Permanent secretaries need permission to plan for the future

Except, that is, for George Osborne, who this week promised that 2014 will be a ‘year of hard truths’. Pointing to his ongoing efforts to close the structural budget deficit, the Chancellor has said that a further £25bn of cuts will be needed after the next election in 2015. Anyone who has looked at the numbers will be unsurprised by this glum prognosis. As the Institute for Government warned in its briefing ahead of the 2013 Spending Review, the scale of the fiscal challenge suggests it would not be surprising if not only 2015 but also 2020 is an ‘austerity’ election. Spending allocations will always, ultimately, be political decisions motivated by values, as David Cameron made clear when he said on Sunday that protecting pensioner incomes was “a choice based on values, based on my values”. Yet to be effective and sustainable, not just election-winning, decisions need to be based on evidence too. Taking good decisions in 2015 requires serious preparation now. Incoming ministers of any party will need a range of viable and stress-tested options on the table for when the Treasury comes looking for further cash in the post-election spending review. Yet as research for the Institute for Government’s forthcoming report on leading change in the Civil Service suggests, few departments are investing in the capacity required to understand the available choices for further spending cuts and reform. While some departments have undergone successful and money-saving transformations, others have merely made a series of short-term cuts to survive. This will not be sustainable for much longer. As the resistance of otherwise hawkish secretaries of state to further cuts during the 2013 spending review demonstrated, the choices are getting tougher. The action by lawyers protesting legal aid cuts is the latest example of how difficult it is becoming to keep those affected on board with reforms. The low hanging fruit has gone, and some of the riskiest reforms this government is implementing – such as Universal Credit – last well into the next parliament. The growing number of politically protected areas of spending – there is pressure today to add flood defences to a list which includes the NHS, schools, and pensions – makes finding savings elsewhere harder. The siloed nature of Whitehall departments means there are few incentives to look for savings across departmental boundaries, even though many senior civil servants think this is where the greatest savings lie. The available options for ministers are currently sparse and politically painful. To produce better options, secretaries of state need to empower their departments to plan for the future. This can be difficult for incumbent ministers to accept, as they tend to focus on short term priorities especially only 15 months before an election. Even if the same parties return to power, ministers are unlikely to remain at the same departments so this is not just about preparing for a possible change of government – all ministers in 2015 will need their department’s best advice. Yet political permission to plan ahead is vital if departments are able to prepare adequately to advise their ministers well under the politically charged pressure of the spending review. Preparation for the future is also a civil service responsibility. Institute for Government research suggests that few leaders at the top of the Civil Service see themselves as ‘stewards’ of the system, but serving the government of the day is taken too narrowly if it means not planning ahead to serve future governments too. New Zealand has recently legislated to make department heads responsible for long term stewardship of their departments. This is a critical role in the UK too, but remains undefined and implicit. There is also a need to tackle the incentives in the Whitehall departmental system. Accessing savings which lie across departmental boundaries requires a different mode of working, and the Treasury must find a way to allow money and accountability to be attached to areas which span departmental silos. Departments need to work together because it is in their mutual interests, but the traditional Treasury method of bilateral negotiations constrains co-operative work. A ‘star chamber’ sends a strong message to departments – but is it one which will lead to genuine and sustainable savings? Barely a week into 2014, it feels like the election campaigns are cranking up. It’s time for political leaders to face up to some ‘hard truths’ about the work needed to prepare for post-2015 government.