TIME TO START CUTTING PEOPLE

Madsen Pink says that the public sector is still bloated, and that the bureaucrats themselves must be sacrificed

GOVERNMENT is living beyond our means to the tune of £50 billion a year. Despite ill-advised talk of tax increases, the Chancellor should know that govern- ment is not in debt because we are taxed too little. It is in debt because it is spend- ing too much. Any businessman could tell him that private firms make the most effective economies by shedding jobs. The more labour-intensive the industry, the more is this true. Since government is the most labour-intensive of all, the place to look for savings is in the number of public sector jobs.

Despite welcome reforms which have reduced the size and scope of public sector operations in Britain, there are key areas where this has made little if any difference to manning levels. Local authority bureau- crats seem to proliferate like rabbits. The NHS and the education service have not shed the numbers made redundant by the reforms.

Similarly, plans were announced last month for the closure of hundreds of local tax offices so that operations could be cen- tralised. Described as 'the most radical shake-up in the Inland Revenue for gener- ations', the proposals will affect 766 offices. Yet, despite the scale of the ratio- nalisation, the sting came in the tail of the Inland Revenue statement: no redundan- cies were envisaged.

This month also brought revelations that in the Ministry of Defence personnel costs now exceed purchases of equipment. It is a bad sign when the costs of an army's administration rise as its ability to fight declines. Despite a diminished size and role for the armed forces, equipment con- sumed 39 per cent while personnel accounts for 41.5 per cent. A high propor- tion of this goes on civilians instead of armed force personnel.

The MoD Civil Service stands at 155,800, of whom 129,200 are here in Britain. The army is smaller than this at Only 126,500. We have grown used to a navy which has more admirals than ships, but it seems astonishing to outsiders that, as the army shrinks, it should take more than one pen-pusher to support each sol- dier. Even the quality of the civilian per-

sonnel cannot be taken for granted. A series of purchasing blunders, reportedly costing up to £1 billion, has cast doubt on the way in which MoD personnel go about the process. Only 1,500 of the 22,000 MoD personnel involved in procurement are military personnel. At a time of cuts in military equipment, the procurement exec- utive is planning a new £250 million head- quarters, with landscaped grounds, woodlands, ornamental pools, sports facili- ties and shops. This may or may not pro- duce the efficiencies alleged to be its purpose.

The Defence Research Agency, formed by amalgamating four separate bodies, has attracted criticism after revelations that one quarter of its £750 million annual budget went on its own bureaucracy and overheads. Revealingly, a spokesman was quoted blaming the high overheads on the amalgamation. 'We have inherited four or sometimes more of everything,' she said.

A similar story can be told at the Department of Health, far larger than the MoD. It is nothing less than a scandal that the Regional Health Authorities have been saved, despite having no further rea- son for existence. The internal market between purchasers, such as budget-hold- ing general practitioners or District Health Authorities, and the providers, such as Trust hospitals, provides resources in response to need and does not require a bureaucracy to allocate them. Nonethe- less, a complete layer of bureaucracy has succeeded in saving itself and its jobs against all rational need.

Eric Caines, the former director of NHS personnel and now Professor of Health Service Management at Nottingham, has calculated that 'the NHS can do the work which the Government is prepared to fund with around 80 per cent of the present staff. In other words, he reckons that the NHS is employing 200,000 persons too many. With over three-quarters of NHS spending going to personnel, he estimates that a further £4.6 billion could be allocat- ed toward patient care without any diminu- tion of service elsewhere. His calculation is a brutal one: 'The NHS has a low pay, low motivation, low performance culture . . . The only way of escape is to have work done by fewer people.'

The same stubborn refusal to shrink with the job is evident in local education author- ities. With grant-maintained and locally self-managed schools taking vastly more responsibility for school budgets, the need for LEA bureaucracy has declined. The 17 per cent increase offered to schools which vote to opt out represents the saving in bureaucracy when they take on the job themselves. Yet, despite large numbers of schools choosing to take that road, no decline in LEA bureaucracy is evident. Numbers are reported to be increasing in some local authority education depart- ments. On a smaller scale, the acting chair- man of the British Tourist Authority, Mr John Lewis, revealed recently that while there have been government-inspired cuts in the staff of the BTA, the number of civil servants employed to monitor the BTA monitoring the tourist industry has remained fixed at 20.

One could be forgiven for wondering what is going on. Talk of savage cuts and the butchering of the Civil Service and its traditions seems to go hand in hand with the familiar maintenance of manning lev- els and the invention of new work to fill the time of those who would otherwise be made redundant by reorganisation and rationalisation.

The answer might be that we are looking at two forces operating simultaneously, but at different levels. There is a genuine revo- lution in government going through in the core Civil Service. Privatisation, market testing and the use of contractors on the one hand, and the reorganisation into Next Steps agencies on the other, are part of a movement to bring better value for money, and to give individual managers within the Civil Service the responsibility and the dis- cretion to introduce innovation and effi- ciency.

This is good, so far as it goes. But it only applies to the central staff. Meanwhile, the rest of the public sector has set a deplorable record. The degree to which bureaucratic jobs have been preserved in health and education is an outrage. The ability of desk jockeys to keep in the sad- dle while work disappears around them is not only well known, it is a moral disgrace. It means that many of the savings achieved by reforms in health and education are lin- ing the nests of bureaucrats instead of working their way back into the pockets of taxpayers.

Yet overmanning remains a fact of life in the public sector. One does not need the details of MoD or NHS staff levels to establish that. A glance at the job vacan- cies page of major newspapers shows that while private business might have been suffering a prolonged recession, the public sector is still recruiting avidly. Tower Hamlets want an ethnic minority child protection project co-ordinator; the Lon- don Boroughs Grants Authority seeks a black female housing support worker; Lambeth Social Services advertise for an African/ Caribbean assistant unit manager for a young people's support service. The black family counsellors chosen for the Hammersmith and Fulham White City mental health project, and offered a high- er salary 'if qualified', have the additional satisfaction of knowing that they will be `working towards a smoke-free environ- ment'. The columns run on through equal opportunity officers to referral service workers. There is no apparent shortage of jobs, or of cash to pay for them. No won- der the advertising managers at the Guardian are rubbing their hands.

We are looking here at What used to be called Parkinson's Law. Bureaucracy is `sticky' downwards. When government expands, the Civil Service can easily expand its functions and its numbers; the stickiness comes in when government tries to contract. It does not find civil servants anxious to show that their own jobs are now unnecessary, or managers prepared to axe their own departments and conse- quently their own salaries.

These days this is called Public Choice Theory. We now know that bureaucrats behave rather like businessmen, trying to maximise their own advantage and seizing opportunities to augment their share of the market. Empire-building is the norm. The skill lies in harnessing this tendency to the achievement of public good, rather than public harm. The rewards have to be changed so that individual Civil Service careers can be advanced by those talented enough to spot and implement opportuni- ties for savings. If the private sector can reward and promote the area manager or divisional director who cuts the budget for his or her operation, then a way should be found for the public sector to do the same. Performance-related pay will only be the start of it.

If we want the worthwhile reforms to bite earlier and to bite harder, we have to learn to plan ahead. When we plan for economies, we must also plan for a reduc- tion in public sector jobs. In sectors where spending cuts or reduced government activ- ity are planned, we must also reduce the number of civil servants who sustain the activity. If spending cuts are aimed at the £50 billion deficit, there should be Civil Service cuts planned alongside them at the outset. Above all, we have to be tougher. Virginia Bottomley should have taken the lead in shedding surplus NHS bureaucrats; John Patten should be taking similar action in his department, and pressuring LEAs to trim the excess bureacratic fat.

Nor should we take the status quo as invi- olable. Do we really need a Department of Employment, for example? Such of its functions as were still needed could be transferred to the DTI or to the Depart- ment for Education, and given to the staff there who find their present duties dimin- ished by privatisation and market reforms. Are we really justified in sustaining the Department of Agriculture? No other pri- vate industry has a whole ministry devoted to it. And it is producer- rather than con- sumer-directed. Radical moves such as this would help shake the Civil Service out of the job-protecting complacency which seems endemic. • The Civil Service is undergoing a series of reforms unprecedented in its history; but it does have a remarkable track record of absorbing reforms and blunting their impact upon its numbers and its practices. We desperately need to bring about in the rest of the public sector the efficiency ini- tiatives which are revolutionising the cen- tral Civil Service. We are told that every country gets the government it deserves, but I cannot imagine what we ever did to deserve a bloated public sector which pur- sues its own influence at the expense of ours, and which seems to regard working for the bureaucracy as a meal ticket for life.

Dr Madsen Pine is president of the Adam Smith Institute.