With election manifestos expected in the coming days, politicians may be tempted to commit to restructure government departments. The 2017 Labour manifesto promised new departments for labour and housing, while the Liberal Democrats have called for the Department of Energy and Climate Change (DECC) to be re-established. And numerous senior Conservatives have talked about bringing the Department for International Development (DfID), and potentially the Department for International Trade (DIT), closer to the Foreign Office (FCO).
However, while creating or rearranging departments can send a message that the government is doing something on an issue deemed to be important, it is not a panacea.
Forming a new department can be the right decision if the prime minister thinks an issue isn’t getting enough attention. This was the case when DfID was created in 1997 – the incoming Labour government wanted to give international development an independent voice around the Cabinet table.
The opposite can also be a sensible reason to rearrange departments. If ministers feel that related policy areas that fall across different departments’ remits could be better dealt with in one place, departments may be joined together – such as the merger of energy and climate change policies in DECC, or, indeed, returning international development to the FCO.
The temptation to rush the announcement of a new department to demonstrate a new government’s intentions can create problems. If a department is established simply to send a message, or without a clear sense of what it will actually do, it can cause confusion and distract from the problem it is meant to address.
Perhaps the highest-profile new department of recent years is the Department for Exiting the EU (DExEU). Created by Theresa May, when she became prime minister, to show she was taking Brexit seriously, DExEU was intended to oversee the UK’s exit negotiations and prepare for the future relationship with the EU. But the prime minister ended up taking control of the exit negotiations, and the future relationship was co-ordinated from the Cabinet Office. The uncertainty over DExEU’s role led to confusion across Whitehall.
Some politicians claim that creating a new department will save money, but our research suggests that the opposite is actually the case.
Any restructure will face upfront costs, like aligning IT systems and finding office space, which can cost around £15m for a medium-sized department. However, the Treasury argues that these changes should be cost-neutral, and refuses to provide any extra funding. This means that officials waste time trying to find relatively small amounts of money, rather than getting on with the issue which the new organisation was set up to tackle. But these direct costs are often outweighed by the longer-term productivity loss that results from uncertainty around the role of the new department and its officials.
A conservative estimate suggests that these productivity costs are at least equal to the direct costs of reorganising departments, and may well exceed them.
A prime minister who decides to pursue the creation of a new department should focus on a number of areas. Firstly, the creation of a new department should be a considered process, one that assesses the alternatives and weighs up the costs and benefits. Announcing a department one day and expecting it to be fully up and running the next will just lead to bad decisions. Secondly, they should be clear about the new organisation’s objectives. Knowing the responsibilities of ministers and officials in the new department will help set expectations and allow them to be held to account.
And when a decision has been made, the civil service must ensure that the resources are in place to make the new department work effectively from the moment of its creation. Rather than just letting policy officials attempt to set up a new organisation, there needs to be specialist support on HR, IT, building space and the other practical issues that arise with any organisational change. The Cabinet Office is building a team to support this work: that is good news, and the team should be set on a sustainable footing. The Treasury should also recognise that this process costs money, rather than force departments to scrabble around for the cash in existing budgets.
A new department can be the right way to tackle an important issue, but only if it is properly planned. Otherwise, it can just become an expensive distraction from the problem it was intended to solve.