Margaret Hodge: accountability system for civil servants is “broken” — but MPs are more interested in new policies than value for money

Former PAC chair Margaret Hodge questions whether ministerial accountability system is fit for purpose and warns MPs are more interested in new policies than scrutinising spending. But her warnings over civil service capability are challenged by a senior Ministry of Defence offficial

Margaret Hodge, former chair of the Public Accounts committee, has called for a fundamental change in the way ministers and civil servants are held accountable for the spending of public money — and warned her fellow politicians against short-term thinking.

Speaking at a lecture given to the Strand Group, part of King’s College London, Hodge said: “The old convention of civil servants being accountable to ministers who are accountable to parliament is broken. 

“It worked when Haldane invented it after the First World War when there were only 28 civil servants in the Home Office. Today, despite the cuts, there are 28,000.”

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She said that this system, combined with the high turnover among civil service officials as they move between policy areas, means that those who are responsible for waste or errors “rarely find themselves accountable”.

She added: “I think until we re-establish that link […] we won’t get very far in improving the quality of services or value for money”.

The former PAC chair also described the civil service as “institutionally incapable of learning from past mistakes”, with no strong finance function, and said Whitehall had “a lack of appropriate skills for modern government”.

“People often talk about this but it remains true,” she said. “Its always a work in progress — we never make much progress.”

“The old culture of focusing on policy formulation rather than programme delivery still holds too strong in too much of the civil service,” Hodge said.

In the audience was John Tolson, a senior official from the Ministry of Defence, who challenged Hodge on her analysis. [Update 7 March: The audience member was not defence perm sec Jon Thompson, as we originally reported. We apologise for the error.]

Tolson said the MOD had been trying to its improve procurement for several decades and asked Hodge whether she believed the department had missed a “magic bullet” or whether large procurement processes inevitably carry a higher rate of risk and “we have to live with that”.

“I think we can do very very much better,” Hodge responded. “Some of these cutting edge procurements when you are trying to buy completely new equipment are bound to go wrong — but […] not everything going wrong which is where we are at the moment.”

She urged the civil service to sharpen its focus on finding and rewarding people with good contract management skills.

“Nowadays people quite like being on the procurement side, so they quite like letting the contracts, no civil servant wants to monitor the contracts and that’s just as important," Hodge said.

The former PAC chair's criticisms were not just reserved for civil servants, however, with Hodge accusing politicians of being “completely obsessed with new policies” and failing to grasp the importance of scrutinising current and past spending.

“Value for money ought to matter more to all politicians, and it doesn’t,” Hodge said.

Hodge said she had tried “really, really hard” in her time at the helm of PAC “to encourage other select committees to take some of the reports that are done by the National Audit Office and do the sort of exercise that we were doing”.

But she added: “I just never got that going because everybody likes to think about the next policy the new policy and comment on that.”

She added: “Departmental committees do have an impact on existing and future policy but nobody is sufficiently engaged on the effectiveness of current expenditure.”

“A lot of rigour in this system”

The former PAC chair's comments on accountability and the proper scrutiny of public spending come in the wake of a recent report by the National Audit Office, which raised questions over the ability of senior civil servants to challenge ministers on big spending decisions.

The NAO said perm secs lack either the “confidence” or “incentives” to fulfil the Accounting Officer (AO) side of their jobs and prioritise value for money over meeting political demands. Ministers had, the NAO said, taken on an increasingly “executive” role in recent years, while the devolution of powers and use of arm's length bodies means perm secs are now “being held responsible for implementation decisions not directly under their control”.

But the notion that there has been a fundamental shift in the lines of accountability was challenged this week by three of Whitehall’s top officials — cabinet secretary Sir Jeremy Heywood, Treasury permanent secretary Sir Nick Macpherson and civil service chief executive John Manzoni.

Heywood told PAC — now chaired by Labour MP Meg Hillier — that ministers themselves did not get enough credit for their own efforts to ensure taxpayers’ money was well spent, saying it was unfair to claim “politicians don’t care about value for money or don’t care about economy”.

Greater involvement of ministers in policy implementation was, he said, “probably a good thing overall”.

He added: “I have experienced that from the early Blair years onwards. Tony Blair as Prime Minister, and individual cabinet ministers, were very closely involved in monitoring performance — the Michael Barber Delivery Unit and so on put a very strong premium on ministers being very engaged in the data, holding people to account and getting really stuck into whether performance was being delivered.

“I think that what we are seeing now is, in a sense, an extension of that, or another variation on that same theme. It has the following very big advantage: if ministers are more involved in the practicalities of implementation, it helps us to design policy more effectively and more practically to start with. This complete separation between policy design and implementation is a very damaging thing.”

Macpherson meanwhile said the NAO had made “a number of points that, in one sense, people seem to have been making ever since I joined the civil service”.

“Namely, that government has become a lot more complex, the civil service is a lot more politicised and special advisers are a lot more powerful.”

But the Treasury perm sec said that that was not a picture he recognised. 

“I am not sure that government is more complex," he said. "Successive governments change the deck chairs — they centralise, decentralise, devolve and concentrate power — but the landscape is not hugely different from the landscape in, say, the middle to late Tony Blair period.”

Heywood specifically rejected the claim that the 2014 move to allow the prime minister to choose perm secs from a shortlist drawn up with the Civil Service Commission had shifted the balance in favour of ministers, saying he had yet to see “any evidence at all, so far, that this has made any difference to anything, frankly”.

He added: “The fact that the prime minister has chosen someone doesn’t mean that they are going to be less likely to be willing to stand up to him, at all. I don’t see that.”

Manzoni, who as civil service chief and perm sec for the Cabinet Office has overseen a number of initiatives led by the centre of government to try and improve functions common to all departments, acknowledged that this raised questions over the lines of accountability.

But he said the Cabinet Office had tried to ensure “a lot of rigour in this system”.

“I can assure you that it is not something that permanent secretaries wave past,” he added.

“As one introduces central initiatives or cross-cutting themes, I spend a lot of my time talking to the permanent secretaries about who is accountable for what and how it changes the accountability. I have said in front of this committee before that the primary accounting officer is always ultimately accountable for his or her outcome. Those are complexities, not gaps necessarily.”

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