.

  9. REPay
    Posted November 6, 2010 at 3:08 pm | Permalink

    These memos show how crushingly awful the government is at PR, despite having so many practitioners in its ranks. The BBC and most media accept the Doolittle facts. I dealt with Central Office during the election – the Tamsin Lightwater spoof was uncomfortably near the mark! Do our MPs understand the truth and are just playing to the gallery. I fear many are so poorly educated and informed that they believe the Doolittle version. I see how this would benefit Labour but not the Coalition! I live in the US and while the Tea Party has whacky elements it is refreshing to see people asking for less not more government spending. The latter is trhe European default.

  10. Hugh
    Posted November 6, 2010 at 3:22 pm | Permalink

    And tomorrow John, please can we have your explanation para by para of just what these two wallies are talking about. Comments pithy and funny to be placed alongside.

  11. Iain Gill
    Posted November 6, 2010 at 5:13 pm | Permalink

    I must say I’m on Price Andrews side

    The MOD are useless

    Ask the supplier for a few trial samples of the new armoured personnel carriers and get them out in Afghanistan, its not rocket science is it? Whether we can afford them or how to deal with the procurement bureaucracy is a big second place.

    I must say centralising procurement as per Top Shop is unlikely to solve poor practises like this.

    What we need are staff in the civil service who have done proper jobs, not spent their entire life in that ivory tower.

  12. Frank Salmon
    Posted November 7, 2010 at 2:59 pm | Permalink

    John
    This is uncomfortably near the truth. The failure to control these expenditures will rebound on us in 2015 when we have to stop borrowing and start paying back. How can the private sector thrive amid greater taxation, increased red tape and ever more demanding employment regulation? For my money, we hit the buffers in 2015.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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