The Death of Strategy in British Government

A flagship policy of the New Labour government was that it would introduce greater stability – no more ‘boom and bust’ as Gordon Brown loudly and frequently boasted.

A key component of this approach was more a ‘strategic’ approach to public spending – embedded in the new 3-year ‘Comprehensive Spending Review’ (CSR) process first announced in 1998.

There were two principle components to the CRS system: the first was that government would take seriously their 3-year spending plans and stick to them. Governments since the mid-1960s had published 3-year spending projections, but no-one, especially the government themselves, ever took years 2 and 3 seriously. They were a mirage, always receding into the distance. Gordon Brown promised to change all that – in a pre-election pledge he committed to stick to the then Tory Chancellor Ken Clarke’s ridiculous spending plans – which Clarke himself has admitted were never serious and were just a tactical ploy to justify promises of tax cuts after the 1997 Election.

But Gordon stuck to Ken’s plans and public spending, as a proportion of GDP, sunk to it’s lowest level in 40 tears by 1998. In 1998 however Mr Brown published the first ‘Comprehensive Spending Review’ that promised firm 3-year spending plans for 1999-2002.

The new plans started a massive increase in spending on public services.

And in exchange for these firm plans the second strand of the revolutionary new system would kick in: government ministries would be committed to ‘deliverables’ in the shape of ‘Public Service Agreements’ (PSAs). PSAs were high-level, supposedly ‘outcome’ focussed, targets of what ministries would achieve in exchange for the increased funding – money for delivery and reform became the new mantra. This new ‘strategic’ approach was however difficult to maintain.

The first cracks appeared when the next ‘spending review’ was published in July 2000 – not in July 2001 as the 3-year cycle would have implied. The obvious explanation for the change was that an Election was planned for Spring 2001 and a Spending Review (with lots of extra spending and ambitious new targets) announced in July 2001 wouldn’t have been much help – so it was dragged forward to July 2000. This of course caused problems.

Year-3 of the previous spending plans suddenly became irrelevant – but despite the supposed link between money and delivery the year-3 PSA targets remained, alongside new year-1 targets for the next phase. In a classic piece of Whitehall jargon the process was now a “three-year cycle reviewed every two years”.

Even two-year fixed budgets and performance targets would have been an improvement, but even this did not last. First, both annual Budget statements (usually in March) and later even the annual Pre-Budget Report (usually in the previous November) were used to announce substantial changes to public spending plans. PSAs were however left largely unaltered, making any claims to ‘strategic’ management – linking resources to performance – seem rather limp.

Finally, the 2004 spending review was suddenly allowed to run for the full three years (2005-7) and the next – 2007 – review was again designated as “Comprehensive”. Which, of course, had nothing to do with the change in Prime Minister from Blair to Brown in 2007.

If the government had reverted it’s “three-year cycle reviewed every two years” we should have a Spending Review (and new set of PSA targets) in July 2009. It is clear this not going to happen. Nor will there be an SR, or CSR, 2010. Preparations for such a new cycle would have to begin soon but everyone knows they would be interrupted by the run up to the General Election in, no later than June, 2010. Apart from anything else in the run-up to an Election the civil service simply starts to freeze work on any policy commitments – and the Spending Reviews are certainly that. In the unlikely event of a Labour victory, it is possible the whole CSR/PSA system will be revived, but if so it won’t happen until 2011 and there will be at the very least an interregnum. Whether a 4th Labour government would really want to revive a system of ‘strategic’ planning is an era of retrenchment and cut-backs is an open question.

The Tories have not yet said what they would do, but it seems unlikely they would want to announce for three-years in advance just how much they were going to cut from public spending, and from where.

So it looks very much like the grand experiment with a more ‘strategic’ form of planning government spending and results is dead. Which is a shame for all those governments around the world who having been following the – sanitised – official story with interest and in some cases envy. This is not, I hasten to add, a purely negative story – there have been some benefits from the attempt at a more strategic approach. But it is a cautionary tale – to beware excessive rhetoric and be aware of the limitations of ‘planning’ in democratic systems.

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