Evidence Session 1: Assessment

What’s Gone Wrong with Whitehall? 

Evidence session with George Osborne

The Commission for Smart Government held an evidence session on Wednesday 4 November 2020, where Commissioners put questions to George Osborne, Chancellor of the Exchequer 2010-2016 and First Secretary of State 2015-2016.

The session focused on the standout successes and failures of recent public administrations, and panellists discussed the Commission’s recent paper What’s Gone Wrong with Whitehall?

Commissioners present at the session included Lord Bichard, Deborah Cadman, Baroness Cavendish, Sir Suma Chakrabarti, Sir Ian Cheshire, Phaedra Chrousos, General Sir Chris Deverell, Baroness Finn, Verity Harding, Lord Herbert of South Downs (Chair), Dame Margaret Hodge, Husayn Kassai, Daniel Korski, Sir Paul Marshall, Sir Mark Rowley, and Baroness Stuart of Edgbaston. 

Highlights from George Osborne’s evidence

On the lessons from the government’s response to the pandemic:

Osborne observed that whilst some things had gone well – standing up the furlough system, delivering a surge in hospital capacity – when looking at questions of government effectiveness, you have to ask why it was that Germany had done so much better.  He identified the following key factors:

Leadership: “You have to look to the political leadership, and there was some inconsistency [and delay] in decision-making at the beginning”.  

Planning: “there were clearly flaws in the contingency planning. No one had anticipated a pandemic that was not a flu’”. 

Weakness of the centre of government: “there was an extraordinary period in April where the centre of government was a bit like the Marie Celeste at a critical moment in the country’s history.”  

Centralisation: “It feels like the German federal system was better able to cope.” 

The NHS: “There are serious questions about how [the UK’s] public health model coped. And whether in Germany there was more of an interface with the private sector, particularly on testing, that enabled them to cope better.”

On bringing in talent to government:

Osborne said that other countries are better at bringing in outside talent to senior government roles and argued for a system of non-parliamentary ministers to increase the talent pool, drawing from the senior ranks of business and academia.  

“One thing I’ve always admired from other systems, which tend to be presidential systems, is the ability to draft people to very senior ministerial and senior administrator roles.” 

Reflecting on the limitations of the UK’s current system:

“You’re quite limited in the range of talent you can bring in.  You either have the odd person parachuted in through the House of Lords or you create kitchen cabinets around prime ministers which are opaque and feel unaccountable – look at the controversy around Boris Johnson’s kitchen cabinet”

“There were some success stories – Jim O’Neill and Paul Deighton – but I would have liked to do more of that. For example, I wanted to bring in a top world class economist as the government’s chief economist.”

He proposed establishing a new approach in which it becomes routine for senior business leaders to spend a four to five-year tour in public service in a pseudo-ministerial/senior administrator post, not necessarily called a ‘minister’ but able to direct the Civil Service:

“You could experiment more with having a wider range of people who wouldn’t necessarily need to be in the House of Commons or the Lords.” 

“This gets around this basic problem that a lot of sane people don’t want to go into politics! People may want to spend four or five years in public service and return to the private sector.  In the US there have been some exceptional examples of very talented people brought into solve problems and be in the President’s cabinet, which our system doesn’t really allow.”

“That our system has become more presidential – authority flows from the Prime Minister and is the person who is held to account – may assist that [to happen].” 

On the role of the Treasury:

On the different functions of the Treasury, including proposals to split out the finance, macro-economic and spending functions:

“The power and the politics is all around the budget.  If you have a Finance Ministry which is just handling regulation of financial services, and representation of their country at the IMF and G20, the Finance Minister doesn’t have much clout, they’re not a senior member of their governments. The Budget Ministry is where the bread and butter of domestic politics happens.  So you might lose a lot and not gain very much.”

“If there’s a complaint about the Treasury, partly because of the decision to Bank of England control over interest rates, it’s that the Treasury ran down its macro-economic expertise. I always thought the Treasury was a bit under-gunned in that space.  The economics ministry element of the Treasury could be enhanced but I would do it within the Treasury itself.” 

On the role of Treasury to assess effectiveness of spending:

“It sees itself as doing the quite crude job of saying: here’s the money, and how are we going to divvy it up between health, education and defence…Treasury doesn’t do a huge amount of managing the effectiveness of the money. The central thing is the audit of the money, rather than what the pound delivered.”

“I’m not sure it’s the role of the Treasury to say we give the DfE £60bn a year, what is the outcome in terms of improving the learning of children?  I think that is the job of the cabinet, the prime minister and the centre.  Otherwise you’ve created an all-powerful Treasury that’s essentially running the government.  And it’s not the institutional job of the Treasury to decide that we should be spending more on healthcare and less on education.  That is a discussion that the Treasury can contribute to, but it’s a central decision for the government.”

On the weakness of the centre of government:

“I did give some thought to what it would be like to be the prime minister, moving from the Treasury.  I always felt that David Cameron didn’t really have the kind of support that I had as Chancellor.  He didn’t have a systematic ability to draw on his own sources of information, he relied on departments who were often reluctant to give information.”

On what he would have done to strengthen the centre:

“A prime minister should enhance the centre. I’d start with the Cabinet Office, you don’t need to invent something new.  The Cabinet Office has become a bit too much of a clearing department.  It’s not good at brokering the deals and imposing a prime ministerial input.  In my time, there was Jeremy Heywood and Oliver Letwin, and their departures created a massive hole in the middle of government. We had not created in the institutional arrangements, something that would outlive [them].” 

On the need for more institutional capacity at the centre:

“Blair began to find ways to enhance the power of No 10 and its ability to deliver in the Delivery Unit and Implementation Unit.  We scrapped all that when we got in then spent years trying to recreate it!”

“So I would recreate some of that machinery that Blair edged towards. I would enhance the Cabinet Office’s power to broker the deals, rather than just manage the process. And it would become a sort of Prime Minister’s department.”

On devolution:

Osborne set out how, if he had stayed on as Chancellor or become Prime Minister, he would have pressed ahead with the devolution project. He said:

“The Covid crisis has exposed the weakness in English devolution and how much more needs to be done.  We have attracted good people to Mayoral roles and the Covid crisis has elevated their status, made them more national figures going toe-to-toe with ministers. The risk is that with bailouts [in times of crisis], it sets devolution back, but it should turbo-charge it.”

“The NHS is too centralised and disconnected with the government, with local authorities, it’s an empire unto itself. I would have liked to have seen the devolution of the health service to Manchester replicated in the West Midlands and other areas.  More local control over skills to allow interface with business. I would have doubled down on Transport for the North and made it much more independent with its own budget.”

On more local tax raising powers:

Osborne agreed a closer link between devolution and tax raising powers was important:

“The Scottish government is held more accountable for its performance on healthcare and education because it has the power to raise money.”

Reflecting on England: 

“You could give more tax raising powers or take existing taxes that are collected nationally and collect them locally.  You could give much greater discretion locally over business rates – over larger economic areas like the West Midlands – and then you’d have a real incentive to grow business and see the revenues come in.  Same with Council Tax – if you build more homes then you get every single additional council tax bill.” 

On digital ID:

“If you had digital identity cards [or its contemporary equivalent] it would help with security online, and security of payments, and deal with problems that undermine confidence in the system as a whole – like welfare fraud and illegal immigration.”