It’s every Whitehall department for itself in spending review scuffle

November 23, 2015

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In an article originally appearing in The Guardian, David Walker, Head of Policy at the Campaign for Social Science, comments on how the spending review has pitted Whitehall departments against one another.

On the clock counting down to George Osborne’s spending statement on 25 November, it’s five to midnight. The most goody two-shoes departments settled with the Treasury first. They include communities and local government, leaving councils in England to infer that if the department can lop off a third of its budget for staffing and buildings, prospects for its grant to councils are grim.

Elsewhere in Whitehall, until this weekend, the line has been defiantly “it’s not over till it’s over”. The Paris killings have reverberated around the Home Office and the Foreign Office but Osborne has now confirmed that all departments have settled their spending plans. What’s clear in this spending round is that, yet again, it’s every department for itself. To meet the Treasury’s demand for cuts, departments are playing beggar my neighbour and its latest variant, shoving the costs onto households and business – by turning tax credits for research and development into loans, for example.

Negotiations have inevitably been geared to the way each department is set up to deliver. Take business, innovation and skills (BIS), where 84% of its £26bn in spending goes through arm’s length bodies or, to use the latest vocabulary, “partner organisations”. BIS lists 45 of them [pdf], some both big and strategic, among them the Met Office, the Competition and Markets Authority and the Medical Research Council.

It’s not just that these quangos have 20,000 staff, compared to the BIS core strength of 2,600; it’s that each has a wide constituency, suppliers and (whisper this, because quangos aren’t supposed to lobby) some autonomous access to political support. The BIS empire covers the universities, which have formidable access, and smaller agencies such as the National Physical Laboratory , which over the years has acquired influential friends in high places.

The Treasury required departments to model cuts from 20% to 40%. For BIS, this meant departmental savings of at least £6.5bn, which if applied pro rata to staffing implied nearly 6,000 fewer posts. You could get rid of all BIS civil servants and get nowhere near that: total BIS administrative costs are about £700m a year.

Business secretary Sajid Javid is a hardliner; in early summer he set about to slash and burn with a will. Within weeks of the election he commissioned McKinsey, the connoisseurs’ cutters, to look at BIS numbers. One obvious rationalisation was the scientific research councils: McKinsey posited major savings from cutting seven separate councils down to one.

But here’s where the spending tale becomes intriguing. The chancellor has pet projects. It turned out Osborne was concerned to protect his personal reputation as the friend of science: he basked in praise for just about maintaining the science budget in cash terms from 2010-2015.

Not all Javid’s ministers shared his enthusiasm, among them the science minister Jo Johnson , who is well-connected to Downing Street. Science has its own powerful lobby within the government machine, led by the chief scientific adviser, Sir Mark Walport . By early autumn, the BIS forward-spending picture was looking much less clear cut.

Another reason for this is that spending reviews don’t freeze policy development. In the case of BIS, the government was keen to press ahead with plans affecting student numbers and university teaching, which in turn have spending consequences. Only a fortnight ago BIS published a green paper, knowing that its financial assumptions (especially over student debt) would force the Treasury’s hand.

Though the specifics of each civil service department differ, the 2015 spending review shows they share two, related characteristics when facing the Treasury squeeze. The first is how little attention is paid by the spending review to the body of evidence about departmental efficiency and effectiveness, especially studies undertaken by the National Audit Office (NAO) and inquiries by Commons’ committees. In the case of BIS, recent NAO work on apprenticeships could suggest major revisions should be made (and big savings realised) – but there is no sign it is being heeded.

The second is how unstrategic, how hand-to-mouth, the spending review has been. The Tories have radical plans to shrink the state, which imply profound changes in the shape and functioning of government. Although McKinsey’s work for BIS informed presentations on how the department would look in 2020, it’s very much business as usual – just a whole lot smaller. The Treasury seems to prefer a lengthy death by a thousand cuts to posing the big questions, such as whether (given Tory beliefs) a “department for business” is needed at all.