Events, dear boy

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The new Whitehall heads face change and disruption on a huge  scale. Will they be able to cope?

Who would want to be in government now? It is not just politicians, facing defeat in elections, as in Denmark and Spain, or replacement by technocrats, as in Greece and Italy. It is also civil servants, who face unprecedented challenges in managing the state.

The new duumvirate at the top of Whitehall – Sir Jeremy Heywood, the new Cabinet Secretary, and Sir Bob Kerslake, the new Head of the Civil Service – are operating in the trickiest environment since the mid-to-late 1970s. That was when their predecessors agonised over whether Britain was ungovernable in the face of rapidly rising inflation and strikes.

The economic and political environment now is different, but no less demanding. First, on the economy, even if the worst should be over later this year as inflation comes down, Britain faces a period of sluggish growth. Gloom about the outlook is reinforced by the continuing upheavals in the eurozone, with or without a Greek default. This is leaving aside a possible threat to natural gas supplies from a confrontation with Iran.

The economy is now 10%–15% smaller than we thought just a few years ago when annual growth of 2%–3% was assumed as a norm. This lost output is likely to be permanent. It also has profound implications at a time when all parties agree on the need to reduce the size of debt, even if they disagree about the speed of adjustment. The squeeze on public spending will carry on, not just until 2014/15 but well into the next Parliament. This means that public sector pay will continue to be held down, and there is likely to be further pressure on the number of jobs in the public sector. Making far-reaching reforms to the NHS, criminal justice, welfare payments and immigration with 25%–30% fewer resources is very hard.

Rather like what happened two years into the life of the Blair Government in 1999, there is pressure on the new civil service leadership from ministers for implementation (the updated term for delivery) but with more activities provided locally and from the private and voluntary sectors. The challenge for Heywood and Kerslake is to improve the civil service’s skills and ability to commission work from external providers and manage big projects, not just to tighten belts.

Second, the politics of austerity creates awkward social challenges. The danger is not just a repetition of the inner-city riots or anti-cuts protests but a growing disaffection among the rising numbers of young unemployed, an erosion of aspiration.

Third, the banking crisis and its aftermath have produced a deeper soul-searching over the model of free-market capitalism that has prevailed for the past 30 years. The Occupy movement can be dismissed as largely self-indulgent and contradictory – the mirror image of the Tea Party protests in the US. But the debate over executive pay and growing inequalities – let alone the behaviour of bankers – has now embraced Conservative politicians. The rethinking of capitalism will change the role of the state and its relations with business.

Fourth, the constitutional integrity of the UK is under question both in the debate over Scotland’s place in the Union and from the abrasive relationship between the Conservative members of the coalition and most of the rest of the European Union. Whitehall has suddenly woken up to these constitutional challenges, which will require deft political manoeuvring.

Fifth, there is profound disillusionment with the political class. That is partly the fault of politicians in raising expectations beyond where they can be fulfilled. But the results are corrosive and make it harder for governments to mobilise consent for necessary changes.
Any of these difficulties on their own would be demanding but together – and  combined with the continuing terrorist threat – they underline the scale of the problems facing both politicians and the new civil service leadership.

Peter Riddell is the new director of the Institute for Government, which will shortly be producing an open letter to Sir Jeremy Heywood and Sir Bob Kerslake on the challenges facing the civil service

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