By Suzannah.Brecknell

01 Dec 2011

The permanent secretary to the Welsh Government, Gill Morgan, talks to Suzannah Brecknell about the ups and downs of administration in a small country – and explains how civil servants in England can help Wales to thrive.

As 2011 draws to a close, the Welsh Government (WG) can look back on a busy year: a closely fought election bringing in a change of government; a referendum approving constitutional changes; a challenging financial settlement prompting a workforce reduction of one sixth. But the year has ended on a high: last week the Welsh Government won its first Civil Service Award – for programme and project management. First to rush over and contratulate the winners was permanent secretary Gill Morgan (pictured above), leader of the civil service in Wales, who earlier that week had told CSW, with evident pride, that WG has improved its shortlist performance from zero in 2009 to two in 2010 and three in 2011. Not bad for an organisation which makes up just over one per cent of the whole UK civil service. But then, Morgan seems keen to ensure that this organisation – which she has led since 2008 – punches well above its weight.

There are times, she suggests, when Wales’ small size can be an advantage. For example, the WG has set up a number of boards, bringing together local and central government with business and unions to develop growth strategies for key sectors. In England, the business department has begun to do something similar – but it’s easier to do this in Wales, suggests Morgan, because of the smaller scale of government and business. “We can put ten really good people working in a particular sector together and give them routine access to government, and they will not only be big companies but they’ll go into some of the very vibrant SMEs that we have,” she says. “You cannot do that in England simply because of its scale.”

Encouraging private sector growth has been a key priority for Wales, where the recession has been “particularly challenging”, says Morgan – but with many of the macroeconomic tools for growth retained by London, the WG has instead had to consider how it can “exploit our scale, and use it to a real advantage in terms of connectivity, pace, imagination.”

Wales’ small size and its devolved control of the skills agenda also meant it could react quickly when the recession first began, says Morgan. The WG was “very fast off the ground” with two programmes aiming to prevent unemployment: ReAct, which provided training for people facing redundancy; and ProAct, which helped businesses experiencing cashflow problems to train their staff and avoid redundancies. “There was a lot of interest from Whitehall,” she says – but not all of it was positive. Some people saw the schemes as simply delaying inevitable job losses, she says; but subsequent evaluations have shown that the schemes did boost the skills base of Welsh employees, and the majority of organisations that received funding did not go under.

“Gus [O’Donnell, head of the civil service] was very ‘economically sceptical’, shall we say,” says Morgan, “but I sent him the evaluation and he’s now quoted it a couple of times as being a different approach, which is much more Germanic, much more about industry, unions, government working together around a common purpose of keeping people with better skills in work.” Again, she says, size helped: the government could implement the ideas “rapidly, with the support of [all stakeholders] because we can put them in the room and have those imaginative conversations.”

Public partnerships
One of the reasons why the recession proved particularly challenging in Wales was the high proportion of its people working in the public sector, but Morgan is keen to emphasise that Welsh public services are not “bloated”. If one looks at models of public sector size according to population needs, she says, “our public service is about right”. The Welsh public sector also faces a different funding context to its English counterpart, because the Welsh Assembly has chosen to allocate funds differently. It has, for example, given the NHS less protection than it enjoys in England, because health services in Wales are “much more co-operative and collaborative”, says Morgan – transaction costs are lower, and they’re less expensive to run.

The Assembly has also put more funding into education, and taken less from local government. The net impact, she says, is that the Welsh Government itself has seen the biggest decrease in size of any one organisation in the public sector – “which is how it should be”; Welsh outposts of Whitehall organisations have seen a similar headcount reduction to their English counterparts; and the wider public sector has seen smaller declines than elsewhere in the UK.

Nonetheless, budget cuts are challenging: according to the Wales Audit Office, the public sector faces 12.4 per cent cuts overall in real terms by 2014-15. Morgan is clear that collaboration will be key to achieving this reduction without damaging services, and Wales has an advantage here: joint working has been the name of the game since the 2006 Beecham review (of which Morgan was a member) called for better service integration across the public sector.

In a 2008 interview with CSW, Morgan said the government was “at the stage of first steps rather than transformation” on this agenda, and said she hoped it would be “well placed to be a world leader” on service integration in five years’ time. In the three years since then, what has been achieved? Morgan points to the “very strong” Local Service Boards (LSBs), which bring together health, local government, police and so on. These are at variable stages of development, she says, but “every single LSB” has examples of “really imaginative” work to jointly transform services.

“The next stage for us is asking the question: what are the things that it makes no sense to do 22 times,” she says, referring to the number of local authorities and corresponding LSBs in Wales. So the government is trying to encourage more local authorities to collaborate within the same boundaries as health agencies, “so that they can do things [just] once” in that area. This is not, she emphasises, about creating regional government, nor forced reorganisations, but trying to encourage shared posts, joint working and “much more integration, collaboration, co-operation at a local level and a sub-national level”.

Morgan prefers this kind of approach to the kind of major organisational reforms that, for example, the English government is imposing on its NHS. If central government imposes wholesale reorganisation, she says, public sector staff “worry about their jobs; they don’t worry about my Aunty Mary and how she’s looked after if she needs health and social care”.
Instead, she favours redesigning and simplifying central government systems to reduce competition and repetitive work: what she calls “tilting the playing field so it makes more sense [for local authorities] to work together, and out of that comes some of the release of resources we need to allow us to make the Welsh pound go further.”

New challenges
The WG has already achieved the budget reductions required across the three years of its funding settlement, thanks to a large workforce reduction this year – all voluntary, notes Morgan, and carried out without damaging engagement scores. It has even, she says, reduced headcount by more than was required, so that there will be scope to recruit people with skills in key areas such as programme management.

Such specialists will be needed because of the changes brought about by the ‘Yes’ result in March’s referendum on Wales’s law-making powers. Morgan explains that the referendum didn’t change the WG’s powers per se – Wales has always had the power to create laws – but it streamlined the process by which Wales can legislate. So Wales has always needed legislative expertise, but now it also needs people who can manage programmes of legislation effectively.

Here, the size of the Welsh Assembly presents a challenge, she notes. It is much smaller than Westminster – just 60 members, from which are drawn both the government and the legislature. “That really puts the onus on civil servants in Wales to be absolutely first class. You need to be writing really good bills and fantastic policy because – and this is no criticism of the Assembly – you just haven’t got enough people to put the time into scrutiny that you would in Westminster.”

Sustaining this quality of policy-making with a small workforce is another ongoing challenge for the WG. It has fewer than ten people working on transport, for example, compared to around 70 in Scotland and nearly 2,000 in the Department for Transport (DfT). “The question for us is: how do you get the policy to the right level and quality to be able to put into legislation when we’re trying to do so with very, very small numbers of people in any particular area?” The WG has a good relationship with the DfT, she says, but because of the different political needs and complications of devolution, “we don’t always see eye to eye”, so “really we have to have that policy advice in-house”.

Devolved matters
In a 2009 interview with the magazine of the Institute for Welsh Affairs (IWA), Morgan said she had encountered a “lack of genuine commitment to devolution and a culture of arrogance in some Whitehall departments”. Has this changed? Morgan doesn’t say yes or no directly, though her answer strongly suggests she doesn’t think it has – she later expresses “disappointment” at the lack of interest in devolution from the “brightest and best” of the civil service (see news). She seems keen, however, to avoid seeming accusatory, prefacing her answer with: “I think it is really difficult at the moment if you’re in Whitehall to remember devolution.”

The pace and scope of the policy reforms underway in England mean that every department faces “phenomenal tasks in terms of implementation and reform”, she continues. “When you’re driving that, it’s very easy to forget the people who are across the border, doing something different. We have good relationships with the majority of departments… but I’m not surprised we sometimes get forgotten.”

Another challenge is that people often make simplistic comparisons with Scotland, she says, but the two nations’ situations are very different. Many people in the North of Wales have traditionally moved backwards and forwards across the border for work, while health services in the Welsh Marches regularly work with English patients – so communities around the border are much more interconnected than those on the Scotland-England border. UK civil servants should remember that sometimes a policy area on which they can agree to disagree with Scotland will cause “real difficulties” in Wales, says Morgan.

The cross-border challenges are not just geographic. Wales has secured much EU funding by linking EU programmes to programmes run by the work and pensions department; if the DWP’s programmes change – as many are – these schemes may not continue to work. But DWP’s relationship with Wales has been “exemplary”, says Morgan. “Sue Owen [DWP’s director general for strategy] has been down a few times to talk to us about the intentions, and we’re looking at ways of handling it in creative joint ways,” says Morgan, “but it will always be a tension for us and at the moment it is difficult for people [in Whitehall] to remember which things are really important to talk to us about.”

Making the grade
Cross-border co-operation can also be hampered by the hierarchical vagaries of the civil service – and here the structure of the WG, in which directors-general have large, cross-cutting portfolios, can complicate matters. On her arrival in 2008, Morgan reformed the top of her civil service, creating more directors-general. She explained to the IWA in 2009 that this was an attempt to encourage more effective dialogue between the governments: when most of the posts were at director level, it was “easy for people in England to stereotype us as the weaker partner”, and hard to build “effective dialogue between people of different grades”.

She thinks the restructure has “made a big improvement in terms of communication”, she tells CSW. Yet those DGs have broad, cross-cutting portfolios to encourage integrated working. The DG for sustainable futures, for example, covers the whole of DECC’s portfolio, as well as elements of the DCLG and DCMS remits. Since each Welsh DG’s portfolio is so broad, most individual policy areas are handled by much lower-ranking civil servants than those managing the equivalent policies in England’s comparatively huge civil service. This can create problems when discussing policy areas: “You can have a power imbalance because the civil service is so hierarchical,” explains Morgan.

Nonetheless, she believes that the restructure, by increasing the numbers of DGs, has helped Wales play a more active role in the senior civil service across the UK. At the top 200 event, for example, “in the past there would be very few people [from Wales]. This time we went mob-handed; there were significant numbers of us from Wales.” This will help the WG learn from the “very different experiences and the depth [of analysis] that people can throw at things in Whitehall”, she says, though she adds that she hopes Whitehall will increasingly learn from Welsh experiences.

For example, she suggests, Wales has much to share about how to effectively integrate arms’ length bodies into departments – a process the Welsh undertook years ago. Her advice is to plan properly to avoid being stung when terms and conditions don’t align, and to invest in “good organisational development programmes to integrate the people who come in”. There are a number of other areas where she suggests the Welsh Government is leading the way – in its support for youth apprenticeships, for example, or in work to set out a coherent definition for sustainable development and legislate to make these values a central part of public service design. Wales is fighting to ensure its voice is heard amid the clamour of cuts and reforms across the UK civil service, but we can be certain that Morgan – described by the Guardian in 2008 as “one of Britain’s best networkers and most effective lobbyists” – will do all she can to ensure that Welsh achievements do not go unnoticed in Whitehall.

What Wales needs from Whitehall
Morgan would like to see greater joint working and development in areas where Wales currently lacks constitutional powers but may acquire them in the future. “Our first minister would say that it can’t be right that a devolved government has less ability to influence energy policy than a local authority,” she says. This takes you “into a set of debates about the boundary of devolution settlements.” This, she adds, may be explored in the recently established Silk commission looking at financial and constitutional settlements for Wales, “but actually some of these things are too urgent and need to be thought about jointly [now].”

Secondly, she asks Whitehall departments to discuss policy changes with Wales early on, so the WG can flag up potential impacts. “People working in many of these areas are very good at doing that” she says. Thirdly, she would like to see a clearer understanding of how the two governments should work together in different policy areas. “If we’re working together on something which is totally devolved, we’re really peers: we’re small, but we’ve got equal interest, equal commitment and we’ve got a task there to link our policies together so citizens don’t suffer. That will always be challenging if you’ve got different ideological perspectives between the governments, and there are genuine, deeply held ideological differences between the parties” running each country, she says. On other ‘reserved’ areas which are subject to UK-based decision making, Wales must simply “follow and try to influence” the policy set out – but civil servants don’t always know the issue’s status. “Sometimes we’re not clear whether we’re working together as peers or whether we’re working together where the UK clearly has the lead,” she says.

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