Magazine article Public Finance

The View from Above

Magazine article Public Finance

The View from Above

Article excerpt

BURIED BENEATH THE swirl of political controversy last month was the demise of the shortest-lived Whitehall department ever. Just 23 months after its creation, the Department for Innovation, Universities and Skills has been merged into Lord Mandelson's new super-department, the Department for Business, Innovation and Skills. But Dius's premature passing is more than just a sales opportunity for sign-makers and stationery suppliers - it provides an insight into a frantic world where civil servants must provide services while assembling their own organisation.

Was the creation of Dius worth the pain? And what can it tell us about the future shape of Whitehall?

There's no doubt that creating a new department causes disruption and costs money - yet establishing exactly how much is remarkably difficult. Although the official Treasury position is that changes have to be funded from within departmental budgets, it is rare to find accurate records of how this is done. Politicians therefore lack reliable information on the likely expenses to weigh against the expected benefits.

An important legacy of Dius - partly because it allowed access to an evaluation team from the Institute for Government and the London School of Economics - is that we now have a clearer idea of these costs and benefits. Dius accounts reveal that administration costs rose by £8.2m the year it was established, through new accommodation and IT infrastructure. Senior figures in the department estimated the one-off direct costs of creation were higher, at up to £13m.

Direct costs give only part of the picture, of course. Dius also had to move into a new building, adopt a new IT system and adjust to new set-ups for human resources, finance and communications. By 2009, there were still significant problems around shared services and pay scales. Since it was a formidable task, it was reckoned that Dius would need three to five years to reap the benefits of these start-up costs. It got less than two years.

What were the expected benefits? In 2007, the Cabinet Office said Dius would provide a 'strong integrated permanent voice' to help break down barriers between universities, colleges and business in terms of innovation, training arid skill development. Dius, with John Denham as secretary of state, was therefore charged with bringing together higher education, further education, innovation and science - a collection of very different cultures each with autonomous institutions.

The plan was that higher education and skills would be encouraged to engage more fully with their contribution to the wider economy. Some observers also regarded Dius as a way to ensure future education secretaries would be less able to sacrifice long-term investments in science and skills for short-term top-ups of the schools budget. Given that UK department ministers enjoy greater budgetary freedom than any other Organisation for Economic Co-operation and Development country (according to forthcoming OECD analysis), this concern is a credible one for a government seeking to protect a prime area of spending.

But the Dius management board decided the new department would not signal a grand new policy programme; rather, it would focus on delivering services. This decision was credited with ensuring that the changes did not overly disrupt the running of large and important programmes.

The department also attempted to bring together its different parts by adopting a hot-desking policy to encourage more fluid mixing of staff (its offices remained spread across Whitehall and beyond). A staff survey in October 2008, which found 60% of staff had a 'clear understanding of the purpose and objectives of the department', conveyed a sense of progress - but also of the distance to go.

By early 2009, there were signs that Dius was beginning to draw together its various components to serve a shared strategic purpose. The department had been restructured around its 'customers' - both learners and businesses - and away from the historical focus on the higher and further education sectors. …

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