19 July 2016

There were two drivers behind Theresa May’s reorganisation of government last week: coping with Brexit and her new reform agenda. In a statement yesterday she further explained the rationale for her machinery of government changes. Jill Rutter dissects what these mean in Whitehall.

One of the notable features of David Cameron’s time in office was the stability of Whitehall structures. The new PM has instead embarked on some big changes – creating two new departments, abolishing one, and engaging in a significant restructuring.  History suggests these come at an immediate price of disruption and distraction and that the benefits rarely justify the costs. Will it be different this time?

Managing Brexit

The Prime Minister needed to reorganise Whitehall to manage Brexit. But where she could have built on existing structures, she has opted to create two new departments.

Department for Exiting the EU (DEEU)

We knew by Wednesday that the PM had created a new Department for Exiting the EU (DEEU) under David Davis.  At the weekend, he told the press that he envisaged a department of around 200 people – far smaller than even Whitehall’s tiddler, DCMS.

There are three building blocks for the new DEEU: the Cabinet Office Europe Unit (part of the European and Global Issues secretariat), the FCO’s Europe Directorate and the UK Representation in Brussels. We now know that the PM sees this principally as a policy and coordination department – doing analysis, negotiation and legislation, and leaving implementation elsewhere. It will continue to act like a Cabinet office secretariat – supporting the Secretary of State but also retaining responsibility for “conducting negotiations in support of the PM”.

On the face of it, this looks little different from bringing the same personnel together with similar functions inside the Cabinet office – an option we thought was a more practical short-term solution.

The immediate question is whether Whitehall can manage the creation of a new department alongside the massive policy task of readying us for exit negotiations.

International Trade department (DIT)

The second new creation is Liam Fox’s new International Trade department (DIT). That absorbs the non-ministerial department of UK Trade and Investment and UK Export Finance – and takes over what trade policy capacity the UK government had sitting in the old Business Innovation and Skills (BIS) department. So far, so sensible – and this will be needed new long-term capacity.

The interesting question will be how big a grab it makes for Foreign Office staff and budget.  Under William Hague, the FCO became more active supporting British business abroad with the “prosperity agenda” and the enlarging of its Prosperity Fund to a £1.3bn cross-government pot governed by the National Security Council. The FCO’s Prosperity Directorate might be an obvious fit for the new DfIT – though diplomats will be reluctant to leave the Foreign Office. Having had its role on Europe diminished, will Boris Johnson’s Foreign Office be squeezed from the other side by DIT?

One notable feature of the changes is how many UK departments now have an explicit outward facing mission at their core. There were already arrangements in place to try to coordinate better between FCO, MoD and the Department for International Development.  Then there were three - now there are five. It will be critical that they work effectively together if the UK is to present a united face externally.

Dep changes to 2020 - new names

Delivering reform

The PM could have left other structures in place. Instead she has chosen to re-purpose BIS, abolish Gordon Brown’s Department for Energy and Climate Change (DECC) before its 8th birthday, and bring all of education and skills back under one ministerial roof.

Department for Education (DfE) and BIS

In her brief leadership campaign, Theresa May emphasised two things: the need for greater social mobility and deeper economic reform. Hence, bringing skills and higher education back into DfE.

The skills agenda is a perennial Whitehall football – never staying long in one place.  The rationale for this change now is to “bring together on one place responsibility for  all elements of education, children’s services and skills – creating a seamless policy and delivery function.”.  But there are some odd consequences – for example,  DfE is now responsible for the apprenticeship levy. Meanwhile the research councils – a major source of university funding – stay with BIS. It also retains responsibility for science, with Jo Johnson as a Minister of State straddling the divide between the two.

Department for Business, Energy & Industrial Strategy (DBEIS)

Having lost universities and skills to DfE and international trade to DIT, what was left of BIS now gets big new responsibilities for energy and climate change policy – as well as the new Prime Minister’s mission to create and deliver an industrial strategy.

While some former Ministers and green groups have yelped at the absence of climate change from the new department’s title, other commentators see this as a chance to properly integrate industrial and energy strategy in a way DECC did not do, and take heart from the ministerial team put in charge.

The rationale here is that “this change will mean that Government will be best place to deliver the significant new investment and innovation needed to support the UK’s future energy policy.” But we have been there before. Energy was part of the business department for almost 25 years before DECC was created. It always felt like a separate part of the department. The big synergies being pointed to now will require much closer integration.

Will it work?

Our general assessment from past experience is that the benefits of machinery of government changes rarely justify the costs and the disruption. Now that she has decided to shake up the furniture, she needs to make sure this is done swiftly and efficiently. Turf wars must be nipped in the bud, and crucially, her new top team must work together effectively across old and new boundaries. New structures are no substitute for collaboration.