Friday, February 17, 2006

Law Of Unintended Consequences


One of the reasons government wastes so much of our money is that so many of its actions have inintended consequences. Chronically poor planning and execution are partly to blame, but more fundamentally, governments are driven too much by what makes a good headline, rather than by what is realistically achievable.

The Gershon Efficiency Programme is a classic case in point. It was initiated by Mr Brown as yet another attempt to convince us those extra billions of taxes are being used productively- whatever the evidence of our own eyes. And although it will doubtless be made to deliver its headline targets, as today's stinging critique from the National Audit Office demonstrates, it will do so only because of massive data manipulation and at the cost of some serious unintended consequences (for more on the NAO report, see here).

To start with, it's pretty clear that most of the "gains" will actually come not from improved efficiency but from a diminution of service levels. As the NAO says "there were still significant risks that efficiencies were not being measured accurately and in many cases departments could not be sure that service quality had not deteriorated as a result of efficiency-related reforms". So for example, it's easy to see how the NHS efficiency programme "to increase the proportion of elective surgery conducted as day surgery" almost certainly represents a cut in service levels to patients (wonder what the Doc thinks) .

None of which would have been intended by Mr Brown, but it's happening anyway.

Also happening are the extraordinary contortions of individual departments as they struggle to make their targeted "gains". So for example, the Department for Work and Pensions boasts of reducing manpower by 14,215- roughly halfway to it's 30,000 target. Very good. Except that we now learn the target only applies to permanent staff. Which has presumably produced the unintended consequence of another substantial increase in the numbers of temporary staff (we don't actually know because the figures for temps apparently aren't included in the DWP's returns).

This is a particularly galling consequence since the employment of expensive agency temps has long been a source of huge government waste. Poor planning, poor management, and the need to operate within arbitrary staff budgeting rules like Gershon's, all produce high staff turnover, with temps hired on a virtually continuous basis to fill the gaps.

A stunning measure of how bad things are is that whereas government employs around 20% of Britain's workforce, it accounts for 50% of the temporary labour market. At an overall cost to taxpayers of £12bn pa!

How do we know this? Why, the Gershon Review told us, and what's more, it promised to do something about it!

As always, the only long-term solution to such idiocies is to cut the size of government. Drastically.

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