ukcivilservant

Articles about the UK Civil Service and Regulation

Should I Stay or Should I Go? (2)

This is the second of two blogs exploring the circumstances in which a permanent civil servant might be driven to offer their principled resignation.  The first blog looked at resignations triggered by government that had become over-authoritarian.  This blog looks at resignations of those who feel that their (non-authoritarian) government’s systems have begun to break down, or felt that they themselves could no longer operate effectively and/or ethically.

There are of course plenty of frustrated ministers in non-authoritarian governments, embittered by constant criticism and questioning from the Opposition, from the media, from the Lords, from lawyers, and from sceptical civil servants.  It is hardly surprising that they sometimes respond by trying to bulldoze policies through, and hiding the fact that they are doing so.  It is in consequence hardy surprising that their officials are often unhappy, and sometimes asked to behave unprofessionally.  What are they then to do?

Some do resign.  Richard Haviland, for instance, has recently released his resignation letter which stresses that his decision was ‘based not on Brexit, but on what has ensued from it [including Theresa May’s] refusal to be honest with the British population about the implications of [her post-referendum policy] choices’. 

In most cases, however, the resignation decision is taken out of their hands.  Dissenters will typically begin by politely refusing to acquiesce in dubious policy decisions, and/or gently challenging what they are being asked to do.  But their dissent will be noted and – unless strongly backed by their bosses – their ‘corridor reputation’ and hence promotability will be negatively impacted.  They will  – rather sooner than later – find themselves in jobs where they ae no longer (in the view of their permanent secretary) rubbing ministers up the wrong way.  And if they are themselves permanent secretaries they will find themselves out of a job  – accompanied by a good deal of taxpayers’ cash, as happened to quite a few of them following Prime Minister Johnson’s appointment.

It is rather harder to sideline or dismiss someone who questions the very legality of a government policy.  It is therefore no surprise that Alexandra Hall Hall points to the example of Carne Ross who resigned from the British Foreign and Commonwealth Office in 2004, after giving then-secret evidence to the Butler Inquiry — a review set up by the British government to examine the intelligence on Iraq’s weapons of mass destruction. He had concerns about the legality of the basis for war, that the case for war was being exaggerated, and that no serious effort was being made to explore alternatives to war. In his written testimony to the Butler Inquiry, he wrote:

Alexandra’s next example is another lawyer.  Elizabeth Wilmshurst, former deputy legal adviser in the Foreign and Commonwealth Office, also resigned over Iraq, in March 2003. Her resignation letter made her reasons clear: “I regret that I cannot agree that it is lawful to use force against Iraq without a second Security Council resolution to revive the authorisation given in SCR 678.” She noted that this was in contravention of the advice that her office had consistently provided. Although she made clear her readiness to resign, Wilmshurst sought and was eventually approved to take early retirement instead.

However, not everyone who feels conflicted over government policy chooses to leave. Some make the decision to stay, and try to be a force for good from within.  Alexandra Hall Hall quotes ex-US Ambassador Volker who does not think it is appropriate for civil servants to resign simply as a way of protest:  He reserved his strongest criticism for those whom he believes tried to undermine the Trump administration from within, because in his view that only exacerbated distrust and fed the narrative of the existence of a deep state. “The only reason to resign is as a matter of personal choice. It’s not about changing the world but whether in good conscience you can continue what you are doing. The U.S. and U.K. are democracies, and the people who are elected have the right to decide. They have the right to make policy. If you don’t like it, that’s your issue. You can express yourself and have a clear conscience, but you can’t expect it to change policy.”

As well as lawyers, UK Diplomats and overseas development officials seem to hate being asked to talk nonsense or tell lies – at least when the lies are easily exposed  The dismissal of UKRep’s Ivan Rogers, for speaking truth to Prime Minister Theresa May is an excellent example, as is Alexandra Hall Hall’s own resignation.  Here is her account of it:

  • ‘It is noticeable Indeed, for most of my time as a British diplomat, I felt proud about how our system functioned. The working culture in the Foreign and Commonwealth Office encouraged different opinions to be aired and disputes to be thrashed out openly … This approach not only ensured that the minister received rounded advice, but was also, in my view, a necessary safeguard to protect officials from being accused in retrospect of having suppressed vital information or having failed to provide alternative options. If all the information and choices were presented in good faith, a minister could not argue later that he or she was blindsided or try to blame officials for the consequences of his or her decision.
  • When I was asked to brief American businesses with significant investments in the United Kingdom, I found myself struggling to maintain the line that there would be no harmful consequences for them, even if the United Kingdom left the European Union without any deal at all. I found it hard to brush aside the concerns of congressional aides working for members of the Irish-American caucus. Sometimes I had no answers to the questions that U.S. stakeholders posed to me. The internal dissonance became acute: The professional ethos of the British Diplomatic Service was that we were upstanding civil servants, steeped in integrity, who never told lies. And yet, that was precisely what I was being asked to do.
  •  But when I relayed back to London that the talking points needed changing, or tried to persuade British ministers passing through Washington of the need for more compelling arguments, I had little success. A few officials in London agreed with me, and for a while we chipped away to tighten the points here and there. But eventually we reached the limit of what could be achieved. Colleagues told me that the prevailing atmosphere in Whitehall meant that all civil servants had to be “on message,” and that any points which did not comport with ministers’ preconceived notions were simply rejected. One colleague working on Northern Ireland was nearly in tears as he told me how he simply could not get his minister to register the enormous damage that would be done to the fabric of Northern Ireland, politically and economically, if the United Kingdom left the European Union without a deal. A low point for me was when I heard a senior British minister openly and offensively, in front of a U.S. audience, dismiss the impact of a “No Deal” Brexit on Irish businesses as just affecting “a few farmers with turnips in the back of their trucks.”
  • With the public messages still containing several egregious distortions, in September 2019 I decided to submit a formal complaint to the Foreign and Commonwealth Office, identifying the specific points where I felt they had violated the civil service code of integrity and political impartiality. This had a stronger effect: I received a reply a few weeks later, telling me that the process for approving the talking points had been changed, to ensure that a career civil servant, not a political adviser, was the last person to sign off on them before they were distributed to embassies.
  • But although this resulted in the official talking points improving a bit, it did not stop the prime minister and other members of his cabinet from continuing to use the old lines, with their distortions and inaccuracies. When I briefed American audiences using the new messages, the first question would always be why the prime minister was saying something different, to which there was no easy comeback. What I was saying was not convincing to me, and no matter how I spun it, it was not convincing to my audiences.
  • But in the end, my decision to leave was more personal. The internal conflict over what I was being asked to do simply became unbearable.

The Effectiveness Trap

Finally, let’s return to the essential question:-  Can an unhappy official achieve more by leaving, perhaps with significant publicity, or by staying, and seeking to improve things from within?

James Thomson famously described ‘the effectiveness trap’ in his analysis of the disastrous Vietnam War – How Could Vietnam Happen? – An Autopsy – and it makes for both entertaining and sobering reading: The effectiveness trap is …

  • … the trap that keeps men from speaking out, as clearly or often as they might, within the government. And it is the trap that keeps men from resigning in protest and airing their dissent outside the government. The most important asset that a man brings to bureaucratic life is his ‘effectiveness’, a mysterious combination of training, style, and connections. The most ominous complaint that can be whispered of a bureaucrat is: “I’m afraid Charlie’s beginning to lose his effectiveness.” To preserve your effectiveness, you must decide where and when to fight the mainstream of policy; … . The inclination to remain silent or to acquiesce in the presence of the great men – to live to fight another day, to give on this issue so that you can be “effective” on later issues – is overwhelming.

Former FBI Director James Comey also summarised the problem very well:-

  • It starts with your sitting silent while [President Trump] lies, both in public and private, making you complicit by your silence. In meetings with him, his assertions about what “everyone thinks” and what is “obviously true” wash over you, unchallenged …  because he’s the president and he rarely stops talking. As a result, Mr. Trump pulls all of those present into a silent circle of assent. … I must have agreed that he had the largest inauguration crowd in history because I didn’t challenge that. Everyone must agree that he has been treated very unfairly. The web building never stops. From the private circle of assent, it moves to public displays of personal fealty at places like cabinet meetings. While the entire world is watching, you do what everyone else around the table does — you talk about how amazing the leader is and what an honor it is to be associated with him.

Mr Comey presumably has some sympathy for Dr Deborah Bix who was forced to sit, looking down at her shoes, whilst President Trump suggested that Americans might inject bleach in order to treat COVID-19. Others, however, were not so forgiving and argued that she could have saved hundreds of thousands of lives if she had stood up to the president during the pandemic’s first surge.

So you are well and truly trapped.  A pathetic courtier if you stay.  A hypocrite if you eventually leave.

Martin Stanley

Author –  Speaking Truth to Power   and   How to be a Civil Servant

Should I Stay or Should I Go?

I apologise to Alexandra Hall Hall (and The Clash) for recycling the title of her recent paper (which is well worth reading in full) analysing the circumstances in which a permanent US or UK civil servant might be driven to offer their principled resignation.  This is the first of two blogs that build on the discussion in her paper.

Alexandra resigned from the Foreign Office because she felt that she was asked to lie about the likely consequences of the UK leaving the EU Single Market and Customs Union.  Her second  paragraph will resonate with every public servant that has considered resigning because they are unhappy with what they are being asked to do.  In it she draws a helpful distinction between resigning because you do not agree with a policy, and resigning because you believe that a policy is unethical or even illegal.

  • My resignation came after many months of internal struggle. As I agonized over my decision, I grappled with many of the same dilemmas that have faced other public servants, in both the United States and the United Kingdom, when tasked with implementing a policy with which they do not agree, or that they consider unethical or even illegal. Is our primary duty to the elected government of the day, even when it may be breaking the law or wilfully deceiving the public? Or is our duty to some broader notion of the “public good”? If the latter, how is that to be defined, and by whom? If we stay silent in the face of wrongdoing, do we become complicit ourselves? But if we speak out, are we breaking our pledge of impartial service to the government of the day and undermining the foundation of trust between politicians and officials? If we resign, do we let down our colleagues and institutions? Do we merely allow others with fewer scruples to fill our shoes? But if we stay on, are we knowingly violating our duty to provide ethical public service to our fellow citizens?

Later, she adds this:

  • There will always be ambiguity — because who is to determine what is unlawful, unconscionable, or unethical? There will always be a different point of view. In many cases, the government may not actually be breaking the law, but nevertheless is acting in a manner which wilfully deceives the public over the true nature and consequences of its policies. Arguably, civil servants, in such cases, have a duty to speak out to ensure the electorate has the facts, but this runs the risk of civil servants being perceived as being political, or as trying to influence an election.
  • In such circumstances, where doubt will always exist and criticism is almost certain, the only viable solution for a conflicted civil servant is to be accountable to themselves. Ultimately, the decision has to come down to a matter of personal judgment and conscience. As I put it in my own resignation letter, “each person has to find their own level of comfort.” You don’t have the right to change policy — that is for elected politicians and the ultimate verdict of voters. But you do have a right to your own personal conscience, and a right not to be a part of something you believe to be unethical.

Edging Towards Authoritarianism?

Let’s now look at the second of Alexandra’s categories:- resignations in protest at unethical/illegal policies. 

Stefan Czerniawski offered a fascinating analytical framework in Civil Servants Civilly Serve in which starts by considering the boundaries to the legitimacy of politicians’ decisions.  He then considers how civil servants might respond if and when previously legitimate governments develop clear authoritarian tendencies. 

Here are some extracts, with emphasis added:

  • ‘There is a simple answer, which is to carry on regardless. That is the answer still being assumed, based fundamentally on the idea that the government remains the government until it stops being the government and that, for as long as it does so, it is not for the civil service to look behind the formalities of its continuing existence or to question its authority.
  • That position has some attractions: we don’t want to be in a world where the civil service takes it on itself to decide whether it likes a government enough to be prepared to work for it. But there is also a profound weakness  … There is no shortage of examples, historical and modern, of states which have kept the forms of democratic government while edging towards authoritarianism. The difficulty is that when those forms fall away, it’s generally too late to do much about it. Before that point, though, there is inevitably judgement and ambiguity, with a very understandable temptation to see the continuity of what is legitimate and fail to see the discontinuity to what is illegitimate.
  • What should civil servants do if those boundaries are reached and crossed? In principle the answer to that is simple. At the point any civil servant judges that the democratic legitimacy of ministers has broken down, they must also accept that their ethical authority has also broken down. Whatever a civil servant does after that, they do as an independent moral agent, personally responsible for their decisions and actions. They may nevertheless choose to continue, accepting that responsibility. Or they may choose to walk away.
  • The institution, of course will remain. Authoritarian governments have civil services, just as democratic ones do. But the surface form hides a profound difference. In such a civil service, loyalty is ultimately to the holders of power, not to the idea of good government, and the consequences are very different. Those who choose to be part of them are choosing to accept those consequences. 

Examples … are thankfully rare, at least in the US and UK.  But I would  put Jonathan jones’ resignation in this category.  He was the chief civil service lawyer who resigned in September 2020 over the government’s announcement that it intended to breach international law “in a limited and specific way”.  Interviewed later he said that his view, aside from the legal principle involved, was that the approach was “completely bonkers and hugely damaging, for the policy and the negotiations …   the government… was utterly disreputable [in] saying publicly that it was prepared … to break the terms of the treaty which it had concluded and indeed, implemented into UK law only months before. That seemed to me to be disgraceful”.

He said in a subsequent interview that he was “perfectly satisfied that I did the right thing by me, and I did what I had to do.” However, he adds, “I never, for a moment, tried to persuade anybody else that they should go. Plenty of people provided moral and personal support but in the end, this was a highly personal decision for me, and others took their own decisions. Because the business of government has to go on.”

Will there be more resignations?

Are we (applying Stefan Czerniawski’s test) approaching the point at which the democratic legitimacy of UK ministers has broken down?

There are plenty who think so.  This is not because of the Brexit referendum result.  Most policy officials accepted it, reluctantly or otherwise.  And many civil servants looked forward to working on the hugely demanding policy questions that arose as a result, even if ministers refused to authorise sufficient Brexit planning and preparation despite it obviously being needed since Mrs May’s red lines in January 2017.

However … many from across the political spectrum have recently been able to point to some very worrying signs of authoritarianism, most obviously in the government’s disdain for Parliament, rational decision making, and the courts.  

  • Former Conservative Chancellor Ken Clarke is reported to have said that the UK is “dangerously close” to becoming an “elected dictatorship”. 
  • Peter Oborne’s  The Assault on Truth  and Peter Stefanovic’s video of Mr Johnson’s ‘rampant lying’ in Parliament provide plenty of worrying evidence. 
  • Others point to investigations by Byline Times & the Good Law Project, amongst others, which suggest that fast track VIP contracts for focus group testing and PPE equipment look ominously corrupt, even allowing for need for speed during the Covid pandemic. 
  • Yet others reference Hannah Arendt who studied authoritarian leaders and concluded that they “did not think”. This did not mean that they lacked conscious awareness of their actions, but that they were incapable of the “thinking” that involved reflective rationality.
  • Historian Richard J Evans points out that ‘democracies die when politicians give up on their own parliaments’ and that ‘By proroguing [Parliament], Johnson signals his contempt for MPs’.
  • Two important Lords committees have published reports respectively entitled Government by Diktat: A call to return power to Parliament and Democracy Denied? The urgent need to rebalance power between Parliament and the Executive.

Here is a smaller but telling example.  It received very little publicity, but I was surprised and troubled  to read that it took six years before barrister ‘Aidan Eardley, for the Home Office, told a court that:

  • “I can confirm that the Government accepts that it was wholly false to allege that Dr Butt is an extremist hate preacher who legitimises terrorism and therefore someone from whose influence students should be protected.  It is sorry for the harm caused to him and in particular for the fact that the allegation was made and maintained for so long.”

He added that Home Secretary Priti Patel had agreed to join the statement apologising to Dr Butt and paying him compensation. 

This behaviour was surely unimaginable even a few years ago. But no-one has resigned.

The second blog on the subject of resignations is here.

Martin Stanley

Author –  Speaking Truth to Power   and   How to be a Civil Servant

Note:- The Law

Statute law and convention both require the civil service to serve the administration as it is duly constituted for the time being, whatever its political complexion, and whatever its behaviour. They preclude any internal opposition to government policies, leaving dissenters with only the right to resign.

Civil Servants’ duties etc. are summarised in The Armstrong Memorandum, the Constitutional Reform and Governance Act 2010 and the Civil Service Code.

The Armstrong Memorandum says that:

  • Civil servants are servants of the Crown. For all practical purposes the Crown in this context means and is represented by the Government of the day. … The Civil Service as such has no constitutional personality or responsibility separate from the duly constituted Government of the day.
  • The determination of policy is the responsibility of the Minister (within the convention of collective responsibility of the whole Government for the decisions and actions of every member of it). In the determination of policy the civil servant has no constitutional responsibility or role distinct from that of the Minister.

The Constitutional Reform etc. Act provides that

  • there should be a Civil Service Code which “must require civil servants … to carry out their duties for the assistance of the administration as it is duly constituted for the time being, whatever its political complexion”.

CMA Investigates J D Sports Meeting in a Car Park

There is an interesting Oliver Shah article in the Sunday Times (7 November) about a meeting in a car park between JD Sports’ executive chairman and his Footasylum opposite number.  ‘Nothing to see here’, they say, despite the two companies being subject to a CMA prohibition against exchanging confidential information, and despite having been initially accompanied by a senior lawyer. 

For those unfamiliar with the intricacies of competition law, these explanations might help:-

First, JD Sports acquired (merged with) Footasylum before waiting to see whether the CMA – the competition regulator –  would mount an investigation.  This was clearly a high risk strategy given that JD Sports already sold 30% of all trainers sold in the UK, and Footasylum would add another 5%.  The CMA would not be sure to require Footasylum to be sold, but it was almost certainly bound to investigate the transaction … in which case …

The CMA would also certainly require the two businesses to be kept entirely separate until the investigation had been completed, otherwise the purchase could not be reversed.  This continued separation would include a requirement not to share  confidential information.

So two rich men meeting in a car park does look rather suspicious, not helped by their need to have a lawyer present for at least part of their meeting.

The whole merger inquiry has been fraught, with one of the chairmen calling the CMA’s interest “inexplicable … appalling, unjust and inaccurate”.  Most merger inquiries are completed within4-6 months.  This one has been dragging on for four years, thanks mainly to determined resistance from the merging companies.  And JD Sports is also subject to a separate CMA price-fixing investigation. I suspect that the CMA;s patience is wearing thin, even in advance of the latest provocation.

One intriguing twist is that the meeting in a car park was possibly filmed by, or at the request of, a competitor, possibly Mike Ashley’s Sports Direct.  Competitors are often in two minds about how to react to a merger in their industry.  Greater ‘concentration’ – that is fewer competing businesses –  generally leads to higher prices for everyone, to the detriment of their customers.  So Sports Direct – or whoever – should benefit – unless, of course, the new larger business starts to behave anti-competitively including by using their new found strength sto squeeze other businesses out of the market.  Maybe this is what the company behind the Sunday Times video is scared of?

Finally, there are, as so often, a number of interesting governance issues.  One of the men in the car, Peter Cowgill, was both Chairman and Chief Executive of JD Sports – seldom a sensible arrangement.  The Board does not have a senior independent director and the lawyer in the car was Mr Cowgill’s in-house general counsel.  It may be unfair to this particular lawyer, but it might have been better for Mr Cowgill to have been advised by experienced external lawyers more able to speak truth to power, and so persuade him to show greater respect for UK competition law.

Martin Stanley

Author  How to be a Civil Servant
Editor  Understanding Regulation

The Crazy, Dangerous World of Modern Banking

  • Lending to firms and individuals engaged in the production of goods and services amounts to only 10% of British banks’ total assets.
  • The annual volume of foreign exchange payments processed in Britain is £75 trillion, about forty times Britain’s national income
  • The value of derivative contracts (whose values are dependent on the values of other derivative securities) is three times the value of all the physical assets in the world

How It Began

[Most of the following text is taken from John Kay’s paper Robust and Resilient Finance.]

When the Piper Alpha oil rig went on fire in 1987, killing 200 people and triggering what was then the world’s largest marine insurance claim, underwriting names who had never heard of Piper Alpha discovered they had reinsured it over and over again.  The total value of claims at Lloyds turned out to be ten times the value of the underlying loss.

A Lloyd’s underwriter denounced in extravagant language the ignorance and incompetence of the agents who had promoted these structures and brought Lloyd’s close to collapse.  When asked why he had not blown the whistle on the individuals concerned he simply said: it was because they were willing to buy risks at a price at which he was delighted to sell them.  This would be a forerunner for the development of modern financial markets more generally.

Modern banks trade in securities, and the growth of such trade is the main explanation of the growth of the finance sector.   Lending to firms and individuals engaged in the production of goods and services – which most people would imagine was the principal business of a bank – is literally an insignificant part of their balance sheets. For British banks today, it amounts to about 10% of their total assets.

World trade has grown rapidly, but trading in foreign exchange has grown much faster.  The value of daily foreign exchange transactions is almost a hundred times the value of daily international trade in goods and services.[4]  The annual volume of payments processed in Britain is £75 trillion, about forty times Britain’s national income.

Once you have created derivative securities, you can create further layers of derivative securities whose values are dependent on the values of other derivative securities – and so on.  The value of such derivative contracts outstanding is three times the value of all the physical assets in the world.

These developments are so obviously crazy that it seems remarkable that no-one appears to be worried.  But …

The Danger has long been Obvious to Some

In 2005 the Federal Reserve Bank of Kansas held a symposium at the agreeable Wyoming resort of Jackson Hole.  The purpose was to honour Alan Greenspan, who would soon retire from his position as chairman of the Federal Reserve Board.  Raghuram Rajan, then chief economist at the International Monetary Fund, queried the value of recent innovation in financial markets and warned of troubles ahead.

Rajan’s paper was not well received.  …  Don Kohn treated the speech as an attack on what he called ‘the Greenspan doctrine’, which proclaimed the virtues of the financial innovations which Rajan had queried.  … Larry Summers described Rajan’s views as ‘Luddite’, and likened his thinking to those who would substitute runners and horses for cars and aeroplanes. … The keynote address at Jackson Hole was delivered by Robert Rubin [who was an] enthusiastic supporter of financialisation and had groomed Larry Summers to be his successor.  Timothy Geithner subsequently told his audience:  ‘Financial institutions [risk managers] are able to measure and manage risk much more effectively’.

The breathtaking scale of these misapprehensions proved no obstacle to the subsequent advancement of those who embraced them.  Rajan left the International Monetary Fund at the end of 2006 and returned to India where he became Governor of the Reserve Bank.  But talking truth to power proved no more welcome in India than in Wyoming and Rajan’s contract was not renewed.

The Result

Three years after Wyoming, Lehman’s failure turned the instability of 2008 into a crisis that jeopardised the functioning of the global financial system. But Lehman was not, in any ordinary sense of the phrase, a business of economic importance.  If it was a systemically important financial institution, it was not an important financial institution.  The business provided no services to the real economy which were not available elsewhere, and few services to the real economy at all.  The company was badly run and operated primarily for the benefit of its own staff, especially its most senior executives.  But Lehman was massively interconnected.  At the time of its bankruptcy, the company had over 200 subsidiaries around the world and approaching one million outstanding transactions, almost entirely with other financial institutions.  

Here in the UK, Alistair Darling, Chancellor of the Exchequer during the 2008 financial crisis, was taken aside by the chairman of one of Britain’s biggest banks and offered the reassurance that ‘they had had a meeting last night and decided that, from now on, we will only take on risks that we understand‘.

But Nothing Much has Changed since 2008

Philip Stephens appears to have been pretty well spot-on when he wrote the following in the FT in January 2014:  ‘The organising purpose of banking – to provide essential lubrication for the real economy – remains entangled with dangerous and socially useless speculation.’

A similar conclusion was reached by Joris Luyendijk writing in The Guardian in September 2015. He quotes a City veteran:  “Seven years after the collapse of Lehman Brothers, it is often said that nothing was learned from the crash. This is too optimistic. The big banks have surely drawn a lesson from the crash and its aftermath: that in the end there is very little they will not get away with.

And Paul Volcker, former Federal Reserve chairman, saw the 2008 financial crisis as a missed opportunity to “put a spear through the heart of all these guys in Wall Street”

Indeed, it is striking that many aspects of the modern financial system are designed to give an impression of overwhelming urgency – the endless ‘news’ feeds, the constantly changing screens of traders, the office lights blazing late into the night, the young analysts who find themselves required to work 30 hours at a stretch.  But very little that happens in the finance sector has genuine need for this constant appearance of excitement and activity.  Only its most boring part – the payments system – is an essential utility on whose continuous functioning the modern economy depends.  

No terrible consequence would follow if the stock market closed for a week (as it did in the wake of 9/11) – or longer; if a merger were delayed, or large investment project postponed for a few weeks; if an initial public offering happened next month rather than this.  A millisecond improvement in data transmission between New York and Chicago has no significance whatever outside the absurd world of computers trading with each other.

The tight coupling is simply unnecessary, the perpetual flow of ‘information’ part of a game traders play that has no wider relevance, the excessive hours worked by many employees a tournament in which individuals compete to display their alpha qualities in return for large prizes.  The traditional bank manager’s culture of long lunches and afternoons on the golf course may have yielded more useful information about business than the Bloomberg terminal.

Analysis & Conclusions

Lehman – an ill-managed purveyor of unneeded products – represented exactly the kind of business that should fail in a well-functioning market economy.  The view that it was a mistake for the US government to permit Lehman to collapse is expressed, not by people who miss the services that Lehman provided, but by people who regret the consequences of its failure.  

The lesson is – on the one hand – to eschew unnecessary complexity, and – on the other – to give close attention to the management of such complexity as is unavoidable.  None of these features – simplification, modularity, redundancy – were characteristic of the financial system as it had developed in 2008.  On the contrary.  Financialisation had greatly increased complexity, interaction and interdependence.  Redundancy – as, for example, in holding capital above the regulatory minimum – was everywhere regarded as an indicator of inefficiency, not of strength.  

The lesson is not that policymakers should try to prevent such failures but that public processes should ensure that similar failures are more easily contained.  This requires reintroducing to the financial sector the modularity and redundancy which characterise robust and resilient engineering systems and which recent decades have foolishly sought to characterise as inefficiency.

Don’t hold your breath!

Notes

This blog is essentially a precis of John Kay’s paper Robust and Resilient Finance, first published in July 2021.  I strongly recommend that you read the whole paper, and apologise to Professor Kay if I have not done it justice.

Readers with long memories will recall that Lord (Adair) Turner, chairman of the Financial Services Authority, in 2009 described much of the City’s activities as “socially useless” and questioned whether it had grown too large.

Martin Stanley
Editor – Understanding Regulation

Response to Better Regulation Framework Review

Here are my views, as sent to BEIS this afternoon.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

I have the following comments in response to your current consultation.

I am responding as an individual and am content for this letter to be published.

My Background

I was Chief Executive of the Regulatory Impact Unit (the predecessor to the BRE) from 1998 to 2000. 

I now edit the Understanding Regulation website[1].

General Comment

I am concerned that the principal audiences for the consultation (“businesses, trade organisations, business groups or representatives, other interested parties”) appear to be business organisations.

The Better Regulation Framework should help ministers and departments find the right balance between under-regulating (and so failing to protect the public) and over-regulating (and so failing to preserve freedoms, creating excessive bureaucracy, and imposing excessive cost on business etc.).  If this balance is to be achieved, it will be important to ascertain the views of civil society.  It is therefore troubling that the consultation does not appear to involve any formal attempt to ascertain the public’s views, for instance via opinion polling or focus groups.  The Citizen Space survey, in particular, is entirely inappropriate for the non-expert. In the absence of other mechanisms, it will be important to bodies which represent the general public and consumers, such as Citizens Advice, Which? and Unchecked

It would be interesting, in particular, to ascertain whether there is any public pressure for any significant deregulation and/or reduction in parliamentary oversight of regulation; I suspect not.   Indeed, the relatively recent Grenfell Tower disaster and the growing threat of global warming (climate change) might predispose many against allowing at least some of the relaxations suggested in the consultation document.

The following comments respond to some of the specific questions in the consultation document.

Questions 1, 11 and 14  –  Delegating More Power and Discretion to Regulators

If I understand it correctly, the consultation includes a number of mutually reinforcing suggestions that we adopt a more UK ‘common law’ approach to regulation, delegating more power and discretion to regulators who might become more accountable to government and Parliament.  Regulatory regimes would then be shaped more by case law rather than primary or secondary legislation. 

I can understand the attractions implicit in this approach but, on balance, strongly endorse the document’s concern that it ‘could lead to more uncertainty in the regulated markets and more litigation’. Smaller entities and the general public need the certainty provided by parliamentary legislation because they do not have the resources to challenge perverse regulatory policies. And regulators need certainty because they will otherwise find themselves in constant litigation with large companies with deep pockets for whom delayed enforcement can pay massive dividends.

It also seems to me that the possible new approach would represent a remarkable transfer of power away from Parliament and away from ordinary citizens and consumers.  Our MPs could no longer pass legislation to influence the detailed behaviour of regulators.  Regulators could be challenged only in the courts which are generally inaccessible to the vast majority of the population, especially given recent governments’ decisions to limit access to judicial review.

The proposal surely exacerbates the concern that Paul Tucker and others have expressed[2] about the already too weak accountability of regulators for decisions involving value judgments that should be in the political domain. The document addresses this concern by suggesting that there might be ‘a more direct form of accountability by regulators to Parliament’.  But having to explain its decisions to easily distracted Parliamentarians would not, I suggest, be much of a constraint on a regulator with a mission – or indeed an incompetent or under-funded regulator. 

Robert Shrimsley quoted a government minister as follows[3]:  “We haven’t taken power back from unelected bureaucrats in Brussels just to hand it to our own unelected bureaucrats back home.” The context was no doubt different but the minister’s warning was highly relevant.  

Question 5 – Adopting a Proportionality Principle.

The document argues that ‘some of the current regulatory standards the UK has inherited from the EU are based on an overly restrictive interpretation of the precautionary principle’.  It suggests, therefore, that ‘a new ‘Proportionality Principle’ … should be mandated at the heart of all UK regulation. Under this principle, the Government would focus on regulating in a proportionate way.’

This strikes me as the weakest section of an otherwise high quality consultation.  It provides no evidence that the precautionary principle has ever been taken too far, whether in the EU or the UK.  (Numerous reports[4] have found very little evidence of ‘gold-plating’ of EU legislation and I am not familiar with well-evidenced accusations of excessive use of the precautionary principle.)  

The suggestion that regulation should be ‘proportionate’ is also, on the face of it, what all good regulators should do anyway.  Legislating for proportionality would most likely make very little difference apart possibly by opening the possibility of unnecessary litigation.

Questions 8 & 9  –  Should competition and innovation be embedded into guidance and/or statutory objectives?

This would require regulators yet again to make subjective and in effect political judgments for which they are not properly accountable at the ballot box[5].  It is a bad idea in constitutional principle, and a bad idea in practice as it opens up various opportunities for vague challenge, both in advance of regulatory decision-making and afterwards in the form of litigation.

(One particularly bad example is that of the Financial Conduct Authority which was recently given six considerations to take into account to add to its four objectives, its competition duty, and its eight regulatory principles. One of these requirements was that the FCA should have regard to the competitiveness of the City of London – a particularly vague and troubling objective, especially as watchdogs should not also be cheer-leaders for the industries that they are supposed to be policing.)

Effective Scrutiny of Regulatory Proposals

I have no strong views on the various suggested ways of improving the calculation of  the cost of regulatory proposals.  The whole measurement system is well intended but struggles to produce robust costings before the regulations have been implemented. 

The Regulatory Policy Committee does great work, despite the impact measurement  problems, but finds it difficult to alter the course of regulatory proposals that have been announced and developed in some detail well before the committee sees them.  I would therefore urge the government to require departments and regulators to consult the RPC at a much earlier stage and (crucially) publish the committee’s advice. 

I would also like to see the committee focussing rather less on measuring the (negative) impact of regulatory proposals and instead consider whether they achieve the sensible balance that I summarise towards the beginning of this letter. 

Short of this, I strongly support the continuation of independent external scrutiny (Question 28 – Option 2)

Earlier post-implementation reviews (Question 26) would be welcome where the evidence of the success or otherwise of the regulation is available by that point, but would make very little difference to future practice, given Whitehall’s general inability to learn from its previous mistakes and the political difficulty of admitting that a regulation that has recently been introduced is not achieving what ministers previously stated that it would.

MARTIN STANLEY


[1] https://www.regulation.org.uk/index.html

[2] https://www.regulation.org.uk/key_issues-accountability_and_independence.html#Regulatory_State

[3]  https://www.ft.com/content/afa340f5-9028-4c8e-8715-6f4f055305ab  (paywalled)

[4] https://wwwhttps://www.policy-making.org.uk/detail-transposition_and_gold-plating.html.policy-making.org.uk/detail-transposition_and_gold-plating.html

[5] https://www.regulation.org.uk/key_issues-accountability_and_independence.html#Regulatory_State

Taking Back Control of Regulation – Part 2

A recent government consultation document Reforming the Framework for Better Regulation looks important.  This is the second of a two-part summary which might encourage you to read and respond to the document itself.  You can read the first part here. 

Adopting a Proportionality Principle

The document argues that ‘some of the current regulatory standards the UK has inherited from the EU are based on an overly restrictive interpretation of the precautionary principle’.  It suggests, therefore, that ‘a new ‘Proportionality Principle’ … should be mandated at the heart of all UK regulation. Under this principle, the Government would focus on regulating in a proportionate way.’

Comment:- This is the weakest section of an otherwise high quality consultation.  It provides no evidence that the precautionary principle has ever been taken too far, whether in the EU or the UK.  And the suggestion that regulation should be ‘proportionate’ is, on the face of it, what all good regulators should do anyway.  The limited discussion in the document leads me to suspect this is a bit of fluff rather than anything that would make a big difference in the real world.  Contrary views would be welcome!

Innovation

Regulators might be given duties to promote competition and innovation.  This would be in addition, in many cases, to their current statutory obligations ‘to design their service and enforcement policies in a manner that best suits the needs of businesses and other regulated entities’ and consider ‘the potential impacts of their activities and their decisions on economic growth’. 

Comment:-  This would require regulators yet again to make subjective and in effect political judgments for which they are not properly accountable at the ballot box.  (One particularly bad example is the Financial Conduct Authority which was recently given six considerations to take into account to add to its four objectives, its competition duty, and its eight regulatory principles. One of these requirements was that the FCA should have regard to the competitiveness of the City of London – a particularly vague and troubling objective, especially as watchdogs should not also be cheer-leaders for the industries that they are supposed to be policing.)

Government ‘Helping’ Regulators Improve

The Government suggests that it …

‘… could invite regulators to survey all of the businesses they regulate to receive ideas on how they can do that more efficiently from the point of view of the businesses being regulated. Regulators could then be invited to explain what they have learnt from this exercise and what changes they propose to make in response.’

‘The Government could also conduct a series of deep dives into individual regulators and act as a critical friend to develop recommendations for the regulator to consider (in a manner that would respect the independence of regulators).  (Emphasis added)  Such deep dives could involve shadowing the regulator to look at its practices and procedures, scrutinising the regulators’ appraisals of regulatory change, and talking to its customers directly, and would be used to identify areas where change could be introduced to smooth processes for the regulated businesses. The results of the survey outlined above could help inform these deep dives and help inform areas of focus.’

Comment:-   These suggestions are apparently innocuous and won’t trouble those regulators who already have a good and transparent relationship with their sponsoring departments.  I was Chief Executive of two regulators and, if anything, felt that my colleagues in central government knew too little about the way we worked, and the challenges we faced.

But … I suspect that many regulators will, quite rightly, feel somewhat threatened by these proposals.  It is not hard to imagine that a strongly pro-business and anti-regulation administration could deploy business surveys and deep dives to deploy serious pressure to encourage light touch regulation.   Strong and truly independent regulators could no doubt withstand such pressure, but many would fold.  And let’s not forget what light touch financial services regulation led to in 2007/8

Earlier Scrutiny?

The Regulatory Policy Committee currently scrutinises regulatory proposals only …

‘… after ministers have agreed to the policy they want to take forward and a decision has been made to regulate to achieve the policy aims. This can be too late in the policy development cycle and does not ensure scrutiny of the decision to regulate (in the form of legislation) rather than using non-regulatory approaches to achieve the desired aim.  …  Scrutiny of policy proposals could happen at the beginning of the policy development cycle, when policy options are developed and appraised and the alternatives to regulation are considered. This process could start when a decision has been made by a minister to regulate; an early document could be produced setting out the options that have been considered and why none of them are as suitable as regulation.’

Comment:-  This proposal seems eminently sensible, even if one harbours doubts about whether it could or would work in practice, given ministers predilection for making policy announcements well before thinking through the implications, let alone having a properly resourced and practical implementation plan.

Finally , should we resurrect …

One In, X Out?

There is an interesting critique of the limitations of the government’s Business Impact Target which has lain at the heart of most recent assessments of regulatory policy.   (The target has been five times the annual total of new regulations’ Equivalent Annual Net Direct Cost to Business (EANDCB).)

The obvious problem with this measure is that it excludes all the regulations’ indirect benefits and non-monetised benefits, such as environmental and social benefits.  This approach is however consistent with the government’s approach to financial expenditure, much of which is similarly constrained by annual limits, whatever the longer term benefits of the expenditure.

The One In, Three Out policy was abandoned in 2017.  Its faults are well summarised in this subsequent real world example in the consultation document.

Following the 2018 Gaming Machines Review, the maximum stake on fixed-odds betting terminals was cut from £100 to £2. This measure scored a large cost on business (EANDCB: £450million per annum) but that made immaterial any effort to save businesses a few £m in other regulatory areas for the overall government target. Also, the Department expected there to be significant benefits to society, including from reduced government expenditure in areas linked to gambling-related harm such as healthcare or the criminal justice system, but these could not be monetised or accurately quantified.

In a One-in, X-out system, presumed to use this same metric, government would therefore have needed to find £450m pa (or £900m pa or £1350m) offsetting savings (‘OUTs’) to have enabled the stake cut to have been made. (By way of comparison, £450m pa is almost the total savings of all the Red Tape Challenge initiatives over 2011-2014, involving amending or revoking over 2000 regulations.)

Comment;-  It seems pretty clear from this example that HMG has no intention of resurrecting this deeply flawed policy.

Concluding Comment

These two blogs have only listed the most interesting of the many ideas in this consultation.  They have the potential to bring about real change in the UK’s approach to regulation.  I would therefore urge all those interested in regulation to read and respond to the document on or before Friday 1 October. 

Note: A previous version of this blog was published by Cambridge’s Bennett Institute for Public Policy.

Martin Stanley

Editor – Understanding Regulation

Taking Back Control of Regulation?

“We haven’t taken power back from unelected bureaucrats in Brussels just to hand it to our own unelected bureaucrats back home” explained a Conservative minister quoted by Robert Shrimsley. But a current government consultation document suggests that this is exactly what ministers might want to do.

Reforming the Framework for Better Regulation is important.  The government itself says that one proposal [would] have far-reaching consequences – potentially both positive and negative.  So here is the first of a two-part summary which might encourage you to read and respond to the document itself.

The fact that Lord (David) Frost is one of the joint authors gives a strong clue to the document’s ideological underpinning which is in part the (politically understandable) drive to demonstrate that Brexit will make a real difference. The post-Brexit policy focus has been on trade and the possibility/challenges of forging new trade deals, and there’s been less public debate about regulation and what exactly a new (less precautionary?, more flexible?) regulatory regime would allow the UK to do that it currently cannot.

The consultation is all about reforming the Better Regulation Framework.  This was designed to ensure that government regulation is proportionate and is only used where alternative non-regulatory approaches would not achieve the desired policy outcomes.   It is intended to ensure the Government is accountable for new regulation. Where government intervention requires a legislative or policy change, departments are expected to analyse and assess the impact of the change on the different groups affected. This generally takes the form of an impact assessment (IA) which is subject to review by the Regulatory Policy Committee.

The consultation document begins with a useful summary (see Annex below) of post-2006 regulatory reforms.  It then turns to the ideas to which ministers want reactions.

Cutting Out Parliament

First, should we adopt a more UK ‘common law’ approach to regulation, abandoning that pesky European (Napoleonic, Roman Law?) approach?  Should we, in other words, stop setting out detailed rules laid out in regulations and instead delegate more power and discretion to regulators and replace prescriptive statutory frameworks with outcomes to be achieved.  Regulatory regimes would then be shaped more by case law rather than primary or secondary legislation. 

Parliament would then …

‘… set out only what is prohibited or the outcomes to be achieved, in plain English, and set out any parameters within which regulators would need to operate to meet these outcomes, but then giving regulators appropriate powers and discretion over how to do so, rather than legislation setting out all of the rules that businesses have to comply with in detail.’

[This flexibility would] ‘allow regulators to do more through guidance, decisions and rules that could be adapted quickly outside of legislative frameworks. This could allow them to respond more quickly to disruptive new technologies and other changes in circumstances. Requirements could be set out in guidance in plain English that could be more easily understood than legislation, making them more accessible to the average reader.  … regulators would still have to set out some detail in rules and guidance but would have the flexibility to change these without having to petition the Government to introduce further legislation.’

On the other hand, the document recognises that…

‘… this approach could lead to more uncertainty in the regulated markets and more litigation’. It could ultimately lead to more regulation being created overall, through mechanisms which are less responsive to public scrutiny and democratic accountability. Regulatory regimes need certainty to be effective and enforceable, so flexible regimes need to have safeguards in place to ensure that requirements are clearly framed in unambiguous terms to avoid uncertainty. It is also important that businesses and individuals have reasonable notice of changes so they can know what is required of them at any given time, and to ensure that breaches can be effectively enforced.

A shift away from prescriptive statutory regimes, leaving regulators to shape the detail in individual regulatory areas, could mean more court time taken with regulated parties defending prosecutions or other sanctions – for example, if the requirements were too vague and uncertain. There would need to be clear outcomes, set out in legislation, for regulators to achieve and clear criteria for regulators on how they should achieve those outcomes. A further consideration for regulatory regimes where it is relevant is that criminal offences and penalties must be provided for in law.’

Comment:

If adopted, this new approach would represent a remarkable transfer of power away from Parliament and away from ordinary citizens and consumers.  Our MPs could no longer pass legislation to influence the detailed behaviour of regulators.  Regulators could be challenged only in the courts which are generally inaccessible to the vast majority of the population, especially given recent governments’ hobbling of judicial review.

This approach does rather echo other moves this government has made (going back to Brexit but in other areas too), and will be seen by many as further evidence of its populist dislike of legislative and other constraints upon executive power.  I myself doubt whether this is one of the animating motives of the government here.  Perhaps naively, I hope that this is really about a different vision of how good regulation should operate and of the merits of a more discretionary model. 

But the proposal surely exacerbates the concern that Paul Tucker and others have expressed about the already too weak accountability of regulators for decisions involving value judgments that should be in the political domain. The document addresses this concern by suggesting that there might be ‘a more direct form of accountability by regulators to Parliament’.  But having to explain its decisions to easily distracted Parliamentarians would not, I suggest, be much of a constraint on a regulator with a mission – or indeed an incompetent or under-funded regulator. 

To be fair, the document also says that …

‘This is a proposal that will have far-reaching consequences – potentially both positive and negative. … We are … considering whether the extent to which flexibility is delegated should vary by regulator based on what they are responsible for, as the pros and cons of this approach are likely to vary depending on the area of regulation, or whether regulators should have more limited flexibility to only exercise discretion in targeted ways.’

This is such an important (and apparently real) consultation that it deserves to generate lots of serious responses.  It will in particular be interesting to see how businesses, trade organisations, business groups etc. respond.  What would it all mean to them Is what is being proposed really what they/we need/want? Is it achievable? 

It will be important, too, that there are high quality responses, including from regulators, that consider the impact on civic society.

Note: A previous version of this blog was published by Cambridge’s Bennett Institute for Public Policy. The second part of this two-part blog is here.

Martin Stanley

Editor – Understanding Regulation

ANNEX

This is the document’s useful, if daunting, list of post-2006 regulatory reforms. 

The length of this list suggests that successive governments have found it very difficult to improve the way in which they have developed and used their regulatory powers.

  • The creation of the Better Regulation Executive (BRE)
  • The current Better Regulation Framework
  • The Administrative Burden Reduction Programme
  • The One in, One/Two/Three Out policies
  • Small and Micro Business Assessments
  • The Small Business Enterprise and Employment Act 2015
  • The Business Impact Target
  • The 2019 Regulation for the Fourth Industrial Revolution white paper
  • The Regulatory Horizons Council
  • The Plan for Digital Regulation
  • TIGGR – the Taskforce on Innovation, Growth and Regulatory Reform
  • Improved and increased International Regulatory Cooperation
  • The Open Regulation Platform
  • The Digital Regulation Navigator
  • The Smart Regulation project
  • The National Data Strategy
  • The Chancellor’s 2021 Mansion House speech focusing on reform for the financial services sector
  • The [Financial Services] Future Regulatory Framework Review

END

Grenfell Tower, Catastrophe and Systemic Change

This blog summarises a fascinating and important book by Gill Kernick.

Gill lived on the 21st floor of Grenfell Tower until 2014.  Three years later, seven of her immediate neighbours died in the catastrophic fire. 

Gill works with high-hazard industries to build their leadership capabilities and culture in order to prevent catastrophic events.  She therefore imagined that a residential fire that killed 72 people would engender a desire to learn and change.  She was wrong.  Her book and accompanying podcasts explore the reasons why.

Leadership

Catastrophic events are by nature low probability  – but they have extremely high consequences.  They don’t just happen.  We create them.  Their frequency and/or intensity can be reduced, but we have to do this in a quite different way from which we reduce the impact of slips, trips and falls.

Excellent leaders avoid catastrophes by deploying chronic unease – constantly searching for dangers and vulnerabilities.  They are aware that the difference between a near miss and a catastrophic event is often a matter of chance. So it is vital to be on the look out for weak signals that something is not right, that something could go wrong.  These can always be found (in hindsight) after major disasters.

Chronic unease also means guarding against natural reaction of ceasing to listen if deluged by complaints.  The opposite reaction is the better one.

Effective leaders are empathetic.  They demonstrate that they care, and can imagine what could happen if a ‘fix’ doesn’t work.  They explicitly or implicitly wonder whether they would be happy if they or their child were asked to work or live in the environment under their control, knowing the risks that they do.

It is not difficult to find examples of leaders failing to respond properly to danger signals.  There were, before the fire, many well documented expressions of Grenfell residents’ concerns about then performance of their Tenant Management Organisation, including concern about fire risk. 

And the Lakanal House fire coroner (2009, six deaths) had recommended that buildings such as Grenfell should be fitted with sprinklers, and that ‘stay put’ advice should be reviewed.  Neither had happened by the time of the Grenfell fire, eight years later.  Here is a minister’s response to fellow MPs’ concerns about the delay:

‘I have neither seen nor heard anything that would suggest consideration of any of [the recommendations of the Lakanal House coroner) is urgent and I’m not willing to disrupt the work of my department by asking that these matters are brought forward.’

Here are two other examples.

Before the Ladbroke Grove rail crash, seven drivers had failed to see and stop at the red light missed by one of the two drivers who died, along with 29 others, at Ladbroke Grove.  The train operator had asked Railtrack ‘as a matter of urgency what [they] intended to do about this high-risk issue’ – but reply came there none.

Jill Rutter tells how senior BP managers knew that their Texas City refinery was a disaster area.  But its problems could only addressed by closing it down for a long periods, and that would have harmed BP’s bottom line at a time when it was a stock exchange darling reporting increasing profits each quarter.  15 died in the subsequent explosion.

Learning from Disasters

The second way to avoid catastrophes is to ensure that responses to disasters involve systemic change. 

Most inquiries lead only to piecemeal change.  They assume a controllable, predictable world in which an error can be prevented through technical solutions or new bureaucratic, command and control rules designed by experts.  The Mid-Staffs inquiry, for instance, led to 270 recommendations which undoubtedly became a tick box exercise for NHS trusts around the country. 

Rules and regulations are never a perfect answer.  They are by their nature reactive and so cannot displace the need to continually search for vulnerabilities.  Compliance is never 100% and compliance falls sharply, and enforcement becomes very difficult, if the regulations are complex, which is too often the case.  (Examples might be the pre-Grenfell building regulations and the Covid guidance and legislation.) Some organisations and individuals actively seek to circumvent regulation.

Systemic change assumes a complex and changing world in which disruption and experimentation are likely routes to improvement.  Those leading systemic change have strong values and draw on the expertise of all stakeholders. They understand and focus on the true purpose of the system – hospital staff caring about (not just ‘for’) their patients, in the case of Mid-Staffs. 

Tick-box and regulatory activity is attractive because they are outputs – they can easily be measured.  But they are not outcomes, valuable in themselves.  So how do we know that systemic change is happening? The answer is to look out for leading indicators.  Do people feel that they are encouraged to report dangers?  Are there plenty of near-miss reports?  Do patients feel well cared for?

Will Grenfell lead to systemic change?  The signs are not good.  Political and media attention has moved on and, four years later, there has been relatively little progress in addressing even the most urgent issues such as the cladding on other buildings.  There has also been little or no sign of the construction industry accepting responsibility for contributing to the disaster in any way – a necessary precursor to avoiding future problems.

Other Lessons

Gill draws a number of other lessons, for regulators, decision makers and others. In brief …

Regulators need to be adaptable to cope with new dangers and technologies, and should not lose sight of their core purpose, such as ensuring safety. Resource constrained enforcement can (but should not) lead to regulatory obligations becoming seen as a maximum target which might be attained of you are lucky, rather than a minimum which must be achieved without fail. 

Decision makers should avoid number-counting and tick-box consultations.  Many other more effective mechanisms are available. 

Decision makers should in particular challenge their assumptions about whose knowledge counts.  It can be experts (e.g. during Covid crisis) but it might well also be those on the front line – including junior staff and local residents.  There was little sign, for instance, that emergency managers were involved in designing the UK’s response to Covid-19.  And the government looked far too ‘blokey’.  The involvement of women, minorities and SMEs in planning would likely have led to better decisions.

Bureaucracies (and companies run like bureaucracies) compile excellent risk registers but should avoid regarding this as ‘job done’ and then failing to take the necessary action to reduce the key risks   The UK’s national risk register, for instance, gave prominence to a possible pandemic whose impact was given the highest possible rating – and yet the 120,000 Covid-19 deaths suggests that the country remained woefully under-prepared. 

Resilience is often seen as paying a big insurance premium for cover for a disaster that you hope won’t happen, or won’t happen on your watch.  But resilience can often be bought in inexpensive ways.  The UK’s pandemic preparations, for instance, did not necessarily need expensive stockpiles.  There could most likely have been plans to requisition manufacturing capacity.

Last, and certainly not least, Gill asks …

Why do we find it so difficult to learn?

One problem is our obsession with blame which doesn’t fix anything, least of all the systemic issues. Blame can be helpful if it sharpens debate, exposes issues.  But it is too often unhelpful because everyone naturally tries to avoid being blamed, so it too often inhibits debate.

For a start, behaviour is context dependent.  There is little point in identifying someone who has made a mistake if you then replace them with someone else who will in future make similar mistakes because they remain subject to the same pressures and constraints.

This is particularly true in government. We all – and journalists in particular – like to ascribe blame to one person.  In government, we like to assume that everything is about, and caused by, Presidents, Prime Ministers and other political leaders.  But the truth is much more complex.  Political leaders work within a system and most decisions are taken at much lower and/or more local levels.  There is seldom if ever any serious political will to bring about systemic change following a catastrophe, especially once the media spotlight has moved elsewhere.  The key political imperative is to avoid blame. 

This absence of political will is exacerbated by weaknesses in parliamentary governance and accountability.  There is in particular no process that ensures that recommendations from public inquiries are implemented, or assessed for effectiveness.

It is therefore devoutly to be hoped that Gill’s book will help bring about genuine change in the UK’s political system, including both the media and senior officials.  If there is no change then we are surely not honouring the 72 who died.

Further Reading and Listening

This blog can only summarise a well sourced and well argued book.  If you would like more detail and analysis then I suggest you begin by watching Gill’s fascinating conversation with Diane Coyle and Jill Rutter on the Bennett Institute website

You can also listen to Gill’s podcast series, Catastrophe

And then Gill’s book can be bought here:-

https://londonpublishingpartnership.co.uk/catastrophe-and-systemic-change/ 

… or on Amazon.

Martin Stanley

Editor – Understanding Regulation

Civil Servants, the SNP and Boris Johnson

The Johnson Government and its MPs have little in common with the former Conservative Party.  Worryingly, from a civil service perspective, they have much more in common with the Scottish National Party.

The SNP came to power in Scotland having had no previous experience of government and with few core policies other than Scottish Independence. It had a charismatic and controversial leader in Alex Salmond but wasn’t supported by any heavyweight think tanks, nor by experienced Special Advisers. The new government accordingly leant heavily upon Scottish Government civil servants. The latter work within the rules and customs of the wider UK Civil Service, and in particular are supposed to avoid any sign of political allegiance. In practice, partly as a result of ministerial pressure, and partly because it was the only way to ensure smooth and effective administration, senior officials became close to SNP ministers and were more obviously supportive of SNP policies than their London colleagues (or the Public Administration Select Committee) thought wise. More recently, Scottish Permanent Secretary Leslie Evans has of course been accused of lack of impartiality in the handling of the investigation into Alex Salmond.

The parallels with the Boris Johnson government in Westminster are all too clear. The Johnson Cabinet is weak and inexperienced, having been chosen exclusively from the ranks of Brexiteers. It has a charismatic but controversial leader and no obvious core policies other than to get Brexit done. Its promise to “fix the crisis in social care once and for all – with a clear plan we have prepared” was a lie. It didn’t have any idea how it intended to take advantage of post-Brexit freedoms, nor did it have an “oven-ready Brexit deal”. Its closest supporters may not be drawn from post-UKIP ‘fruitcakes’ but they are certainly not drawn from mainstream industrialists, scientists and economists – or even heavyweight think tanks. Its most prominent Special Advisers, in the form of Dominic Cummings and his close colleagues, clearly had no clue how to get things done in government.

The result, as in Scotland, has been heavy reliance on a civil service that has in turn been anxious to ingratiate itself with its new political bosses. Obliquely supportive officials’ tweets have become more common and the recent Good Law Project litigation has shown how Cabinet Office officials have given up challenging procurement decisions. 

It is perhaps even more concerning that Whitehall mandarins had previously learnt not to challenge any policy that was anything to do with Brexit. There is no sign, in the recently published Jeremy Heywood biography, that he or any of his senior colleagues fought to be allowed even clandestine preparations for a referendum decision to leave the EU, even though Rachel Sylvester (I think correctly) reports that, ‘There is now widespread recognition in Whitehall that [this was] one of the biggest mistakes made before the referendum’. Nor is there any sign that they were forceful in seeking to get ministers to face up to the clear need for a border either between Northern Ireland and the Republic, or down the Irish Sea, even though, as his new biography reveals, Jeremy Heywood commented as follows as long ago as 2016:  “But do you know what the most difficult issue is? … Ireland”.

But what else could they do, potentially faced with a choice between having limited influence and no influence at all? Exactly the same dilemma has faced political journalists who would have lost all their access to gossip and intrigue if they had challenged Johnson, Gove et al in the way that the civil service had failed to do. The self-censorship was perhaps most obvious on the BBC’s main channels where a perceived  anti-government stance could have imperilled the institution’s core funding. 

The same dilemma faced most of the private sector who (in my view correctly) thought it wrong to criticise the referendum result, but went on to fail to challenge ministers’ approach to implementation. They were almost certainly wise to fear politicians who reacted angrily to criticism. Even Mr Johnson’s predecessor, Theresa May, had forced Deloitte to withdraw from bidding for government contracts for six months when she heard that the consulting firm had expressed concern that she drew in too many decisions and details to be settled by herself. It is disturbing that senior officials allowed this to happen. Deloitte had done nothing wrong, and her response probably broke the law in the form of EU procurement rules. As David Lock QC commented ‘truth telling is not a permissible reason to exclude bidders’.

This is a deeply depressing story, but it was also predictable and predicted. John Kay, as long ago as 2013, forecast that Scottish independence could likely lead to a mixture of rather conservative municipal socialism and crony capitalism. He might as well have been talking about post-Brexit Britain. And David Richards et al have long chronicled the decline of the Westminster Model of UK government:

‘Since 1997, but in particular after 2010, a number of core changes in the process of governing have fundamentally transformed both Whitehall and more broadly, the state. This in turn creates a crucial problem; whilst UK governance is going through a process of radical change, the constitutional precepts are said to remain in place. The net effect … is that the mechanisms of democracy and accountability are not keeping up with changes in practice. The … shift in the nature of the relationship between ministers and civil servants [means that] the deliberative space afforded for critical engagement over public policy has been diminished. The Westminster Model has always been recognised for its limited number of veto points. Such a shift has further exacerbated this dimension of the model, leading to what Anthony King and Ivor Crewe refer to as growth in the “blunders of our governments”.’

Sadly, as long as the Johnson government – and to a lesser extent the Scottish nationalists – believe that everyone who is not ‘for’ them must be ‘against’ them, they will continue to face very little challenge from the media, from industry and in particular from their civil servants. There will be the occasional principled resignation along the lines of Home Office Permanent Secretary Philip Rutnam and chief lawyer Jonathan Jones, but it is noticeable that their senior colleagues either disagreed with them or (more likely) did not have the guts to follow them. But no-one seems to care. As David Allen Green commented so perceptively in a recent tweet: 

‘Law and policy commentary in the age of Brexit, Trump and Covid is like being Benjamin the donkey in Animal Farm: “Fools!” Do you not see what is written on the side of that van?’

[This blog was first published by the Constitution Society.]

[Probably the best forensic analysis of Boris Johnson’s lies may be found in Peter Oborne’s The Assault on Truth.]

Martin Stanley

Editor – Understanding Government

English Devolution (and The Mystery of the Disappearing Speech)

England has one of the most centralised systems of government in the world. And yet, ever since 1997, every government has promised more devolution.  This blog looks back at what has actually happened and summarises the present unsatisfactory state of play.

In short …

Labour delivered genuinely devolved government in Scotland, Wales and Northern Ireland and introduced a Mayor and Assembly for London but achieved little else south of the border.

The subsequent Coalition and Conservative Governments entered into a whirl of activity based around local areas negotiating individual “Deals” with central government for greater control over key policy areas.  But although some powers have been passed down from central government, they often come with limitations on their use and, with some exceptions, do not include the power to raise revenue.  The majority of funding continues to come from central grants that can be withdrawn/modified at ministerial discretion.   And recent spats with the likes of Andy Burnham have reminded ministers of the political dangers of creating regional power bases.

The result is that local government in England is now a surely unsustainable patchwork of different governance models and powers.  Whitehall retains tight control, and a White Paper on Devolution in England appears to have been shelved.  The debate looks increasingly likely to be wrapped into a bigger discussion about the future of the Union.

In more detail …

Labour’s regional agenda

Apart from the London Mayor and Assembly, the 1997-2010 Labour Government left England largely unchanged. Labour was much more concerned about improving central government decision making than in empowering local government.

The previous Conservative Administration had already created a network of Government Offices (GOs) in the nine English regions to decentralise and join up central government decision making.  (You can read a ‘lessons learned’ account of the program here.)

Labour created Regional Development Agencies (RDAs) to sit alongside the GOs and charged them with developing Regional Economic Strategies.  Outside London, Labour also created Regional Assemblies, which were voluntary partnerships between local government and “social and economic partners”, and promised to make them directly elected in due course with a range of powers over economic and planning issues. Legislation was introduced in 2003 but the rejection of an Assembly for the North East in a referendum in the following year brought devolution to a halt.  (Dominic Cummings played a leading role in the campaign against the Assembly.) 

Assemblies were then replaced by Local Authority Leaders Boards. These no longer included other partners and had joint responsibility with the RDAs for signing off new integrated regional strategies, which brought together economic and spatial issues.

Insofar as Labour addressed sub regional issues, they did so through the mechanisms of Local Strategic Partnerships (LSPs), Local Area Agreements and Multi Area Agreements. LSPs involved local government working with other partners “to improve the quality of life in an area and deliver public services more effectively”. Targets were negotiated with central government (generally through the GOs) as a part of the local agreements

The move to combined authorities

From the middle of its period in power, Labour came under increasing pressure from the major cities – led by Manchester – for a greater role in economic development and other areas such as skills and transport.  RDAs began to focus more of their activity on cities, and the government introduced legislation in 2009 to allow the creation of Combined Authorities, These allowed groups of neighbouring local authorities to come together and share responsibilities and powers over a range of services. As such, they effectively recreated the Metropolitan Counties which had been abolished in 1986, and arguably laid the ground for much of what was to follow.  Note, though, that no power was transferred out of Westminster.

The Coalition and Local Enterprise Partnerships

The Coalition stripped away Labour’s regional infrastructure, abolishing GOs (and so removing Whitehall’s regional ‘eyes and ears’), RDAs and LSPs, Then, rather than give economic development responsibilities to local government, it replaced RDAs with Local Enterprise Partnerships (LEPs).

LEPs are voluntary non statutory bodies bringing together LAs and the private sector to promote economic development. There are 39 LEPs covering the whole of England. Because their boundaries are set to reflect “functional economic areas” they are generally organised on a different geographic basis to local government and also have an unclear relationship with the latter since they must be chaired by, and have at least half of their members drawn from, the private sector.  Following the publication of Lord Heseltine’s report No Stone Unturned in 2012, LEPs were charged with developing Strategic Economic Plans to use as the basis of negotiating “Growth Deals” with government from Local Growth Fund. Details are here

City Deals, Devolution Deals and Mayoral Combined Authorities

Alongside the discussions with the LEPs, the Coalition began negotiations with major cities on a series of 26 Deals that went beyond the purely economic focus of Growth Deals. As Nick Clegg said at the time, the idea was to move “away from a one-size-fits-all model towards individual city deals”

To further complicate the picture, having approved the formation of the first Combined Authority – in Greater Manchester (GM) in 2011- the Coalition began negotiations about devolving further powers (including spatial planning, health and transport) in exchange for a directly elected Mayor. This “Devolution Deal” – generally known as “Devo Manc” – was concluded in November 2014 and led to the creation of other similar Mayoral Combined Authorities, again on the basis of bilateral negotiations. As part of this agenda, Metro Mayors were given statutory powers in 2016

There are currently 8 Mayoral Combined Authorities with a further two agreed in principle. (See this report by the Institute for Government.)  All include an agreement on devolved responsibility for substantial aspects of transport, skills training and economic development.  Some also include housing and planning, business support, employment support and health and/or social care. 

The limitation of the freedoms negotiated in these Devolution Deals is illustrated by two examples, both from Greater Manchester. The first was when HMG withdrew £68m of funding from the GM Combined Authority when the latter reduced its housing targets as part of developing the Greater Manchester Spatial Plan. The second was the very public disagreement between the Mayor (Andy Burnham) and the Government over the amount of support available to businesses in GM as a result of Government imposed Covid restrictions. The Government’s response – a threat to negotiate support packages with individual local authorities in GM – was also instructive.

Civil Service Jobs

Although the Government has undertaken to move some Treasury and other jobs (though not necessarily current officials) out of London, it remains to be seen whether any power and influence accompanies them.  It appears to have no interest in learning the lesson from Government Offices (or, for that matter, from RDAs) about the importance of bringing different Departments together to break down silo modes of thinking. Nor is there any sign that they intend to follow up on Lord Heseltine’s suggestion in No Stone Unturned that relocations should be used to build more strategic capacity in local government.

Delayed White Papers and Disappearing Ministerial Speeches

Local government in England is now a patchwork of different governance models and powers – with a bias towards city regions with an elected Mayor – which does not look sustainable.   Levelling up has not yet developed beyond being a slogan.  City Deals sit alongside Devolution Deals and Growth Deals with much overlap between content, geography and governance. And a recent report pointed out there are now 349 Local Authorities and Combined Authorities with economic powers, sitting alongside 39 LEPs which also have economic powers but with different geographies and lines of accountability.  Moreover, post-2010 austerity means that many LAs have lost the capacity to work outside their statutory responsibilities.

It is also increasingly clear that in some areas – for example transport, environment and planning – there is the need to reinstate at least part of the regional apparatus put in place by Labour.  Recent reports by both IPPR and the  UK2070 Commiission have argued for four new democratically accountable bodies covering the North, the Midlands, the South West and the wider South East.

Michael Gove in his Ditchley Lecture back in July offered an insight into Government thinking on the importance of elected Mayors when he said “we need to look at how we can develop an even more thoughtful approach to devolution, to urban leadership and to allowing communities to take back more control of the policies that matter to them. One of the glories of the United States is that there are fifty Governors, all of whom can be public policy innovators”.

The then Minister, Simon Clarke, went even further in a widely reported speech around the same time when he explicitly linked future funding and powers to a reorganisation of local government in England into unitaries and Combined Authorities, all with elected Mayors“This September, the government will … be publishing the Devolution and Local Recovery White Paper…which will lay a clear path for levelling up every region of our country.  The White Paper establishes the framework to fundamentally rewire the role of the state at all levels.”

But it seems that ministers began to realise that giving people like Andy Burnham a voice (even without giving them resources) can cause acute political difficulty.  The Local Government Chronicle reported that most senior ministers had gone cold on the devolution agenda.  There is no sign of the White Paper.  And Mr Clarke’s speech mysteriously disappeared from Government websites(You can however read it here.)

All in all, it is hard to identify any real progress since 1969 when Harold Wilson said, in reference to the Redcliffe Maud report, “It is my hope that the reorganisation of local government will provide an opportunity and the incentive …..for a fresh attack on (this) problem of central financial control”

David Higham

(This guest blog by David Higham (@oldtrotter) was first published by the Constitution Society.)

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