Category: Blog

The Cabinet office weighs in as one of the cheapest departments. Its total spend for 2009-10 is an apparently modest £7,500,000,000. £360,000,000 of this is the administrative cost of the place, whilst the bulk, £7,140,000,000, is the civil service pensions bill.

The Cabinet Office employs 205 higher paid employees, and a total staff of 1279 (full time equivalents). It also accounts for the Intelligence Agencies, whose staff have shot up from 8,984 in 2003-4 to 12,633 for 2009-10. Their budget had doubled over the same time period. Let’s leave this on one side, and turn to the really big spending that goes on under the eyes of this department.

If the government had a proper balance sheet, it would show like the company sector the accumulated pension deficit as a liability. The civil service scheme is totally unfunded – there is no money saved to pay future pensions. Along with the other unfunded schemes (e.g. teachers), and the deficits in the funded public sector schemes(e.g. Councils), the total liability is now around £1,000,000,000,000 – yes, that’s right folks, £1 trillion, or more than the £800,000,000,000 of debt the state has acknowledged in the recent borrowing figures. That’s another £1 trillion on top of all that borrowing.

The private sector has long since decided it has no option but to cancel, limit or otherwise modify defined benefit (final salary based) pension schemes. We live in a world where for many access is denied to good final salary schemes these days. Even members of some final salary private sector schemes are finding they are blocked from saving more under them, and may have to agree to a reduction in benefits.The public sector has made far fewer moves to limit the costs. It is true the MPs funded and contributory scheme is now consulting members on how to worsen its terms to cut its future deficit, and there have been some modest moves to reduce costs on the unfunded civil service scheme.

The country cannot afford to go on making these generous promises to new comers. These schemes, like their private sector counterparts, have to be closed to new members. New employees need to be helped to save for a defined contribution scheme, where they will get a pension based on what they and their employer has saved and the investment returns made on the money.

We need to ask if we should go further. One option is to stop existing members accruing extra pension from future service on these terms, and whether they too need to go over to defined contribution saving for the remaining years. As the MP consultation shows, there are numerous ways in which the cost of such a scheme can be lowered. It would be right to consult members of these schemes and seek agreement to changes, based on more affordable levels of employer contribution.

One way to cut future costs would be to agree a higher retirement age. Another help would be to be more careful about granting early retirement, which has become common in parts of the public sector.

The total spending of this department is in the budget at £3,157,000,000 for 2009-10.

The department for the Environment, food and rural affairs, is a dab hand at spending on consultants. Last year its spending on professional services and consultancy reached the height of £573,000,000. This does include Warm Front spending which can do some good insulating people’s homes and cutting fuel bills.. The core department spent £37,000,000 on consultancy and professional services.

Its quangos include Animal health, Centre for Environment, Central Science Laboratory, Government decontamination service,Marine and Fisheries Agency,Regulatory Science Agency, Rural Payments Agency, Veterinary Laboratories Agency, Veterinary medicines Directorate,Commission for Rural Communities, Consumer Council for Water,Environment Agency,Food from Britain, Gangmasters Licensing Authority,Joint Nature Conservation Committee, Natural England, and the Sustainable Development Commission.

It has been criticised for its financial management generally, and especially for its poor management of the single payments scheme for farmers. Over one third of all the claims cost more to process than they were worth. The scheme was much delayed and the error level was high.

The Environment Agency is one of the largest government quangos. It has plenty of senior staff to argue how little resource they have, and to ration the real work it needs to do to reduce flood risk. There appear to be more men and women with pens hiring consultants than there are men in diggers clearing and improving drainage channels.Like many quangos it is good at writing memos, drawing up plans, increasing licence fees at faster rates than general inflation, cluttering the riverside with signs and instructions, and issuing warnings based on risk assessments. This is the body that thinks the way to tackle flood risk is to draw maps showing who is at risk, to put up their insurance premia, and then issue regular warnings when it rains that they might be flooded.

What the public want them to do is to get on with putting in the schemes that would remove the flood risk. Many of thse are small and cheap, entailing some dredging or clearing of existing water channels, or adding a few more land drains . Many would like to see less spent on management and lawyers, less spent on stating the obvious and making up endless risk assessments, and more on practical work to keep people’s living rooms dry. It would also help if they more robust in opposing over development in areas prone to flooding. Many of the flood problems have been brought on or made worse by permitting building on flood plain and water meadow.

The other mixed bag of quangos should be subject to review. We do not need so many of them . Their useful work could be given to a few amalgamated bodies or to elected local government. Which ones would you like abolished?

The Department for Communities (and local government) has an apparent annual total budget of £39,686,000,000 including capital. This, however, leaves out the main financing of schools through the new centralised schools grant, another £23,000,000,000. There are other discontinuities and recharges in the figures which mean the budget does not capture the full picture of local government spending.

The Department’s annual report does not make good reading. Between the department and local government they are making heavy weather of the very centralised target system this government has put in. DSO 3 “to build prosperous communities” has not yet been assessed, which is perhaps just as well in the middle of a recession which is doing lots of damage to prosperity. We are told there is “no progress” with DSO 5 to provide “a more efficient, effective and transparent planning system” . The PSA target to improve the “effectiveness and efficiency of local government” is “not met”. PSA target 21 to “build more cohesive, empowered, active communities” has not been assessed.

Doesn’t it just go to show how absurd all this top down effort to control and direct local government has become? If they want to run everything, why do we pay for Councillors and Chief Officers in Councils to do it as well? Wouldn’t it be better to sweep away the panoply of central targets and controls, and let Councils get on with it? We can always kick out Councillors when Councils don’t perform or waste too much money. When we costed this for the 2005 Conservative manifesto it would have saved £1,000,000,000 of central overhead. It will be much more four years on.

The department has 123 staff earning more than £100,000. It has 75 staff in communications. It spent £54,000,000 on consultancies and interims last year. Councils spend £1,589,000,000 on economic development, on top of the regional and national budgets.

There is considerable scope here for savings at the national level. Individual Councils also need to decide how many corporate strategists, networkers, strategic partnerships and all the rest they really need, as they now have a small army each to talk the talk with the crazy language of Whitehall bossiness, interference ,advice and targets. There are too many box tickers on both sides, so let’s have fewer boxes to tick. We need fewer strategic partnerships and more concentration on each Council’s core functions.

Looking at many a Council’s management structure the viewer is mesmerised both by the very large numbers of well paid senior officers, and by the array of job titles which tell you nothing about what if anything they really do. They need these people to conform to the government’s wasteful and jargon filled view of how Councils should work. If they don’t do it this way they get black marks and lose their stars. Whitehall treats Councils like primary school pupils. Gone are the days when there was a Head of Education, a Head of Social Services, a Finance Head, and a few other sensible titles and roles. Now there are Heads of Strategic Partnerships, Heads of corporate strategy, all sorts of roles for networkers and “business services”. It would be good to hear from you about some of the silly job titles and overlaps in your local Council.

The health department spends £116,900,000,000. £5,500,000,000 of that is on new buildings and equipment, and £12,500,000,000 is on pensions. The new GMS contract has cost an extra £8,000,000,000.

The Health department has an administrative budget for itself and its helpers of £218,000,000. This buys us 2245 staff, including 17 staff paid more than £150,000 a year and 54 staff paid between £100,000 and £150,000. There are a further 3536 staff in agencies.

Beneath the Department are the Strategic Health Authorities. Their budgets run to £6,000,000,000. The national quangos include the Office for Strategic Co-ordination of Health Research, the National Institute for Health Research, the National Institutue for Health and Clinical Excellence, the Care Quality Commission., the NHS Litigation Authority, the Medicines and Healthcare products Regulatory Agency, the NHS Purchasing and Supply agency, the Council for Healthcare Regulatory Excellence, the Health Protection Agency, the National Patient Safety Agency. the NHS business services Authority and the NHS Institutute for Innovation and Improvement!

There should be plenty of scope to amalgamate, streamline and remove bits of all those. The Litigation Authority now has a budget of £1.1 billion. Raising quality would cut the costs of this very large complaints department. Maybe we should ask whether it is wise to have so much litigation against ourselves, as it is our NHS. Wouldn’t it be possible to have a cheaper and simpler Independent Adjudicator who made quicker and cheaper settlement of grievances against the NHS?

When I ran the Welsh Health Service I streamlined the top of the system and saved substantial sums by doing so. For example, I removed the pay twice approach I inherited of having both a Permanent Secretary to the Health department and a CEO of the NHS, by amalgamating the posts and getting rid of one of the offices. I asked the pharmaceutical companies to deliver the drugs directly to the hospitals, to remove the need for an expensive purchasing and warehousing business within the NHS itself. Cutting out central warehousing and a supplies department saved money, cut stocks, and meant the hospitals were using more recent pharmaceuticals. We still got the drugs at the same prices.

The drugs bill is large, amounting to £8,000,000,000 for GP prescribed drugs and £3,500,000,000 for drugs in hospitals. We do not want to deny people drugs they need, and may need to add a few more to the list. What we also need to do is to cut down the waste which comes from overpresribing or prescribing to people who do not want to take them all. We need infection control systems which rely more on thorough cleaning and less on drug taking in hospitals. We need to use good generics where possible. We need to remove waste that comes from having to throw away out of date medicines from stock.

We need to ask whether we require such top heavy administrative systems as we currently have with Strategic Authorities as well as PCTs.

The Department for Work and Pensions presides over the biggest budget by far, and unfortunately the fastest growing one, owing to rising unemployment. It is a huge clerical factory, employing 100,380 staff to give out a wide range of different benefits to a large number of people. There are another 12,000 staff identified as helping with these tasks but now accounted for elsewhere in the public sector.

My experience of managing industrial plants tells me two things. You need to manage quality well, and to keep morale of staff high. If you see the error rate rising too far you have problems. You need to improve your systems, upgrade your equipment, and idiot proof your processes. You need to involve and motivate your staff, and get them to buy into doing things right first time, taking a pride in a job well done. It needs to be worth their while. To be world class these days you aim for an error rate of 100 parts per million. I would be seriously worried about anything above 500 parts per million. If sickness and absence rises above 3 days per staff year in the offices you have a morale problem.

At DWP the apparent error rate has come down a lot, but is still a massive 6000 per million transactions. The absence rate is 9 days per staff year. In other words, the taxpayer pays for almost a million staff days when employees do not turn up. Some are genuinely sick and deserve their break. It is unlikely, however, that sickness rates across such a large workforce can be so high compared to private sector organisations without there being something wrong with the culture and incentives.

In 2008-9 the department spent around £100,000,000 on external consultances, and a total of £174,000,000 on external consultancies, temps and interims. This is far too high for comfort. The existing staff should know how to run the place better. The senior management and Ministers should try asking them and engaging with them, rather than calling in so many outsiders to reorganise. They might also get a bonus with more of the staff coming in for more of the working days, reducing costs further. If absence fell from 9 days to 4 days, that gives the taxpayer an additional 500,000 days of work each year, or a saving of around 2000 staff.

The department does not fail to spend on IT. That budget should be better used to idiot proof, streamline and improve systems. The current budget runs to £873,000,000. You could probably do it for less in this climate and get more out of the enhancements.

The best cut of all will be in getting out of work benefits down by getting more people back to work. Welfare reform is an urgent priority. We need to tackle this before it overwhelms us and the public accounts. The total budget of £156,648,000,000 includes £50,000,000,000 in benefits for people who are out of work. This is rising alarmingly. Clinton style reforms worked well in the States. What has been stopping reform here?

In 2010-11 the government is planning £35 billion of cuts as part of a value for money programme. After years of telling us all public spending was sacrosanct and there is no waste, in more recent years the government has come round to the view that there is considerable scope for reductions in spending to improve efficiency. These Labour cuts have not received enough attention.

The Health department is to find £10.5 billion of them. Ideas include shorter stays in hospitals for patients, lower prices for pharmaceuticals, more efficient back offices and sharper buying of other supplies.

At Education there will be £5.14 billion of cuts. Each school is to find a 1% efficiency cut, whilst the quangos have to find 3%.

Local government has to find £5.5 billion.

The MOD has a disproportionate requirement to cut £3.15 billion, a far higher percentage of its spending. The government proposes a mixture of manpower and purchasing savings.

Transport is to cut £1.96 billion. Ideas include less grant for Network Rail and more efficient procurement.

A hefty £1.94 billion is to be saved by FE and HE, through a mixture of less administrative cost, better buying and delay in offering grants. The FE capital programme is an early casualty and presages general cuts in capital spending elsewhere.

The Home Office has to find £1.69 billion. The police are to use more technology to save police time, whilst the Borders Agency is to use iris and facial recognition to cut costs.

The Ministry of Justice weighs in at £1.08 billion, and the Revenue departments at £788 million through general efficiencies.

Work and Pensions can only manage £1.4 billion despite being the big spender. This is to be delivered through better staff efficiency.

I welcome the government’s conversion to the view that efficiency, quality and productivity can and should be raised throughout government. The dangers are twofold. One, the government will not deliver as promised. Two, the base figures for spending are so inflated that the targets are in some cases too low.

The gap between the best of the private sector and the worst of the public sector is collossal. The gap between the private and public sectors’ average performance is big. We need more demanding targets for improvement, and more Ministerial involvement in delivery.

Over the next few days I will be looking at the main departmental budgets. There needs to be a proper review of all departmental spending, to find more economies more quickly, before the debt mountain crushes us.

When I was a lonely Parliamentary voice saying do not nationalise big banks because the taxpayer could lose too much money, the government told us they would make money on the transaction. I said lend them as little as you could get away with for as much security as possible and make them cut costs and raise capital.

Now we learn the Treasury thinks the two they bought could lose £77,000,000,000. That’s twice the annual defence budget, more than the education budget. That money would be lost by us, taxpayers, as we own a majority of the shares of the banks that might lose it.

That’s money we cannot afford to lose. With a deficit like the present government one, the last thing we need is banking losses on top. What a disaster if they lose anything like that much. The banks should be made to cut costs and sort their businesses out more quickly to stop that happening.

Parliament has broken up for an 82 day recess. Yes, 82 days off. There is no Parliament to go to until the second week of October. It’s the wrong decision by the majority, at a time of crisis in the public finances and a time of economic problems generally.

Some Labour MPs say they do not think people should be part time MPs. Maybe they should explain that to the Foreign Secretary, who told me in answer to a question about a week in his life that he spent 81 hours of the week on his second job as a Minister, leaving it quite tight to do a minimum 40 hours as an MP.

They should also explain to me how any MP can do a good full time job when there is no Parliament to go to for 17 weeks of the year. Yes, there are letters to answer, cases to take up, and people and institutions to visit. They can be fitted in to a busy Parliamentary day.

If any organisation in Wokingham would like me to visit or has something they want me to take up, August and September is a good time to do it, as my main job has been taken away for those months. The government can get up to what it likes and we have no opportunity to question and probe, or to get them to change their minds.

The truth is MPs are very busy on those minority of days in the year when Parliament meets for the day and the evening, and when there are many other meetings grouped at Westminister that are important to constituents. An MP just has to knuckle down and work through for 15 hours or so to get the most out of it. When Parliament is not in session there not only is Chamber to attend, questions to ask and contributions to make to debates, but all the behind the scenes meetings, meetings with people wanting to brief us and other events dwindle or disappear as well.

Labour have failed to make the Commons family friendly in its hours, and now prevent us doing our job for 12 weeks at a stretch. When there is no Parliament sitting, it’s not half the job. All I can do is write letters to Ministers. It’s not the same as meeting them daily and challenging them acorss the floor of the Commons.

Yesterday the government was in a hurry to get rid of all remaining business, so it can govern for 82 days without a Parliament to answer. In the process it can lead many to ask the reasaonable question, why can’t our MPs do their main job until well into October? The government used its majority to ensure the Commons had too little time yesterday to deal with the outstanding items, and to send us away for a long time.

Before we went the Speaker wisely granted an Urgent Question on the topic of Equitable Life. It has been the only sign of urgency around an issue where the government has dithered and delayed for all too long. The urgency was to follow up a government promise of a Statement on what compensation it was proposing before the summer recess.

The Chief Secretary to the Treasury gave a pathetic performance. He told us again that the government accepts many of the Ombudsman’s findings of maladministration by the regulators, yet it refuses to offer compensation. Instead he suggested some ex gratia payments to those who have lost out most.

Several of us asked for a deadline for the development of the scheme and for the payments under it. I also asked for some idea of how much would be paid on what basis to the losers. The Minister would not answer any of these basic and simple points.

This most profiligate and spendthrift of governments does at times combine being mean with a dogged determination to do the wrong thing. In the week of the helicopter shortage we witnessed that same lethal combination yesterday over the Equitable Life victims. Even Labour MPs looked astonished at the government’s insouciance, and told the Minister to get on with it.

When I was the Minister in charge of financial regulation, I inherited the Barlow Clowes mess. The findings of the Ombudsman in that case were clear – the regulators had failed. I did not hesitate. We compensated the victims at taxpayers expense, even though the last thing I wanted to do was to increase public spending for the sake of it. I felt we had to, as people had relied on regualtion and it had let them down. It is equally clear in the case of Equitable Life. What is the point of all this regulation, if when it goes wrong the government just walks away?

Yesterday it looked as if the government is happy for more delay, so more people will die who have lost money in this disaster. They looked like a government waiting for an election. I would love to be proved wrong, but I predicted they will not make a single payment before we go to the polls. The Minister did not protest at this. It felt as if the idea of ex gratia payments is just to get them through the Parliamentary embarrassment, and it did not even succeed in doing that very well.

Yesterday in a masterly act of self parody, the government put forward its Child Poverty Bill. Let me share with you its first two clauses, which set the tone:

1. It is the duty of the Secretary of State to ensure that the following targets are met in relation to the UK in relation to the target year –
a) the relative low income target
b)the combined low income and material deprivation target
c) the absolute low income target
d) the persistent poverty target
The target year is the financial year beginning with 1 April 2020

2. The relative low income target is that less than 10% of children who live in qualifying households live in households that fall within the relevant income group
For the purposes of this section, a household falls within the relevant income group …if its equivalised net income …is less than 60% of median equivalised net household income…

So here we have it. The government legislates to ensure a future government abolishes poverty, something this government has singularly failed to achieve.

If an Act of Parliament with a few targets in it can remove poverty, why didn’t Labour do it years ago? This was just another political press release masquerading as an Act.

Mr Brown hoped the Conservatives would oppose it. Then he could claim they did not care about child poverty. If they accepted it, he or his successors could use it to criticise Ministers in ten years time for failing to hit the targets.

I trust it will be much criticised in committee. Yesterday Miss Cooper was in her best answer no questions mode, turning every request we made into an anti Tory soundbite. She made it clear this is legislation as political stunt.

As the Conservatives pointed out, the issue is parent poverty. The solutions are many and complex, revolving around a back to work culture.