Re-skilling the State

Decades of anti-public service ideology has seen the state's capacity diminished through waves of cuts and outsourcing – if it is to play an active role in the economy again, it must be rebuilt.

Covid-19 is teaching us many lessons, most obviously about the fragility of the NHS hospital system and the limited capacity of our public health laboratories. But as our new When Systems Fail report argues the problems of inadequate testing and PPE supply reveal a loss of organisational capability which is typical in what we call the post-administrative state. The lesson is that, if we want the state to do more, we must re-skill the state.

Consider PPE procurement, where the strategic stockpile of PPE equipment and NHS procurement is centrally managed by NHS Supply Chain Co-ordination Ltd, which is directly owned by the Department of Health. But the warehouse operation had been outsourced to an American firm, Movianto, which struggled to cope with demand – not least because 45% of the items in the strategic stockpile were out of date in January 2020.

Meanwhile, NHS Supply Chain had limited reach into, or understanding of, the supply chain. Reportedly, this organisation had no experience of directly sourcing PPE and was accustomed to securing it through UK-based intermediaries. This created multiple problems in securing new supplies, and led to the purchase of unusable products, as with the Turkish gowns flown in with maximum publicity by the RAF. 

When in-house capability is limited, UK government departments have no choice in a crisis but to default to distress outsourcing – like the Brexit contract with a ferry company with no ferries.  At every point in the Covid-19 crisis, when central government needed something done quickly and at scale it turned to outsourcing companies who were incentivised with contracts without competitive tender, which allowed cost plus charging. 

Deloitte was recruited to assist with procuring PPE, and, along with other firms such as Serco, Sodexho and Boots, to increase the number of regional testing sites to 50. NHS England hired a team of about 60 KPMG consultants to build seven temporary Nightingale hospitals. By early May, private call centre operators including Serco were being asked to provide more than 15,000 call centre staff for contact tracing. 

This is not just about an ideological bias towards outsourcing, it is also about the limited capability of the state apparatus at central and local level. Successive reorganisations have removed Department of Health civil servants with specialist technical and administrative expertise and networked connections outside their Department.  

This deskilling of the state is what explains the failure to supply public health directors with the post code and ethnicity data on those who tested positive so that local authorities could contain local outbreaks. In May, public health directors could not access data from the privately-operated super-labs; and it was only in late June that test data began to reach local authorities. 

The Health Department, NHS England and Public Health England have strategies, plans, mission statements, policies, key performance indicators, risk assessment and ex-post evaluation. The formal apparatus of modern management is all in place, but these organisations are hollowed out because they have limited capacity to make administrative judgements and operationalise policies.  

Historians know that the modern administrative state is a nineteenth century European invention and that, until late in that century, many economies operated without a strong, centralised state apparatus. Most have assumed that this achievement was permanent. We now understand that the administrative capability of central and local state can be undone by churning reorganisations, austerity cuts and atrophy.    

This problem is particularly acute in the highly-centralised UK where London-based politicians and civil servants have been reluctant to operate multi-level governance structures which allow local discretion and distribute capability. Local authorities have been stripped of functions in housing and education and, after austerity cuts, struggle to do more than meet their statutory obligations on adult’s and children’s social care. When central government reinstated English city region government, they offered ‘city deals’ with no choice but to accept the Treasury’s superordinate policy objectives of economic growth and jobs

Privatisation, outsourcing and deregulation all denigrate state administration by imposing top down policy designs and objectives regardless of specifics. The result was policy fiasco and human tragedy. The Grenfell Tower fire was caused by the undermining of building regulation and inspection, which resulted in sub-contracted, poorly fitted and highly combustible cladding panels on many high-rise blocks. The Windrush victimisation of undocumented Afro-Caribbean migrants was part of a hostile environment policy after 2012, which created ‘foreseeable and avoidable’ injustices. 

Against this background, it is bizarre that Michael Gove and Dominic Cummings want to press more centralised top-down policies against the administrative and political structures they called “the blob” when they were in charge of education. More top-down control initiatives will only produce new fiascos while distracting attention from the slow, patient work of rebuilding the administrative capability of the local and central state. 

Going forward, this issue is critical for socialists. A green new deal should put housing retrofit at its centre. But state grants plus unmanaged outsourcing have already produced problems in cavity wall insulation. Planning different kinds of work on older housing stock and organising the replacement of 20 million gas boilers will be a major test of distributed administrative capability. On present form, UK government will fail that next big test.  

You can read the Foundational Economy Collective’s ‘When Systems Fail’ report in full here.

About the Author

Karel Williams is professor of accounting and political economy at Alliance Manchester Business School. He is a member of the Foundational Economy Collective.