Damian Hind is economic and social policy research fellow at Policy Exchange and author of their new report, Whitehall Rules.
Effective Government is more than simply having the right priorities; it’s about getting the right results.
That is why the Prime Minister’s vision of a ‘Smarter State’ – one which spends less but delivers more – has featured so prominently on the Government’s agenda, and it will no doubt underpin many of the decisions taken at the forthcoming Spending Review.
But if we want the state to get smart then it needs to recruit better people.
When today’s Government faces enormous competing pressures, it is essential that the Civil Service can attract and retain people with the skills and experience to help politicians deliver – experienced commercial leaders, first-rate HR professionals, skilled project managers, and digital experts, among others.
Too often, however, the Civil Service has been treated as a cost to be managed rather than a strategic asset. This is clearly a mistake: in the private sector it is people who are often a company’s major source of competitive advantage.
If we really want more effective Government then we need the Civil Service to be able to compete for the best talent.
The Civil Service clearly has the resources to compete – it spent an enormous £15.7 billion on staff in 2014/15 – but it doesn’t use this budget effectively. While the Coalition made much needed reforms to Civil Service pay and recruitment after years of excessive growth, these changes have come at a price.
Of the reductions that have been made, the majority of exits have been voluntary. These both cost the taxpayer more than compulsory redundancies and are potentially more damaging, as the people who leave voluntarily are likely to be high performers who can get a job outside the public sector.
The pay freezes and subsequent caps have also made it difficult for departments to pay people to stay in strategically important posts, match improved pay offers, or link pay to performance.
A paper by Policy Exchange, released today, explains how the Government can use its HR budget more effectively over the next five years to attract and retain talent while still delivering value for money.
Firstly, paybill control needs to be fully devolved to departments. This will force them to think more strategically about the skills they need over the long-term compared to the current system, which allows departments to cover up poor planning by recruiting contractors off payroll.
The Government could save £1 billion over the next four years by reducing the amount it currently spends on contractors – consultants, agency staff and interims – by just 20 per cent.
Paybill control will also remove existing pay caps, enabling departments to pay the going market rate for specialists while increasing or lowering pay depending on performance.
But if we want substantial improvements in Civil Service performance, then HR needs to take a more active role in departmental business planning.
Conducting a zero-based review of each department – asking fundamental questions about what it should and shouldn’t do, and how people can be prioritised accordingly – is a good place to start.
It can also cut costs by removing standing policy teams who find unnecessary work to do, and create a flexible pool of high performers who can be moved around the department as and when needed.
The money currently spent on generic Civil Service training would also be better spent improving the recruitment process – it is better to hire exceptional people than try to train people to be exceptional.
Finally, funding for the Fast Stream should be reallocated away from the generalist schemes to the new specialisms like Commercial, Digital, and HR, to help build capability in areas where there is currently a shortage.
Over the next five years, this Government has to deliver big commitments with limited resources. The ability of the Civil Service to attract and retain talented people with the right mix of skills and expertise will be a big determinant of whether or not they succeed.