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Francis Maude: Urgent necessity for financial discipline in government

Thank you George.  You've set out the urgent necessity for a new financial discipline in government spending based on new incentives, new information and new ways of investigating waste.  This paper isn't the last word on what has to be done; nor will the culture change needed be quick or easy to deliver.

There is no rule that says that government spending is inherently wasteful.  There is no evidence that civil servants are any happier than anyone else about working for inefficient organisations.  Most people want to work for organisations that they can feel proud of.  Civil servants are no different.

Yet morale today in the Civil Service is shockingly low.  And demoralised people don't give of their best.  We want to release the best in Whitehall so they can make taxpayers' money work in the way that taxpayers are entitled to expect.  The reforms we outline here are the first steps.

We welcome the development in recent years of professional streams within the service.  The old days when a generalist was expected to do a turn as finance officer or head of HR in a huge and complex organisation have rightly gone.  The IT and Communications streams seem to have developed a greater strength than the others. Strengthening the effectiveness of the finance stream within the Civil Service is mostly about giving these professionals the same sort of status that the Chief Financial Officer would have in the private sector.  The finance professionals need to be centrally involved in all policy and spending decisions, not brought in as an afterthought as is too often the case.

We illustrate in our paper how little emphasis on financial management there is in the appraisal and career development of officials.  We show how few are the incentives to drive down costs and drive up efficiency.  This has to change.  This is not just about simple individual financial rewards.  The incentives we develop have to reflect the public service ethos that attracts people to public service in the first place.  But the fact that it isn't simple doesn't mean it's impossible.  Over the coming months we'll be examining the best examples from overseas and from the private sector and voluntary sectors as we develop our thinking.

Also crucial to this drive for efficiency will be the development of a less risk-averse culture.  Organisations that stifle innovation forego the step changes that drive the never-ending search for greater efficiency.  This is not about encouraging recklessness or negligence.  Nor is it about casually embarking in any change without proper understanding of the risks.  But we have things the wrong way round at the moment.  At the macro level the government takes stupendous risks, embarking on major organisational upheaval at the same time as fundamental policy change, blind to the huge implementation risks.  Any account of the introduction of tax credits illustrates what can happen when a dogmatic minister refuses to listen to advice on the risks.  Reducing the risks at this macro level is more about the willingness of ministers to seek and listen to advice, both from within Whitehall and from outside.

By contrast at the working level the culture is thoroughly risk-averse.  No one's career is damaged by persisting with an inefficient status quo.  But try something new that doesn't work and it can be an instant black mark on the personnel file.  The truth is that many innovations don't succeed.  But good organisations learn as much from the failures as from the successes.  Of course innovation needs to be well thought through and the risks properly assessed.  We need to move away from the blame culture where every failure is assumed to be a culpable failure.  We need a culture where people are encouraged to try new things, to acknowledge if they haven't worked and to learn the lessons from the attempt. 

This will probably require the audit culture to evolve.  While losing none of its zeal to highlight reckless failure, there should be a greater readiness to recognise the need for innovation, and to suppress the understandable desire to find a scapegoat for every innovation that fails.

Creating space for the innovation on which progress in driving efficiency depends will mean the greater use of delegated authorities than is usual in Whitehall.  In large private sector organisations it is now usual for people at every level to know clearly what are the boundaries within which they have freedom to make decisions and implement them.  This engenders responsibility, measured assessment of risks, enables management lines to be shorter and organisations to be flatter.  It is also very motivating for the people so empowered.  Yet these delegated authorities are the exception rather than the rule in the public sector.

Over the coming months we shall be working with some of Britain's most senior former civil servants, together with successful business leaders, to take these ideas to the next stage.  We enthusiastically invite contributions to our thinking. 

With our commitment to strong incentives, more transparent information and better investigation we can create a culture of financial discipline across government and better value for the tax payers. We know that it is Your Money.

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