Civil Service reforms

The Efficiency Unit

In 1979 the government established an Efficiency Unit, headed by Sir Derek Rayner, a management expert from the private sector (Marks and Spencer). This was intended to improve the “three Es” - economy, efficiency and effectiveness.

The Efficiency Unit was able to reduce operating costs in a number of areas and to improve management techniques. It was claimed that over £1 billion had been saved by 1986 and the efficiency reviews have continued to be part of modern civil service practice.

The Financial Management Initiative (FMI)

This was started in 1982 and was a development of the efficiency reviews. The main idea of this was to make civil service managers responsible for their own budget areas, giving them more responsibility and holding them accountable for their performance. It contrasted with the earlier system by which individual civil servants had no direct responsibility for costs, which often led to cost overruns and waste.

This new management system is now established practice and is part of the reason for reduced costs and more efficient management in the civil service.

The Next Steps

Despite the progress in improving management, there was more pressure for greater efficiency and this lead to changes in the entire organisation of the civil service. “Improving Management in Government: The Next Steps” was a report published in 1988 by Sir Robin Ibbs, the head of the Efficiency Unit.

This was critical of the civil service:

· it was too big and unwieldy as a single organisation, combining too many different and contrasting activities within the same structure

· it did not give enough freedom to managers

· there was not enough emphasis on achieving results and on quality of service.

It made a number of recommendations:

· the separation of the advisory role of the senior civil service in Whitehall from the executive role of implementing government policies

· the establishment of executive agencies to run each separate operational area within the civil service

· each agency to be run by chief executives who would have the freedom, within overall policy set by government, to run their agencies as separate ’businesses’

· ministers would no longer have direct responsibility for operational management, which would lie with the new chief executives.

These recommendations were accepted by the Thatcher government and have since been implemented. Arguably, they constitute the biggest change in the organisation and structure of the civil service since the Northcote-Trevelyan report.

Implementation of the Next Steps

The process of creating an agency starts with a prior options examination - i.e. there is a consideration of all other alternatives for operating the civil service function, such as privatisation, contracting out, etc.

Since 1989 the vast majority of civil service executive functions have been re-organised into agencies - there are currently more than 170 agencies in existence. Examples include:

· the Benefits Agency
· the Prisons Agency
· the Meteorological Office
· Her Majesty’s Stationery Office
· the Driver and Vehicle Licensing Agency
· the Ordnance Survey
· the Employment Agency.

Recruitment - The agencies are able to recruit their chief executives from outside of the civil service - from the private sector or other public sector organisations. This is seen as opening up the civil service to a wider range of experience and expertise and is a clear contrast to the earlier practice of generalist civil servants being promoted from within the service.

Targets - Each agency, in negotiation with departmental ministers, sets itself targets against which its performance can be measured. These are intended to enable the agencies to improve their performances and to demonstrate their quality of service. Some of these targets may be included in the agency’s version of the Citizens’ Charter.

Pay and conditions - All agencies with a staff of more than 2,000 are responsible for negotiating the pay and conditions of their staff. This reflects the fact that the nature of the work involved in each agency can be very different - the Prison Service compared to the Meteorological Office, for example - and the market conditions (demand and supply) for the jobs can vary widely.

This has been opposed by the trade unions, which argue that the pay and conditions of weaker groups of workers will deteriorate under these arrangements.


One of the key issues that has arisen with the introduction of agencies is that the accountability of civil servants to Parliament has allegedly been reduced.

· previously, MPs could raise problems with a department directly with the minister concerned, in person, by letter or in Parliament (Question Time)

· now MPs have to raise such issues with the chief executives of agencies, which is less open, less certain and possibly less effective.

There has also been confusion as to the exact division of responsibility between ministers and agency chief executives:

· the traditional view of responsibility was that ministers are ultimately responsible for all of the actions of their departments (i.e. individual ministerial responsibility)

· the new view is that the minister is responsible for policy decisions, the agency head is responsible for the implementation of that policy.

This is best illustrated in the case of Michael Howard, Home Secretary until 1997 and Derek Lewis, chief executive of the Prisons Agency. In 1995, there were a series of high profile escapes from British prisons and other problems (e.g. with Group 4). Initially Howard defended Lewis but, with the publication of the highly critical Learmont Report on the escapes, Howard promptly sacked Lewis.

Under the earlier understanding of individual ministerial responsibility, Howard, as minister, might have been held responsible (and resigned). However he claimed that, as minister, he was only responsible for deciding policy and that Lewis was responsible for carrying out the policy and had failed. Yet the Learmont report demonstrated that the division between policy and implementation was not at all clear and showed that Howard was very closely involved in all of Lewis’s day-to-day decisions.

Market testing

Having enforced competitive tendering in the NHS and local government, the government introduced it into its own services from 1991, where it is known as ‘market testing’. The intention was to enable private sector companies to submit financial bids to carry out activities or services provided by central government. It is expected that the result will be that services are provided more cheaply and efficiently, either by the private sector or by the civil service or agency who will have been forced to be reduce costs because of market pressure.

Examples of services now operated by the private sector as a result of market testing include private prisons and immigration and asylum seekers detention centres.

The Conservative government claimed that considerable financial savings have been made as a result of market testing, but critics would argue that quality and standards may have suffered as a result.


The civil service has clearly undergone very significant changes since 1979:

· it is no longer an organisation with a single structure
· it is more managerially efficient
· it is more financially efficient
· it is much smaller in terms of numbers
· it has clearer targets
· some services are provided by the private sector
· its accountability to Parliament has been reduced.