In an interview with Silicon.com Phil Pavitt, CIO at HM Revenue and Customs, told this story:
In my first few weeks of the job I was visited by leading members of the Cabinet Office.
In that conversation with me they mentioned I am in the top purchasing club… That means you have tremendous influence on buying power, buying ideas and management and so on.
I said ‘If I reduce costs by 50 per cent what happens?’, ‘Well, you leave the club,’ I was told.
So here I am relieved of my ability to influence government’s ability to purchase if I am clever and do my job. It’s one of the most perverse things that I’ve heard.
We don’t have a ‘demonstrable reduction of cost club’, we have a ‘sheer size of spend club’. Surely this is the wrong way round.
Which is one of the reasons why costs in the civil service keep rising. Not only is there no incentive for senior managers to cut costs, they are often penalised for doing so. As one civil servant explained to me:
It’s better to over-spend against your budget than to under-spend. As long as you don’t take the piss, you can always come up with a good reason for over-spending. If you put up a good enough argument they will find the money from somewhere. If you under-spend, though, they will just give you less next year and it will be much harder to do your job.
In a system like this, no-one is willing to make cost-reduction plans on anything more than a piecemeal basis. There is no point in anticipating problems and making your team lean and mean to face future challenges. No-one will reward you for it. Better to wait until you are forced to make cuts, make as few as you can get away with this year then hope your won’t get hit again next year. After all, as Phil Pavitt says, your prestige depends on the size of your budget. Only a fool would cut any more than he had to.
As Edgar Schein told us, twenty-five years ago, organisational culture is based on deep assumptions which are shared by a particular group. In the Civil Service the prevailing assumptions are that the size of your department is a key determinant of your status, that budgets keep increasing year-on-year and that there will always be extra money if you can put up a good enough case. Intellectually, civil servants might know that public spending needs to be cut but this knowledge can sit quite comfortably with a belief that it won’t actually affect their own departments. Chris Dillow could probably name a cognitive bias for this. For now, I will call it the It’ll-happen-to-all-the-rest-of-them-but-not-me bias.
This way of thinking is deep rooted in the Civil Service and it will take some changing. It is yet another force militating against the public sector cost savings on which both major parties’ spending plans rest.