Look after the pennies ...

It is an old saying that if you look after the pennies the pounds will look after themselves. Maybe, but one might say that being focused on details means that one misses the big picture. It seems to me that this is the effect of the government's transparency policy: by enabling anyone to see details of payments for £500 swamps them with masses of data but they aren't really holding anyone to account. Accountability, you see, requires explanation as well as information (just as accounting requires words as well as numbers). Knowing what £500 was spent on does not tell you whether it was spent on the right thing. As Carnegie and West put it: “a hospital that is well managed in financial terms cannot be presumed to be meeting a community’s needs for health care.”

I spotted a couple of things in yesterday's news that brought this issue to mind. First I saw that Grant Shapps was criticising the Audit Commission for spending £20,000 on the failed recruitment of a chief executive last spring. The amount doesn't seem unreasonable to me and the fact that no chief executive was recruited had more to do with Shapps's boss than anything else. Shapps was also critical about the various minor payments made by Audit Commission staff on its procurement card. Now, procurement cards are usually normal-looking credit cards that are restricted only to allow purchases of certain classes of goods and services. They are promoted to public sector organizations to make the purchase of low-value goods in a cheap and efficient way by avoiding all the red tape of writing formal orders and processing invoices etc. In my experience their use is well-controlled, often the control being better than under previous systems because the credit card company can provide so much information about when and where the card was used. The fact that someone in the Audit Commission bought something from an HMV shop suggests to me that there was a business reason for buying whatever it was. I would be very surprised if it turned out that someone bought the latest Take That CD to listen to in their car on the way home from work. That sort of thing rarely happens, and it is even less rare, I believe, when it is as easily detectable as a payment made on a procurement card that will have an itemised bill sent to the finance department. All in all, the Audit Commission will probably spend more time and money providing evidence to Grant Shapps that it was a legitimate business expense than the item cost. That's not value for money in anyone's book.

The second story I saw yesterday was about the Department for Education spending £21million on consultants. A much more significant amount of money, you'll agree,  and it may well be that it is much less than Labour spent. But the figure by itself doesn't tell us what the consultants have done so that we can judge the value for money of their services. If I can only have one explanation, I'd rather know what the £21million bought us than the £20,000 spent by the Audit Commission on its procurement cards.

Reference

Carnegie, G. D., & West, B. P. (2005). Making accounting accountable in the public sector. Critical Perspectives on Accounting, 16(7), pp. 905-928. doi:10.1016/j.cpa.2004.01.002

Are there too many middle managers?

Eric Pickles's latest move to improve transparency about the cost of local government is to publish a code of practice encouraging councils to provide the names and job descriptions for anyone being paid £58,000 a year. There are lots of problems and issues with this (sufficient to mean that the Civil Service has already backed away from a similar proposal). Clearly it is founded in the notion that  there are too many middle managers and exposing their "non-jobs" will result in the posts being abolished. Also, as an aside, I suspect that when county and metropolitan councils publish data about staff being paid over £58,000 a significant number will be not be middle managers but school headteachers and deputies and senior police officers, all of whom, technically, are employed by local authorities. Indeed, it is not unheard of for the highest paid employee of a council to be a headteacher rather than the chief executive.

How can anyone know how many middle managers is too many? Each council has its own way of operating and, therefore, its own requirements for senior and middle managers. Robert Winnett's conclusion in this article in the Daily Telegraph, that, "Over the past decade, the number of council middle managers has risen eleven-fold" is not sound. What has changed since 1997 is the number of people earning above £50,000 . As pay has increased annually, middle managers earning less than £50,000 in 1997 would now be paid more and thus be included in the figures. It is conceivable (though perhaps it is unlikely) that there are fewer middle managers now than there were in 1997. No-one can deduce what the true picture is from the data disclosed in council annual reports.

If councils do accede to Pickles's code of practice (I would like to see some councils stand up against his bullying and inconsistent messages) then I expect that every individual who is to be named for earning £58,000 or more, will demand that their job description is fully up-to-date before it is  published. It will be just like the process of job evaluation where the manager will have the incentive to expand every bullet point and to emphasise the strategic importance of the decisions that they make. All of this will, of course, be dull, boring and practically unreadable. So, whilst the average resident might be interested to know how much so-and-so who lives down the road was paid they are unlikely to look at the justification. Similarly, journalists on local newspapers might publish the data (one hopes without the kinds of flawed logic displayed by Robert Winnett) they are unlikely to undertake any analysis of job descriptions.

Finally, if transparency about public money is so important, why is only Eric Pickles pushing for it? As mentioned above, the Civil Service has decided that the appropriate threshold for publication is £150,000 a year. And I am not aware of NHS organizations being "encouraged" to provide details of the payments to doctors and other health professionals as well as middle managers but, then, I imagine Andrew Lansley has enough on his plate convincing GPs to take on £80 billion of commissioning work (the sort of thing done by middle managers) that insisting on full disclosure of their pay would be a tactical mistake.