HC Deb 27 October 1994 vol 248 cc1107-14

Motion made, and Question proposed, That this House do now adjourn.—[Dr. Liam Fox.]

10.1 pm

Mr. Peter Mandelson (Hartlepool)

The debate arises from the announcement last week of a radical transformation of the role and staffing of the Treasury. I record my interest as secretary of the parliamentary Labour party's treasury affairs committee and as a parliamentary adviser to the First Division Association of Civil Servants.

No Opposition Member opposes good housekeeping, but the Treasury is already small, given the job that it does at the heart of Government. Its running costs represent only 0.4 per cent. of total Government running costs. So the downscaling of the Treasury cannot be justified on the ground of its financial burden to the nation. The Treasury's size has already been reduced dramatically under this Government. Only 1,400 people now work in the central Treasury, compared with 3,000 in 1982. Many top jobs were cut less than a year ago. Yet it is now proposed to remove as many as one third of the senior posts, with others to follow. In time, a quarter of the entire staff of the Treasury is to be axed.

It is right to ask why that is being done and with what consequences for the ability of this and future Governments to run economic policies. It is also necessary to ask what wider motivation Ministers have for running down the civil service. A real fear is now growing within the Labour party that the current reforms will have such an impact on the whole government machine that there might hardly be a civil service worth its name, not only in the Treasury but throughout Whitehall, to implement the programme of an incoming Labour Administration if we have a change of Government at the next election.

I ask the Minister to describe clearly the way in which staff cuts will be implemented at the Treasury. By what process will individual civil servants be selected to stay or go, and will that process comply with European law? Will there be compulsory, as well as voluntary, redundancy? What severance terms will be provided, and at what public cost? How will individual civil servants' pension arrangements be safeguarded?

What criteria will be used to select individual civil servants for redundancy? How can the Minister assure the House that those criteria will not include, directly or indirectly, considerations of political suitability? Can he assure us also that there is no hit list of those individuals whom the Government want to remove? The civil servants involved, as well as Parliament, are entitled to answers to all those questions.

Let me suggest to the Minister that, in the approach that the Government are taking, they are in danger of creating the worst of all worlds as a result of the job insecurity that those changes are generating in the civil service.

Those officials with the most marketable credentials and contacts in the private sector will be the most tempted to take voluntary redundancy and go—and CVs are probably being brushed up in every corner of the Treasury as we speak. All too often, that group will contain some of the brightest and best, because they have been pushed into aspects of work, such as privatisation, that have been a high priority for the Government. On the other hand, the people with the strongest commitment to the public service, but who have not had such glamorous roles and have not had the same chances to develop, will be eager to stay.

Those people who want to get out but are refused will be disappointed and demoralised, which will affect their future work. Others, who are wanted at the top of the range, will have to be paid more to tie them in. That is not a happy or productive environment in which to work in the most crucial Department—or in any Department—in Whitehall.

What is the purpose of the disruption? The Government's justification is to de-layer management, devolve responsibility, focus on key objectives and move away from the "command and control" style of management, as the permanent secretary, Sir Terry Burns, put it in a lecture earlier this year. At one level, it is hard to argue with all that, and no one would if that was the whole story and the only motivation, but it is not. The Government have decided to swing their axe now because they desire to shred the civil service throughout every Department in Whitehall, and the Treasury is going first, to set an example to the others.

The Department of Health and the Department of the Environment are rumoured to be next in the firing line. Sweeping staff cuts in those Departments are predicted, regardless of the needs that those Departments serve and the services for which they are responsible—but the public's needs never have been the Government's priority.

What supposedly started as a cost-driven exercise is in danger of ending up as an ideological vendetta against the public sector, in which notions of quality, performance and standards of work in the civil service barely figure in Ministers' minds. The staff axe is being wielded not for the cause of better government but simply in aid of less government.

Dramatically scaling down the machine itself is the ultimate application of the Tory philosophy that the Government should withdraw—that they should take less responsibility and that they should intervene less. In other words, the radical downsizing of the Treasury is the logical outcome of the laissez-faire policies that have produced the shrunken economy for which the Treasury, under its present leadership, is responsible.

If one examines the proposed new, leaner, directorate structure proposed for the Treasury, its bias is clear to see. It is not proactive or interventionist; it is not pro-industry. It is barely engaged in the real economy—in what is happening among firms and companies, where Britain's true economic success lies. The Treasury's objectives, apparently, are only to maintain affordable public expenditure, improve the efficiency of markets, maintain a framework of Government accounting, maintain the financial regulatory regime, deliver permanently low inflation and promote United Kingdom interests abroad. Those are all laudable aims, but what about the United Kingdom's other interests at home?

The most important influence any Government have is through the money that they spend— 44 per cent. of gross domestic product. An active Government who understand how the power of public action can be used creatively to strengthen the supply side in the economy and help create opportunities for every individual in society need a strong Treasury to co-ordinate that effort. Under the new regime, the Treasury will not only be failing in that task but its other important role—to manage public spending—will be weakened.

The withdrawal of the Treasury's detailed control over other Departments' spending, which is proposed in the changes, will have bad consequences if it leads to a relaxation of financial discipline throughout Whitehall and to a green light being offered to all the special interests that breed in the spending Departments. One has only to think of the Agriculture and Defence Ministries to recognise the dangers. The Government will have less ability centrally to enforce spending priorities throughout Whitehall. Whitehall needs a strong co-ordinating Department to bang the table and sort out priorities when departmental priorities conflict. That requires detailed knowledge that will be jeopardised by the proposed staff changes.

Ministers may think that in their quest for less government and a smaller public sector the morale and motivation of the civil service is a reasonable loss to incur; if so, they are making a big mistake. The loyalty and dedication of civil servants and their desire to give a lifetime of service to the good government of their country constitute a priceless asset that should not be squandered in the cause of endless fragmentation of that service— contracting out and buying in from outside consultants and numerous special political advisers. When the Prime Minister talks of the problems of maintaining standards of conduct in public life, he should understand that those problems would be much larger without the standards of integrity, independence and political neutrality that are the hallmarks of the British civil service.

There is a further constitutional as well as practical implication of what the Government are doing in the Treasury and elsewhere in Whitehall. It must be asked whether, as a result of the rundown of the civil service, the very machine that will be left behind will be adequate to administer the policies of an incoming Labour Government. It is true that the newly enshrined objectives of the Treasury could easily be "unshrined" or at least "reshrined". But a properly staffed, managed and equipped machine has to be in place to do that. Such consideration is too much to expect from the Chancellor of the Exchequer. He has a record of undermining public service in each Department in which he has served. From doctors to teachers, from the police to the Treasury, he has destroyed public servants' pride in what they do.

The permanent secretary to the Treasury, however, has a personal responsibility, independent of the Government of the day, to secure the Treasury machine for subsequent Administrations. He has shown some dereliction of duty by not consulting the Opposition about the changes that he proposes. He should have considered whether they would be adequate for the needs of a different, Labour Administration. Upon a change of Government, the Treasury will need to shift radically and quickly to new priorities and ways of working, and there will be no time to waste.

The permanent secretary should not only fully consult the Opposition about the changes already under way—others' views have been sought—[...]e should also, long before the next election and with the agreement and consent of the head of the home civil service, call on the shadow Chancellor to be fully briefed on Labour's plans so that the Treasury will be ready to implement them from day one.

As the civil service White Paper reminded us earlier this year: The Government recognises that the Civil Service is not the property of any single Administration but will continue to serve Governments of whatever party. I hope that Ministers will think again about what they are doing to the civil service and about the consequences of that for government and for our public life. In implementing any reforms, they have a duty to ensure that there remains a unified, properly staffed and motivated civil service to pass on to succeeding Administrations. I hope tonight for an unequivocal commitment from the Minister to that end, and that, on behalf of the Treasury, he will give me the undertakings that I have sought.

10.14 pm
The Parliamentary Secretary, Office of Public Service and Science (Mr. Robert G. Hughes)

I congratulate the hon. Member for Hartlepool (Mr. Mandelson) on securing this Adjournment debate and on his promotion to the ranks of the Opposition Whips Office. I am sure that serving as a Whip, as much in opposition as in government, is a valuable role; and that the hon. Gentleman, like anyone else who has served as one, will learn a great deal about government. Having heard his speech, however, I suggest that a period of silence on his part would be welcomed by many—especially by the people about whom he has been talking.

The hard-working civil servants whom the hon. Gentleman has attacked this evening have every right to resent his attack. As a Minister responsible for the civil service I certainly resent it on behalf of all the civil servants, of every grade, with whom I come into contact.

I am glad to have the opportunity to debate redundancies in the civil service and to set out clearly the true picture. There has been much ill-informed speculation of late, which I am pleased to have this chance to refute. The hon. Gentleman has tonight repeated some of the ill-informed exaggerations produced by the media and the trade unions.

This occasion allows me to discuss redundancy in the correct context of the reform of the civil service. This is an issue to which the Government attach the highest importance and on which, I believe, we have an excellent record. Our aim was well expressed in the citizens charter first report in 1992: New management structures are being developed, competition is being introduced or extended; arrangements for pay are changing rapidly. All these changes are in pursuit of a single, worthwhile cause: the safeguarding and improvement of our public services, for the benefit of those who use them, at a cost which the nation can afford. The hon. Gentleman said twice that he wants there to be enough civil servants in place to implement the programme of an incoming Labour Government. Repeating an argument does not make it true. The fact is that civil servants are there to carry out the functions of the civil service. Although he only alluded to this in his speech, it is common for the hon. Gentleman, the First Division Association and other Labour party spokesmen to say that there has been a change in the civil service's code of ethics and that it will not be capable of serving a Labour Government. That, too, is an insult to civil servants—

Mr. Mandelson

indicated dissent.

Mr. Hughes

That was certainly the tenor of the discussion in which the hon. Gentleman took part at the seminar held by the FDA—and it certainly represents the burden of what the hon. Member for Oldham, West (Mr. Meacher) said in a speech last week.

The right hon. Member for Manchester, Gorton (Mr. Kaufman) has done us all a favour. When I became a departmental Minister in the reshuffle, I was still in the middle of reading his excellent book, "How to be a Minister". In it, the right hon. Gentleman had some interesting things to say, among them the view that Labour politicians have of the civil service. He writes, on page 45: Some officials will just suggest one course of action, for you to take or leave. Others, more cunning, will attempt to confuse you with a choice, while carefully steering you in the direction they want you to go. The key of course is not necessarily to accept any of the courses of action they recommend, but to come up with some others yourself. The really inventive Minister will even reject the very problem posed to him, and map out another and more politically attractive scenario. That is the sort of contempt with which the hon. Member for Hartlepool has spoken of the civil service.

The White Paper entitled "The Civil Service: Continuity and Change", which was published in July, was the first comprehensive statement of Government policy on the civil service since the Fulton report of 1968. In that document the subject of job losses was specifically and realistically addressed. It stated: On the basis of experience so far, recognising the challenging nature of running costs targets, and allowing for further opportunities for outsourcing and privatisation, the Government would expect Civil Service manpower to fall significantly below 500,000 over the next four years. Incidentally, that fall is from a total at 1 April 1994 of 533,350. The White Paper continued: The Government does not intend to set specific manpower targets either globally or for departments; it firmly believes that control should continue to be exercised through running costs rather than staff numbers.

Mr. Kevin McNamara (Kingston upon Hull, North)

I thought that the kernel of the speech by my hon. Friend the Member for Hartlepool (Mr. Mandelson) was the management of Government finance. Does the Minister intend to address that topic, bearing in mind the fact that various reports by the Public Accounts Committee, the Select Committee on Defence and the Select Committee on Treasury and Civil Service have dealt with the whole issue of costing and control of finance? They have also commented on how the Treasury will deal with it if we lose a complete layer of management. For example, how are we to deal with the burgeoning costs of the Ministry of Defence?

Mr. Hughes

After that uncalled-for intervention, I shall have time to reply to slightly less of the speech by the hon. Member for Hartlepool. I was seeking to speak to those points, but the hon. Member for Hartlepool went wider and I am entitled to respond to the wider issues as well.

It is quite wrong to associate a reduction in civil service jobs with redundancies. One does not necessarily follow the other. As the White Paper went on to explain: The Government's aim has been, and will continue to be, that reductions in the size of the Civil Service should as far as possible be achieved without redundancies. Normal turnover in a large organisation gives managers scope for this. In recent years about 5 per cent. of staff have been leaving the Civil Service each year and in the Civil Service, as elsewhere, this figure may rise as the labour market changes. The Government's aim is borne out by the facts. Provisional figures for the financial year 1993–94 show a total of about 37,000 departures from the civil service, of which only 2,800 were redundancies, and 800 of those were voluntary. In addition, there were 3,100 early departures, and in some cases that avoided later compulsory redundancies. Therefore, when discussing redundancy in the civil service, we must be sure to keep things in perspective.

The hon. Member for Hartlepool made a specific and important point about pensions. Those made compulsorily redundant receive payments under the principal civil service pension scheme related to age, reckonable service and pensionable pay. Terms agreed with the civil service unions when present arrangements were introduced on 1 April 1987 remain in place. I understand that those terms compare favourably with those in the private sector and are on the same basis for all grades. Of course, people are right to be concerned, but I do not think that there is a basis for that concern.

I shall now refer specifically to the Treasury's fundamental expenditure review. I am quite astonished that that review could lead either to this debate or to the cuttings that I have read from newspapers. First, no decisions have yet been made. The fundamental expenditure review did no more than recommend that 31 senior posts should be cut. Two of them are to transfer to other Departments and another three are currently unoccupied. It is surprising that the possibility of 26 redundancies should cause headlines claiming that 100,000 jobs are to be cut and that it should lead to this debate and its tone.

The White Paper stated: Every effort will be made to ensure that civil servants will be treated in a way that is fair and reasonable. I shall reply specifically to the scurrilous points made by the hon. Member for Hartlepool about redundancy on political grounds. Of course, that is not correct; it has never been like that. He also asked whether there would be a hit list. That is an outrageous suggestion, which I emphatically reject.

The Government recognise the value of their staff and they reaffirmed that in the "Continuity and Change" White Paper, which said: The Civil Service needs to make better use of its most important resource—the staff of departments and agencies—by providing the prospects of a career with a good employer, offering challenge and reward; by developing their skills to meet the managerial, technical and competitive challenges they face; and by ensuring equality of opportunity for all members of staff, irrespective of background, gender, race and disability. The Government will not idly throw away staff who have been recruited and trained at expense to the public purse because we appreciate the value of a permanent, well-trained civil service. It is nonsense for the hon. Gentleman—the point was repeated by the hon. Member for Kingston upon Hull, North (Mr. McNamara)—to talk in terms of the emasculation or destruction of the civil service as we know it. An emasculated and incapable civil service would be of no use to any Government, let alone an incoming Labour Government or, as is more likely, a continuing Conservative Government. Any wise Minister values the advice that he gets from his officials and, more to the point, knows that its quality is dependent on the robustness and impartiality with which it is delivered.

Good government in this country depends on a good and strong civil service, and the Government acknowledged that in the White Paper, which says: Successive Governments have paid. tribute to the service it has provided and have taken care that the Civil Service should maintain its impartiality and its ability to command the confidence of successive administrations. This Government are fully committed to maintaining this approach. The idea that somehow, either in quality, in its disposition or in the numbers, the civil service would not be able to help or be of value to an incoming Labour Government is, in my judgment, a slur upon the civil servants who are there at the moment.

The exaggerated media stories and spurious figures on redundancies in the civil service that have been repeated tonight are inaccurate and, as I hope I have shown, will not help in the management of what is a difficult period of change for the civil service.

When the hon. Gentleman talks about demotivation and suggests that the Government have a desire to shred the civil service, what effect does he think that has on civil servants and their families? If anybody is demotivating those people, it is people such as the hon. Gentleman.

Mr. McNamara

Market testing.

Mr. Hughes

Market testing is enabling civil servants to do the jobs that they want to do; it is getting good value for the taxpayer. I know that the hon. Gentleman does not care about that; he does not care whether the customers—the people paying the bill—get the service that they want, but what can be the argument against people getting the best quality service at the best possible price? I thought that nobody would argue with that, least of all what we keep being told is the modern Labour party, the new Labour party that believes in value for money. That idea is blown out of the water every time Labour spokesmen open their mouths.

I believe that what has been said tonight will not help in the management of what is a difficult period of change for the civil service. The Government know well the excellent service that the civil service has provided to the country over many years and are determined to maintain an apolitical permanent civil service that is honest, impartial and accountable through Ministers to Parliament. Those qualities have served us well in the past and will do so in future.

The Government are also determined to have a civil service that is effective and efficient. There is simply no reason to maintain within the civil service jobs that can be best done in the private sector. Let me remind the House that our criteria are best long-term value for money. We are seeking to safeguard services for the future, not to contract them out to the lowest bidder.

Alongside our determination for efficiency is an equal determination for quality of service. The citizens charter programme is a 10-year programme designed to raise the quality of public service across the board—and that includes the civil service.

Mr. Mandelson

Does the Minister accept that the fears of the Opposition might be greatly allayed if he were to take up my suggestion that the permanent secretary to the Treasury should call on the shadow Chancellor and reassure the Opposition that the Treasury machine that he is leaving intact, as the Minister has described, will be capable of implementing the policies and programmes of an incoming Labour Government? Why does not he accept my suggestion?

Mr. Hughes

Any reading of chapter four of the "Civil Service Management Code", which is a published document, not unwritten rules, would make the capability of the civil service abundantly clear to any sensible person from any party. That code covers the duty not to misuse official information, political neutrality, conflicts of interest, duties of civil servants in relation to Ministers and rules on accepting employment after leaving. The essential rules for being a civil servant are laid down centrally. They have everything to do with the hon. Gentleman's question. Those are the important issues for the Government to consider, not some fanciful idea of what an incoming Labour Government might or might not want to do.

The reorganisation of a management structure as large and as complex as the civil service is bound to be unsettling for those involved. We shall seek to keep redundancies, particularly compulsory ones, to a minimum. It is in no one's interests that there should be more than are necessary. It must be our aim to limit the number of redundancies as far as possible, in the interests not only of good personnel management, but of good economic management.

The Government now demand and get from the civil service better efficiency and better quality. For instance, the Benefits Agency has estimated that its productivity increase in the past four years means that it is now coping with a work load that would have required 15,000 more people in 1990. Demanding and getting value for money, looking for efficiencies and making the savings that are necessary are part of the duty of the Government to the taxpayer. I do not think that anyone would seriously argue about that duty and I do not believe that the Opposition will be taken seriously if they seek to do that.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes to Eleven o'clock.