Making and breaking Whitehall departments: A guide to machinery of government changes

The Institute for Government (IfG) has published a report on Whitehall machinery of government changes, which contains recommendations for the new government.

Making and Breaking Whitehall Departments is based on interviews with senior civil servants who have been involved in mergers and demergers of government departments over the past 30 years. The research was a joint project between the IfG and the London School of Economics.

Why make machinery of government changes?

Effective machinery of government changes help governments tackle long term policy and administrative challenges. They also allow departments to be given a periodic shaking up, force new issues onto the agenda and tackle underperformance. The IfG recognises that machinery of government changes are still necessary some of the time.

However, our research shows these potential benefits come at a price. Whatever their motivation, machinery of government changes are:

• often announced at very short notice
• usually poorly managed
• always costly

The cost of new government departments

Whitehall keeps little information on the costs or benefits of machinery of government changes. We estimate from our research that each wholly new department incurs at least £15 million in costs.

Pay settlements and productivity losses can increase this substantially - one large-scale merger we studied is estimated to have cost around £175 million.

Procedures for reorganising Whitehall departments do little to minimise costs, due to:

• Insufficient planning time - historically, Prime Ministers often announce new structures with little to no prior planning. Transition teams are often forced to 'go live' without sufficient planning time - or staff, building or equipment resources
• lack of funding - budgets allocated do not adequately cover the set-up of corporate overhead functions, partly because the Treasury insists all changes must be cost neutral
• overloaded staff - officials find themselves with a double workload of running day-to-day operations while also trying to do the required strategic planning for the new department
• little central support - the Cabinet Office and Treasury do not have the resources to provide effective support to new departments

How to make machinery of government changes work better

With a looming period of relative austerity, and a new government, there is no better time to reconsider how department changes are undertaken. Before changing departments, the following questions should be asked:

• Are there significant administrative or policy rationales to reorganise departments?
• Have we considered the alternatives to machinery of government change?
• Are we prepared to spend at least £15 million?
• If there are big pay differences between staff in affected departments, are we prepared to level up salaries or risk industrial action?
• Can we afford a productivity dip and a minimum two year wait before realising the concrete benefits?

Once the decision to change a department has been made, the process can be managed better by:

• Announcing the changes early enough so the transition can be planned effectively
• Requiring an affirmative Parliamentary resolution after a reorganisation is made
• Giving new or radically changed departments greater support from the centre
• Completing an assessment within 18 months of the change

These recommendations would minimise the costs of organisational changes, whilst increasing the likelihood that they are well considered, properly planned and implemented in a sustainable way.