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Articles about the UK Civil Service and Regulation

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Dear Mr Gauke. Sacking Independent Decision Makers Encourages Cowardice and Indecision

All British governments from – and including – Mrs Thatcher’s have recognised that it makes sense to hand much tricky decision-making to independent bodies.

Lower energy prices are politically popular, but damage investment. Liberal prescribing of new expensive drugs is welcomed by patients, but unaffordable by the NHS. Parole cuts prison costs and is often humane, but carries risk of re-offending.  These judgment calls are best made by independent bodies, not least so that you – Minister – cannot be criticised. Their decisions can of course be challenged on appeal or by judicial review brought by those affected.

You absolutely do not want such regulators and other agencies to be scared of being challenged in court and/or upset by media criticism when they lose an appeal.  You want them to take difficult decisions involving fine judgments and to learn whenever they are over-ruled.   A regulator who always wins on appeal is a regulator who always shrinks from difficult decisions, and  who never takes on a big company with a large army of lawyers.

The problem in the UK is that (with some honourable exceptions) we have too often suffered from regulators and other decision makers who have been too scared of challenge and so too indecisive – remember Private Eye’s ‘Fundamentally Supine Authority‘ – and possible Ofgem’s previous management’s reluctance to tackle the big energy companies?

The courts found that the Parole Board had erred in the Warboys case because

  • The (criminal court) judge’s sentencing remarks were not in the Parole Board dossier (not their fault)
  • Information about the other 80 possible victims was also not in the dossier (not their fault)
  • In particular, the (civil court) judge’s decision was not in the dossier (not their fault). (He found Warboys to be ‘clinical and conniving’, and noted that the rape kit in Warboys’ car suggested there would have been other later victims.  But Warboys never accepted such responsibility.)
  • The Parole Board had not made detailed inquiries about the other possible offences.  This was their error albeit made to some extent on advice, fearing that it would be wrong to imply guilt for an offence for which he had not been charged.

None of these reasons suggest that the Parole Board was badly run or incompetent.  They made a close-call decision which was rightly challenged and overturned.   That is the way the system is supposed to work.  You should have supported the Board, not criticised nor sacked its highly respected Chair.

(Secret Barrister’s  very clear summary of, and comment on, the Warboys decision is here.)

Martin Stanley

Understanding Regulation

 

 

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The Problem is Smuggling

Brexit is all about having different import duties and/or regulations on either side of the UK/EU border.

As soon as there is divergence, there will need to be bureaucracy, much of which – and maybe most of which – can be automated.  Legitimate, organised, compliant traders might face little or no monitoring, even if they find ‘rules of origin’ to be a right pain.

But there will be an incentive to evade higher tariffs and/or higher regulation by smuggling food, livestock and other goods across the border.  The incentive will be in proportion to the difference between the UK and EU regimes.  Low import tariff UK food, for instance, might be smuggled into the Irish Republic over any of the >200 current crossing points.  But smuggling needs to be identified at the border, or else there will be little deterrent and no sound evidence trail which can be used by prosecutors .

Some traffic and some people will therefore need to be stopped and searched.  This is why a so-called ‘hard border’ will be needed – in Ireland as much as in Dover and Calais.

 

Martin Stanley

The UK Civil Service
Understanding Regulation

£10+ Billion Deregulation since 2010 – or ‘Alice in Wonderland’ Statistics?

I was not the only commentator who found it difficult to understand Ministers’ claims that they had ‘reduced regulatory costs for business by £10 billion during the 2010-15 Parliament’. But I have recently re-read an excellent NAO report which explained how this was calculated and – just as important – what it did and did not include.

First, the £10bn is calculated as follows. Let’s say a regulation which costs business £20m a year was abolished in 2010. The saving over the coming five year Parliament is assumed to be 5 times this amount – £100m. Fair enough! But what happens if it was abolished in 2015 – during the last year of the Parliament? It is then still reported as £100m over the Parliament. That is a seriously weird way of reporting the figure.

A much better way of reporting the savings would be to take the annual savings as perceived by business – which started quite low but had built up to around £2.2bn over the five years to 2015. That is still a worthwhile saving – except ….

There are major exclusions before the net savings are calculated. These include massive areas such as:

  • tax administration (particularly Income Tax, Corporation Tax and VAT),
  • European Union regulation,
  • the National Minimum Wage (see further below),
  • the Living Wage (ditto),
  • the Apprenticeship Levy,
  • compulsory Workplace Pensions,
  • fees and charges imposed by government or regulators, such as the fees paid by care homes to the Care Quality Commission.

The result of these exclusions is as follows.

2010-15: The NAO reckon that almost half (46%) of the 951 regulatory decisions made during the 2010-15 Parliament were not included in the estimated savings of £10bn. These 46% were estimated to have imposed annual costs of £2.8bn, rather more than the £2.2bn annual savings that had been achieved by the end of that period. In other words, the burden of regulation increased over those five years, not decreased.

2015-16: The Government claimed net savings of £0.9m during the period from the beginning of the next Parliament through to the date the NAO prepared its report. This however excluded the cost of the introduction of the National Living Wage (£4.1bn) as well as the increased minimum wage  – adding another £3.1bn to businesses’ costs. This was clear cherry picking of the measures that HMG chose to include in its targets. Other exclusions added up to around £0.8bn bringing the total to £8.0bn, a good deal more than the savings of £0.9bn!

The inclusions – those savings that are claimed by the Government – are interesting, too. Over 90% of the £10bn claimed savings 2010-15 were due to 10 changes, including:

  • changing the inflation index used to increase pension benefits,
  • reducing audit requirements for small companies, and
  • streamlining the guidance relating to contaminated land.

These were hardly the sort of deregulation that would be appreciated by a typical SME.

The inclusion – as deregulation – of the new law requiring larger retailers to charge £0.05 per plastic bag was particularly odd. This was counted as a regulatory saving amounting to £1.0bn over five years because the shops would now spend less on buying the plastic bags. But was this really deregulation? As one MP noted: “we imposed this regulation on business to [make them] do something they were not previously doing, [and yet] we are claiming £1bn towards our target. That is like something out of Alice in Wonderland.”

And note, by the way, that if this £1.0bn figure is excluded from the net saving of £0.9bn, there was in fact no progress at all towards the government’s target during the 2015-16.

Note too that subsequent research showed that the gross proceeds from the plastic bag charge had been around half of the Government’s first estimate, so the true five year saving to business (if it was a saving) was only £0.5bn. But the reported figures will not be revised.

Indeed, the NAO also pointed out that departments seldom monitor the ongoing impact of their regulatory decisions, And departments are supposed to evaluate their new regulations within five years of implementation – but they don’t. 83 regulatory decisions were made in 2011. By 2016, only seven reviews had been scheduled of which only two had been completed.

A detailed history of deregulation in the UK may be found here.

Martin Stanley

Editor Understanding Regulation

How to Earn Loads of Money in Whitehall – Senior Salaries Analysed

I have annotated the government’s fascinating list of 442 central government public servants paid more than £150k a year. Click here to download the spreadsheet. 

First, I have re-ordered the list so that the highest paid appear at the top of the spreadsheet.

I have then highlighted in BOLD those civil servants who work in Whitehall departments reporting directly to Ministers.  I have thus excluded those (mainly non-civil servants) who work in:

  • semi-commercial organisations such as Network Rail
  • the NHS
  • the Armed Forces
  • Parliamentary Counsel’s Office
  • ‘Next Steps Agencies’, and
  • various regulators.

Within this EMBOLDENED category, I have then highlighted in red those who seem to me to have traditional civil service roles as distinct from having been recruited (probably at a senior level) as commercial, procurement and other specialists.  There are only 26 of these.

Enjoy!

Martin Stanley

Editor, the UK Civil Service and Understanding Regulation

Notes

  1. The original spreadsheet lists those jobs whose salaries are set by Ministers (or by the Treasury on behalf of Ministers).  It thus excludes much of the public sector, such as local authorities, the police, the BBC etc. Click here if you want to read a definition of the civil service and a description of the various sorts of public body in the UK.
  2. It is interesting that, apart from the Permanent Secretaries, the highest paid central government public servants all have an engineering or commercial background, or are senior lawyers or medics.  And those engineering /commercial specialists who work in Whitehall will all, I suspect, have been direct entrants at a senior level and will not have risen through the ranks.
  3. Click here to see the original spreadsheet, which includes more detail than my version.

(Indian) Civil Service Reform (1854)

Those interested in the history of the Civil Service will enjoy reading the 1854 Macaulay Report on the selection and training of entrants into ‘the Civil Service of the East India Company’.  The report was in some ways a 19th century version of the 1968 Fulton Report on the structure of the UK Civil Service.

Like the Northcote Trevelyan Report, published around the same time, the text is mercifully short and to the point, and the authors were delightfully honest when not 100% sure of their recommendations:-

“… we are inclined, though with much distrust of our own judgment, to think that …”.

They were also well aware of how their recommendations could be perverted:

“We propose to include the moral sciences in the … examination … Whether this study shall have more to do with mere words or with things, whether it shall degenerate into a formal and scholastic pedantry, or shall train the mind for the highest purposes of active life, will depend, to great extent, on the way in which the examination is conducted.”

And the training was to be thorough:

“[The new recruit] should study [Indian history], not merely in the works of Orme, of Wilks, and of Mill, but also in the travels of Bernier, in the odes of Sir William Jones, and in the journals of Heber. … He should understand the mode of keeping and checking accounts, the principles of banking, the laws that regulated the exchanges … [etc.].”

I have added the report to my online reference library. Or, to go straight to the report, click here.

 

Martin Stanley

www.civilservant.org.uk

Understanding Regulation

 

Electricity Prices – Government Report Blames Government

Dieter Helm’s report, published today, blames excessive and wrong headed government intervention for high electricity prices.

The report is an economic and regulatory tour de force. It recommends that £100 billion of climate change costs should be isolated and charged outside regular energy bills, with industrial customers being exempt.  The agricultural sector and Ofgem should be reduced in size.

How will politicians react?  They should agree with everything that Professor Helm recommends. But that would mean taking brave decisions …

Here are key extracts from the report’s summary recommendations.

“This review has two main findings. The first is that the cost of energy is significantly higher than it needs to be to meet the government’s objectives and, in particular, to be consistent with the Climate Change Act (CCA) and to ensure security of supply. The second is that energy policy, regulation and market design are not fit for the purposes of the emerging low-carbon energy market, as it undergoes profound technical change.”

“The [£100 billion] legacy costs from the Renewables Obligation Certificates (ROCs), the feed-in tariffs (FiTs) and low carbon contracts for difference (CfDs) are a major contributor to rising final prices, and should be separated out, ring-fenced, and placed in a ‘legacy bank’. They should be charged separately and explicitly on customer bills. Industrial customers should be exempt. Once taken out of the market, the underlying prices should then be falling.”

“In electricity, the costs of decarbonisation are already estimated … to be around 20% of typical electricity bills. These legacy costs will amount to well over £100 billion by 2030. Much more decarbonisation [i.e the response to climate change] could have been achieved for less; costs should be lower, and they should be falling further.”

“Government has got into the business of ‘picking winners’. Unfortunately, losers are good at picking governments, and inevitably – as in most such picking winners strategies – the results end up being vulnerable to lobbying, to the general detriment of household and industrial customers.  … the government now determines the level and mix of generation to a degree not witnessed since these were determined by the nationalised industries …. Investment decision-making has been effectively quasi-renationalised.”

“The overwhelming focus on electricity rather than agriculture, buildings and transport has added to the cost. Agriculture in particular contributes 10% greenhouse gas (GHG) emissions, and the costs of reducing these emissions are much lower than many of the chosen options because the economic consequences of a loss of output in agriculture are small. Agriculture comprises just 0.7% GDP and at least half its output is uneconomic in the absence of subsidies. With the development of electric vehicles (EVs) it is apparent that transport can contribute more.”

“Ofgem’s role in regulation should be significantly reduced …”

“Not to implement these recommendations is likely to perpetuate the crisis mentality of the industry, and these crises are likely to get worse, challenging the security of supply, undermining the transition to electric transport, and weakening the delivery of the carbon budgets. It will continue the unnecessary high costs of the British energy system, and as a result perpetuate fuel poverty, weaken industrial competitiveness, and undermine public support for decarbonisation. We can, and should, do much better, and open up a period of falling prices as households and industry benefit from the great technological opportunities over the coming decades.”

Further background is in the Energy Regulation section of the Understanding Regulation website.

The full Helm Report is here.

 

 

GDP will be Lower if Immigration Turns Negative

Much of the Brexit debate has been about UK population growth, especially that caused by immigration from the rest of the EU. It’s therefore worth remembering that GDP is broadly proportional to population.  GDP/Head is a better indicator of economic success. This chart compares UK data since 1971.

Screen Shot 2017-10-15 at 14.29.21

c0.8% pa of recent GDP growth may be attributed to population growth:

Screen Shot 2017-10-15 at 14.29.41

GDP is now 17% higher because of our increased population since the 1970s – that is the gap between the blue and red lines in the first chart above:

Screen Shot 2017-10-15 at 14.29.58

Implications?

  • GDP growth will decrease if EU immigrants leave.
  • Much government expenditure is broadly proportional to population so HMG could then spend less.
  • But long term international political influence depends on economic strength.
  • Could there, in particular, be serious implications for e.g. defence and infrastructure expenditure?

Martin Stanley

Uber: Regulation isn’t just about Encouraging Competition

Transport for London’s (TfL’s) decision that it will not (yet?) renew Uber’s licence has upset a great many people, particularly those who had been delighted to see an innovative new taxi service competing with black cabs and minicabs.   I still shudder when I remember how hard it used to be to get a black cab to come ‘South of the River’ – across a central London bridge which is all of 10 minutes walk from my home.

But we all need to remember that even economic regulators need to worry about more than just competition and prices.  All of us who have worked in competition authorities love to show that competition lowers prices, as it so often does. But we also need to ensure that price-constrained entities do not increase their profits in other ways – in particular by sacrificing quality or service – or by risking their customers’ safety. We all focus on electricity prices, for instance.  But let’s not forget that electricity suppliers are fiercely quality controlled in that they must supply alternating current with high reliability and fixed voltage etc..

So TfL have an important duty to worry about much more than Uber’s pricing.  They have, quite properly not released the detailed decision letter that they will have sent to Uber.  But they and we have seen the Met Police’s April 2017 letter to Uber.  I also recommend this detailed analysis of TfL’s decision:

https://www.londonreconnections.com/2017/understanding-uber-not-app/ .

TfL themselves say that:  “TfL has concluded that Uber London Limited is not fit and proper to hold a private hire operator licence.”  This is because “TfL considers that Uber’s approach and conduct demonstrate a lack of corporate responsibility in relation to a number of issues which have potential public safety and security implications. These include:

  • Its approach to reporting serious criminal offences.
  • Its approach to how medical certificates are obtained.
  • Its approach to how Enhanced Disclosure and Barring Service (DBS) checks are obtained.
  • Its approach to explaining the use of Greyball in London – software that could be used to block regulatory bodies from gaining full access to the app and prevent officials from undertaking regulatory or law enforcement duties.” (emphasis added)

Much criticism of TfL’s decision seems to assume that their safety and regulatory access issues are mere pretexts for closing down the service.  This is a pretty serious charge and, if it is true, then this will become clear on appeal.  But if TfL do indeed have genuine safety etc. concerns, then surely they are acting responsibly?  Uber may not be as important a part of the London transport system as buses, tubes and trains, but none of us want our children or young friends – or indeed ourselves – to be using potentially unsafe transport.  And it is surely much better for TfL to act now than after some dreadful incident?

Equally, good regulation requires early intervention when a problem is spotted.  If weak warnings are issued, and a problem is allowed to continue, the company could later, with some justification, claim that the issue cannot be that serious or the regulator would have acted earlier.

Also, in this particular case, I rather agree with James O’Brien who tweeted “I think getting caught developing [Greyball] software specifically intended to obfuscate the work of regulators is also likely to backfire, you know”.

Mind you, the competition issues are interesting in one way. The (unlikely) disappearance of Uber from London’s streets has been treated as such a major calamity that it is all over the national news. Many London-based journalists – presumably frequent Uber customers – seem genuinely to believe that all Londoners should be concerned at this terrible threat to the city. I have my doubts, I must say, for London has one of the best public transport systems in the world.  But if the commentators are correct then maybe Uber is getting close to becoming ‘too big to fail’?  If this is so, then Uber surely has become just a bit too powerful.  Regulators including TfL must then have the guts to stand up to Uber, and not exempt it from complying with standards that have to be met by all its competitors, however powerful Uber’s PR machine may be.

Editor  Understanding Regulation

 

 

Francis Maude Fluffed His Chance to Achieve Lasting Change

Ex-Cabinet Office Minister Francis Maude has renewed his criticisms of senior civil servants. According to The Times, he believes that they routinely mislead Ministers, waste billions of pounds, “turkey farm” poor performers (promoting them or moving them sideways) and treat outsiders as “country members of their club.  Whitehall has ‘a bias to inertia’ and needs to be fundamentally reformed, he says.

His use of the word ‘club’ is interesting – and pretty accurate.  The club like nature of the Senior Civil Service has been one of its great strengths. The club’s culture has fostered great integrity, commitment to public service, mutual support in times of real crisis, and – yes – an admirable willingness to forgive occasional error rather than eject everyone who takes risks that go wrong.

The clubby atmosphere is however also its greatest weakness. Forgiveness of mistakes morphs too easily into tolerance of poor performance.  ‘Turkey farming’ is indeed widespread. New recruits from outside are indeed eyed with considerable concern until they have shown that they will not rock the club’s boat too much. Senior women have to be ‘the right sort of chap’.

But I don’t buy his accusation that Ministers are frequently deliberately misled or disobeyed.  He has said this before, been challenged to quote examples, and failed to do so. I suspect that the truth is that some of his reforms were deeply unpopular with his Ministerial colleagues (as well as civil servants) and so failed to gain traction.  There was certainly great bitterness, for instance, in Vince Cable’s department when they obeyed Cabinet Office orders to buy ICT from smaller firms and found themselves unable to identify any one provider willing to take responsibility for ensuring that an expensive new system actually worked.  They wished they had dragged their feet like some others – including the Treasury who strongly opposed the creation of new central functions and in due course totally opted out of Francis Maude’s disastrous recruitment and training reforms.  If (now) Lord Maude has criticisms, they should be directed at George Osborne.

As for ‘wasting billions of pounds’ – tell that to the many high level project management recruits from the private sector.  They despair at having to implement major projects with unclear and changing objectives, ridiculous politics-driven timescales and inadequate resourcing.  Think Universal Credit – or Brexit ….

What about the “bias to inertia”? Maybe it’s “Look before you leap, Minister!”

The real shame is that Francis Maude and his officials missed their golden opportunity to reform Whitehall when embarking on what they described to the Public Administration Committee as “intense change” and a “dramatic change in culture”. “The civil service will inevitably become much smaller, flatter and less hierarchical, as it should do.” But they reckoned that they could achieve this change without any sort of plan. The Minister and his officials, including Gus O’Donnell, Head of the Civil Service, said that there was “no blueprint” and proposed to implement the changes “for the first time without a White Paper”. “A lot of this is just common sense – not revolution”.

To their credit, Committee Chair, Bernard Jenkin, and other committee members were openly sceptical. Surely every successful change programme needed to be planned? “Having a plan is an act of leadership.” In response, ex-Accenture and loyal official Ian Watmore declared that he was a change expert, recruited from the private sector, and saw no need for a plan – a statement so ridiculous that it would undoubtedly have led to failure in any appointment or promotion interview whether within the civil service or with his previous employer.

Reporting in 2013 Sir Bernard’s committee said that “The Government has not … identified any fundamental problem with the Civil Service and the Minister, Francis Maude, says he does not believe that fundamental change is necessary. We conclude that “incremental change” will not achieve the change required. Unless change is clearly heralded and given high profile leadership by a united team of ministers and senior officials, it is bound to fail.”

The Liaison Committee – made up of the Chairs of all the Commons Select Committees – then agreed, even after they had met the Prime Minister: “We remain unconvinced that the Government’s Civil Service Reform Plan … is based on a strategic consideration of the future of the Civil Service. The Prime Minister’s evidence to us in September did nothing to suggest that the Government has a coherent analysis of why things in Whitehall go wrong. We endorse the recommendation of the Public Administration Select Committee that the Government should ask Parliament to establish a Parliamentary Commission into the Civil Service.”

The Government’s January 2014 response was an extremely – almost rudely – thin and bland document which said very little more than that “The Government is not persuaded by the Committee’s argument in favour of a Parliamentary Commission”. 

But Whitehall is of course well overdue for reform.  There have been many successful management and efficiency reforms, including under Francis Maude.  Longer ago, ‘Fulton’ and ‘Next Steps’ were very positive developments but they didn’t touch the fundamental questions that so concern Lord Maude.  Indeed, there hasn‘t been a proper look at the relationship between Parliament, Ministers and the Civil Service since Lord Haldane reported in 1918. I am far from sure that I know the answers but it is surely reasonable to ask questions such as:

  • What is the right balance between cost and service quality – in terms of both the service provided by ‘Whitehall’ to Ministers and the service provided by the wider (and much larger) Civil Service to the public?
  • Are senior officials now spending too much time defending their Ministers, and not enough time speaking truth to power?
  • Is there no way of allowing officials to demonstrate promotability other than by moving from job to job every couple of years?
  • How much freedom should officials have to innovate and respond to local needs?
  • Do we still need a single ‘Civil Service’ as distinct from a number of grouped departmental administrations?
  • Or, looking the other way, do we still need a single Civil Service comprising only 8% of, and quite separate from, the rest of the public service?

It’s a great pity that Francis Maude did not allow these questions to be asked when he had the chance.

Martin Stanley

Editor The UK Civil Service

Brexit could Harm Competition within UK

Experts at the Centre for Competition Policy have analysed the effect of Brexit and concluded that:

  • It will create new freedoms for the UK to shape its competition policy outside the EU,
  • but these freedoms come at a cost and could prove damaging to competitive markets.
  • In merger control, the UK will be free to intervene, for instance  to protect jobs (‘public interest interventions’). Such interventions could be particularly targeted at foreigners attempts to buy UK companies.   But these powers could be misused and create uncertainty.
  • There will be pressure for greater protection of UK industries through state interventions, such as subsidies, but such freedom will constrain, and be constrained by, the UK’s new trade arrangements and could prove wasteful.
  • The UK will be free to set its own path in many areas, for example by fully criminalising cartels,
  • but cooperation with other EU competition agencies will dwindle.
  • The resources of the Competition and Markets Authority may need to be doubled.

An abstract is here.

[Further information about the UK’s current competition policies may be found on the Understanding Regulation website.]

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