THE MANDARINS' PIPS ARE SQUEAKING

Sue Cameron reports on fear and

loathing in Whitehall, as market forces intrude on life at the top

THE PERMANENT secretary, who I sup- pose I must call Sir Humphrey, shook his head mournfully. 'I'm not ready for it,' he said. 'I can see it coming. Eventually. But right now I say it would be premature.'

What had caused him to falter in mid- flow was the suggestion that Whitehall pol- icy advice--- and, more to the point, policy advisers like Sir H. himself — should be, in a manner of speaking, 'privatised'. After all, everything else is, including, according to last weekend's Observer, the prison dog service.

Top civil servants like 'Sir Humphrey' reluctantly admit there is now the awful prospect of market forces being brought to bear in the hitherto sacrosanct area of Whitehall policy advice to ministers.

Not before time, according to some right-wing pundits who believe the intro- duction of commercial disciplines is the only way to boost performance and effi- ciency in Whitehall's upper echelons. They point out that such an approach has already been adopted in New Zealand. Five years ago the permanent secretaries there were turned into departmental chief executives and put on short-term contracts complete with written objectives.

The fear of losing their annual pay rises, annual bonuses and job contracts seems to have galvanised New Zealand's top offi- cials into improving their standards. Nowa- days they all hit departmental spending targets instead of exceeding them, as they invariably did when they had no personal stake in meeting budgets.

Is the time now ripe for our own Sir Humphreys to be put on short-term con- tracts? Should they have to compete for advisory work against outside consultants? Should they run the risk of being out on their ears if they fail to perform well against a set of written, published objec- tives?

`Sir H.' swallowed manfully: 'You could find criteria for judging the quality of advice given to ministers,' he said slowly. You could ask whether all the options had been covered; whether the right people had been consulted and whether enough time had been allowed to consider the pol- icy.,

`But that's not what the public would be looking for' — he sighed — 'they'd want to judge us on policy results.' What sort of policy results? Pit closure disasters? Black Wednesday? That kind of thing? He nodded miserably. Mmm . . . One could see the difficulties of replacing Whitehall's traditional public service ethic with something altogether more busi- nesslike. Yet that is what is starting to happen. Ever since the great reforms of the mid- 19th century which replaced civil service jobbery with high-minded meritocracy, the public service ethic has been rooted in Whitehall's independence from outside interests — particularly those of party politicians. The Whitehall monolith looked after its own, if not from the cradle to the grave then certainly, in the case of the mandarinate at least, from Oxbridge to an honoured retirement. (With a brace of Ks and a peerage for its most favoured sons.) It never paid more than a comfort- able competence, but it rewarded ability with promotion and it offered complete security of tenure. In return, British man- darins put the public interest first. They were not always right in gauging where it lay, nor did they always agree about it. But they advised their political masters without fear or favour; they took a long-term view and they had no hesitation in saying 'No, Minister' when they believed it necessary.

Then came the Thatcher years. The machinations that had enabled the Sir Humphreys to manipulate policy gave way to a 'can do' mentality. Meanwhile, minis- ters came increasingly to make use of pri- vate think-tanks such as the Centre for Policy Studies and the Adam Smith Insti- tute for policy initiatives, if not their imple- mentation. And what the mandarins could do when told by ministers to reform their own system proved quite breathtaking. Within a few short years, under the Next Steps programme, nearly three quarters of the 600,000-strong civil service has been hived off from Whitehall into semi- autonomous executive agencies, headed by chief executives on contract.

Radical pundits like Graham Mather of the European Policy Forum, and aca- demics like David Osbourne and Ted Gae- bler, authors of the US bestseller Reinventing Government, insist that the new business culture is already acting like a tonic on Britain's ailing civil service. They believe further doses of the medicine are all that is needed to cure any remaining sickness in the system.

So far, changes have affected only offi- cials who run services to the public — be it vehicle licensing or social security benefits. What the radicals are now asking is why short-term contracts, open competition for senior posts and the contracting-out of some policy advice cannot be introduced to Whitehall's policy-making heart.

In evidence to the Treasury and Civil Service Select Committee inquiry into the role of the civil service, Graham Mather complained: 'Whitehall has tended not to `I like to see a girl with spirit.' practise what it preaches for others . . . It is a truism that effectiveness in policy-mak- ing cannot be measured in precisely the same way as commercial performance. Yet it would be absurd to suggest it cannot be measured at all.'

Whitehall seems to be dragging its feet in the classic manner. Senior officials acknowledge that reform along business lines would be possible. But they are not slow in showing the drawbacks. As they might put it, they are fully seized of the need for reform and have taken it on board. Which is not at all the same as promising to do anything about it. When I was attached to the Department of Energy officials would occasionally and damningly describe a particular policy as 'bold', 'origi- nal' or 'interesting', by which they meant dangerous, stupid and totally unworkable. Traditionally, the mandarinate's first defence against changes it dislikes has been to produce a list of potential prob- lems. When it comes to reservations about applying market-place methods to policy advice, the list is a long one. Near the top is concern about the difficulties of assess- ing a policy adviser's performance.

Such an objection might be more con- vincing if Whitehall had not already sold the pass on this particular question. Two years ago it accepted the introduction of performance-related pay awards for all senior mandarins except permanent secre- taries. The awards have boosted many salaries by several thousand pounds a year.

Fears that the introduction of commer- cial disciplines such as short-term con- tracts could jeopardise Whitehall's much-prized political neutrality are also used as an argument against change. As Sir Robin Butler, Cabinet Secretary and Head of the Home Civil Service, told the Treasury and Civil Service Select Commit- tee: 'Advice to ministers is likely to be more impartial if people are not seeing the end of a fixed term approaching and are worried about whether their position will be renewed. Tenure is more likely to lead to frank and fearless advice.'

On the surface, the civil service case for insisting on job security as the sine qua non of political impartiality still seems to be a strong one. But last year it was dealt a serious blow when Whitehall itself counte- nanced the sacking of Sir Peter Kemp, the permanent secretary who had been in charge of the Next Steps programme. Sir Peter was fired partly because he was thought to be unsuited to the job of run- ning a department and partly because of a personality clash with his minister, William Waldegrave, who seems to have felt that frankness and fearlessness could go too far. Whitehall has always been prepared to move officials who failed to establish a working relationship with ministers. But in the past it has always looked after its own by finding them alternative posts — partic- ularly if a man were being shifted at the behest of a politician. But now, as Sir Robin Butler has admitted, 'the idea of the civil service as a secure sinecure has gone'.

So if Whitehall has already conceded in principle that its performance can be mea- sured and its security of tenure can be breached, why not embrace the enterprise culture wholeheartedly? Such a suggestion provokes most mandarins to move to their classic second line of defence — viz: if you see a bandwagon rolling inexorably towards you, shout hurrah, leap aboard — and start looking for the brakes.

`Of course, you can't carry out huge changes in the greater part of the civil ser- vice and then leave the last 25 per cent the policy advisers — unchanged,' said one permanent secretary to me. 'But maybe we can have the best of both worlds. Maybe we can keep a career civil service but with enhanced personal accountability, greater professionalism and a strong sense that if you don't perform you're out.'

Maybe, but not if they continue to erode the foundations of a career civil service by sending out such confusing signals to potential recruits. For example, mandarins who take top jobs in the new semi- autonomous executive agencies can negoti-

ate pay rises of up to £20,000 a year on the grounds that salaries for such posts are `market-led'. So, is the message to young high flyers that old-style policy advisers are no longer as highly valued as the new breed of public sector business managers? It is not as if potential recruits can any longer be lured along with the hope of honours. Whitehall's guaranteed bumper ration of automatic knighthoods and assorted lesser gongs has just been abol- ished by John Major.

Some top Whitehall officials may fondly imagine that, gongs or no gongs, they will be able to inflate their salaries on the backs of their better-paid colleagues in the executive agencies. But attempts to do so would almost certainly raise questions in the House — to say nothing of the tabloid press — about the scandal of giving huge pay rises to those who had advised minis- ters on Matrix-Churchill, Black Wednes- day, the Criminal Justice Act, the great pit closure disaster, and so on, and so forth.

The only way to escape from what Sir Humphrey calls 'the pay bind' is for the mandarins to adopt market disciplines and accept higher risks — in the form of short- term contracts — in return for higher pay.

Senior officials arc certainly not giving an unequivocal thumbs down to market reforms for policy advisers. As one of the younger, comparatively radical permanent secretaries said, 'Any civil servants who feel that the period of change is now over and they can return to old certainties can forget it. It's going to go on changing and things are going to be pretty bumpy.'

On the other hand, some mandarins do seem to be busily vacillating behind their files. They are 'waiting for ministers to decide'. Word from ministers is that this is news to them, Said one member of the Cabinet, 'I'm not aware that we're about to take any decisions — I certainly haven't seen any papers. Of course it's not my department, so maybe nobody's told me.' Some things never change.

Sue Cameron is a presenter on BBC2's Newsnight.