Bill Gates and state budgets

I was surprised, and pleased, to come across the following video on www.ted.com where Bill Gates urges people to hold politicians to account for the budgets they approve.

In the video he makes a good point about the level of expert external scrutiny applied to the financial position of publicly-listed corporations. There is very little of this, he says, applied to public sector organizations such as the State of California.

Bringing this back to the UK for a moment, the government's proposals for armchair auditors might improve the level of scrutiny at a transactional level. But, knowing what every £500 has already been spent on is not the same as holding politicians to account for the big picture: the sustainability, or otherwise, of the public services that they want or expect to receive.

Are there too many middle managers?

Eric Pickles's latest move to improve transparency about the cost of local government is to publish a code of practice encouraging councils to provide the names and job descriptions for anyone being paid £58,000 a year. There are lots of problems and issues with this (sufficient to mean that the Civil Service has already backed away from a similar proposal). Clearly it is founded in the notion that  there are too many middle managers and exposing their "non-jobs" will result in the posts being abolished. Also, as an aside, I suspect that when county and metropolitan councils publish data about staff being paid over £58,000 a significant number will be not be middle managers but school headteachers and deputies and senior police officers, all of whom, technically, are employed by local authorities. Indeed, it is not unheard of for the highest paid employee of a council to be a headteacher rather than the chief executive.

How can anyone know how many middle managers is too many? Each council has its own way of operating and, therefore, its own requirements for senior and middle managers. Robert Winnett's conclusion in this article in the Daily Telegraph, that, "Over the past decade, the number of council middle managers has risen eleven-fold" is not sound. What has changed since 1997 is the number of people earning above £50,000 . As pay has increased annually, middle managers earning less than £50,000 in 1997 would now be paid more and thus be included in the figures. It is conceivable (though perhaps it is unlikely) that there are fewer middle managers now than there were in 1997. No-one can deduce what the true picture is from the data disclosed in council annual reports.

If councils do accede to Pickles's code of practice (I would like to see some councils stand up against his bullying and inconsistent messages) then I expect that every individual who is to be named for earning £58,000 or more, will demand that their job description is fully up-to-date before it is  published. It will be just like the process of job evaluation where the manager will have the incentive to expand every bullet point and to emphasise the strategic importance of the decisions that they make. All of this will, of course, be dull, boring and practically unreadable. So, whilst the average resident might be interested to know how much so-and-so who lives down the road was paid they are unlikely to look at the justification. Similarly, journalists on local newspapers might publish the data (one hopes without the kinds of flawed logic displayed by Robert Winnett) they are unlikely to undertake any analysis of job descriptions.

Finally, if transparency about public money is so important, why is only Eric Pickles pushing for it? As mentioned above, the Civil Service has decided that the appropriate threshold for publication is £150,000 a year. And I am not aware of NHS organizations being "encouraged" to provide details of the payments to doctors and other health professionals as well as middle managers but, then, I imagine Andrew Lansley has enough on his plate convincing GPs to take on £80 billion of commissioning work (the sort of thing done by middle managers) that insisting on full disclosure of their pay would be a tactical mistake. 

In praise of accountants

The following is the 27 January 2011 posting on the We Love Local Government blog. What more can I add?

"In one of my previous local government incarnations we were going through a restructure and the powers that be had made it clear that, as so often, they would do everything in their powers to ‘protect the frontline’. One of my colleagues, only half in jest I believe, suggested that he was going to print some T-shirts for my team with the slogan: ‘back office staff are people too.’

"I’m reminded of this frequently in recent times as politicians, managers, tweeters, bloggers and commentators all talk of implementing cuts that won’t affect the ‘frontline’. The hidden message in this language is that the back-office staff don’t really matter and cutting them won’t really make any difference.

"Local Government workers, and hopefully blog readers, don’t need me to tell you that this is baloney. For example, there is not a member of staff who is not 100% reliant on the work of their IT department.

"Despite this I recently found myself saying something similar about our finance department. I think my words consisted of something like: ‘there are quite a lot of them down there; what do they do exactly?’ I guess in times of cuts everyone looks for a scapegoat.

"I was wrong of course. Good local government accountants are indispensible.

"In a time of budget cuts it is the accountants who can tell us exactly how much money we have and what effect all the many cuts have on our overall budgets. It is the accountants who ensure that every team and service area is spending within its means and ensure that we don’t overspend the public’s money.

"More than this though; it is the accountants in the council who are crucial when looking at new forms of business or service model. If anything, this year will be the year of the accountant.

"Individual budgets for adult social care will mean that council adult services don’t have guaranteed budgets for the year. In order to properly plan for these services quite detailed projections are going to be needed. Who’s going to produce those projections? Yes, it’s the accountants.

"Eric Pickles is particularly keen on shared services. But a shared service requires two authorities to share costs and often one council to make a charge to another for a service provided. Working out which costs are appropriate to share between the authorities and how the cost of the service will be allocated (based on usage?) is a question for which we are entirely reliant on, yes, our accountants.

"Finally, outsourcing services is not as simple as simply comparing one price with another (I used to think it was). The cost and the risk models rely on projections and a deep understanding of the actual costs of services, including costs that maybe we don’t always take into account.

"In the past few weeks I have had lots of dealing with accountants and every time they have shown imagination, skill, mental dexterity and a deep understanding of how our council’s budget works. Without them I, and I dare say the rest of my council, would be lost.

"All hail to the accountants."

Source: http://welovelocalgovernment.wordpress.com/2011/01/27/in-praise-of-accountants/#

Not-so-big society

It seems that the concept of the Big Society is floundering; communities and voluntary organisations have not rushed forward to provide services to local people. Is that really a surprise to anyone who hasn't lived a privileged, Oxbridge-educated, elitist life? Just looking at the concept in financial terms it is no surprise.

Public bodies are having their funding squeezed by HM Treasury and services and facilities are closing or being reduced. Public bodies try to avoid this, partly because they want to provide as good a service as possible and partly to avoid being criticised by the government (such as Grant Shapps complaining that local councils are cutting care services but what option do councils have?) the suggestion that others will spontaneously provide these services is naive. If we were talking about closure of a factory producing private goods then the market would meet the demand by virtue of charging a price that suits seller and buyer. But we aren't. Economists have understood for centuries that markets fail to provide public goods.

Nevertheless there seems to be a hope by the government that some benevolent people will step in. Perhaps they would if there were public funding to support them but why spend their own time and money. Indeed, given the tax rises and level of job losses people have less money than they did a year ago. Perhaps the government hope that public servants that are made redundant by the cuts will use the time they have on their hands to do for free what they used to do for a salary. Now, that would be a level of public-spiritedness beyond any reasonable expectation. Someone like that really ought to be working in the public sector!

An opportunity for improvement

Last week, HM Tresury published a short pamphlet entitled, Managing taxpayers' money wisely: commitment to action. You can get a copy of it from here. The pamphlet is a statement of intent that the government will adopt in its financial management.

It says that there are four enablers for improving the government's financial management:

• effective leadership;
• a cost-conscious culture;
• professionalism; and 
• expert central functions.

Now I suppose it doesn't do any harm for senior managers in any organization to state clearly to every one in the organization what is expected of them. I do hope, though, that in January 2011, more than thirty years since the beginning of reforms aimed at making public servants financially-responsible for their services, that these requirements are not news to anyone.

One could infer from the publication of this pamphlet and the statement in the foreword by Justine Greening MP that it is ‘the foundation for a forthcoming Finance Transformation Programme across central government,’ that central government's management of six hundred-odd billion pounds of public money every year is not all that it might be. Perhaps she might be interested in buying a few thousand copies of my book!

Back to the blog...

I handed the manuscript of my book to my publisher today. A big milestone for me. There's still all the editing to do but the book should be in Amazon's warehouse by the summer. Meanwhile I can get back to fulfilling my urge to write by posting some items on this blog.