The Dissolution of the Mandarins: the sell-off of the British state

For the UK's senior civil service, 'public interest' is increasingly defined in terms of the private sector's agenda. With high-profile figures moving to private directorship roles and policy making being tailored to corporate interest, the days of a bureaucratic public career are over. 

Colin Leys
15 June 2012

In April 2012 the Guardian carried a modest item headlined ‘Former Met police chief lands first board role’.[1] Sir Paul Stephenson, who had resigned over the phone-hacking scandal the previous July, had now, like so many former ministers and senior civil servants, stepped through the revolving door into the agreeable world of the non-executive director.

Of course Sir Paul’s background is not that of a typical mandarin. Being a senior policeman is not the same as being a senior civil servant. The son of a butcher, grammar-school educated and promoted through the ranks, Sir Paul reached the top of one of the very few public service careers that is genuinely open to talent regardless of class origins. Sir Humphrey Appleby (Winchester, Balliol, GCB, KBE, MVO, MA Oxon) he is not. But in some ways he is more in tune with the zeitgeist. It is the mandarinate that is out of touch – and, in fact, disappearing.

It is true that some senior civil servants would hesitate, even for a reported salary of £35,000 a year for two or three days’ work a month, to be associated with the particular company Sir Paul has joined, a storage company called Restore that is 51% owned by the former Conservative Party deputy chairman and serial tax avoider Lord Ashcroft (his shares in Restore are held by another company in the British Virgin Islands). Ashcroft knew Sir Paul through the charity Crimestoppers, which Ashcroft also chairs, and personally proposed him for the board. What Sir Paul will contribute to Restore is not obvious. The company’s chief executive didn’t even pretend to care, saying ‘we do quite a lot of public-sector work and he can help us understand how the public sector works’. It is hard to avoid the impression of someone simply being taken care of by someone else closely connected to the Conservative Party.

An uncharitable view might be that Sir Paul is not as ignorant as he has claimed about the misdeeds of the Murdoch press and its Conservative Party connections. Like Tony Blair he seems to have felt that it was enough that he sincerely felt he had done nothing wrong. ‘I and the people who know me’, he said, in the PR language people increasingly resort to on such occasions, ‘know that my integrity is completely intact’. Not everyone would be inclined to accept this as sufficient. Neil Wallis, the News of the World’s deputy editor, and then executive editor, while phone hacking was taking place, told the Leveson inquiry that Sir Paul had dined (or ‘had the odd glass of wine’) with him every other month (at an average cost, according to Wallis, of £50-100 per head, paid for by News International).  So had three other senior Met officers. None of them, it seems, had smelled even a whiff of phone hacking.

Sir Paul insisted to Lord Leveson that he did not ‘occupy a position in the world of journalism’ and ‘had no knowledge of the extent of this disgraceful practice and the repugnant nature of the selection of victims that is now emerging; nor of its apparent reach into senior levels’. This statement makes his relationship with Wallis look remarkably unidirectional. According to Sir Paul, at their meetings (which he said were much less frequent than Wallis claimed) he endeavoured ‘to represent [to Wallis] the context of policing’; while according to Wallis, in his evidence to Leveson, he gave Sir Paul his views on ‘what was needed at the Met’. So Wallis learned a lot about the Met while Sir Paul learned nothing about News International. London’s criminals might have been grateful to know that such an incurious person was in charge of the police.

But the real interest of his story is not what Sir Paul knew, or should have known, about the misdeeds of the Murdoch newspapers. It lies in the assumptions he, and others, have made about the larger context in which he found himself operating.

One aspect of this is his free 5-week stay, worth £12,000, at Champney’s, a luxury hotel and spa in Tring, early in 2011. In his resignation statement Sir Paul declared that there was no impropriety in this, he was ‘extremely happy’ with what he did, and it was ‘cynical and disappointing’ that anyone should think otherwise. He accepted the gift, he said, purely in order to accelerate his return to work after an operation; and a statement issued by the Met explained that the manager of Champneys was a ‘personal family friend’, and that the gift had been recorded in Sir Paul’s register of gifts and hospitality. But besides making Sir Paul one of the few people of note who believe that there really are free lunches (and making Champneys’ manager someone remarkably free with his employers’ money), this leaves out of consideration the particular links that existed between Champneys, News International and the Met. Rebekah Brooks, the executive director of News International in the UK, was said to be a specially valued regular visitor, and Neil Wallis’ PR firm, which he set up after leaving the News of the World in 2009, handled Champneys’ public relations, as well as being employed to advise the Met. According to the Met, when he stayed at Champneys Sir Paul didn’t know about Wallis’ Met appointment. His ‘personal family friendship’ with Champneys’ manager had apparently not been close enough for it to have been mentioned.

Giving the benefit of quite so much doubt does become increasingly stressful. On the other hand it is possible to read the whole story in a way that is somewhat more charitable to Sir Paul. Whether or not he was as ignorant as he maintains, he clearly did assume that what he did was ok, because it was all normal. It was normal for the Commissioner of the Met and his senior colleagues to be wined and dined routinely by Murdoch’s senior staff. It had been the norm for years. It was even normal to accept a corporate gift worth a cleaner’s annual income because the company’s manager happened to be a friend. Blair took his family on holiday at the expense of his friend Silvio Berlusconi, Osborne and Mandelson holidayed on Corfu (where they were joined by Rupert Murdoch) at the expense of their billionaire friend Nat Rothchild.  And it was certainly normal to accept private company directorships after leaving one’s public service job, even with companies that had no obvious use for your particular skills. Sir Paul could be forgiven for thinking, if he did, that he could contribute as much relevant expertise to the board of Restore as, say, the former health secretary Patricia Hewitt could contribute to Eurotunnel (for which she was paid a good deal more), or as Tony Blair could contribute to JP Morgan (for over £500,000 a year).

Precisely how typical Sir Paul was, as a former policeman, in joining the private sector, we can’t say, since no data is available on what happens to people who leave public service jobs other than ministers and senior civil servants; and only approximate data is published on what happens to retiring or resigning senior civil servants below the rank of director. But higher-ranking civil servants and government ministers must apply to the Advisory Committee on Business Appointments (ACOBA), which publishes annual reports. These show that in the five years 2006 to 2011 no fewer than 90 ex-ministers took private sector jobs, leading David Beetham to conclude, in a report for Democratic Audit, that ‘a smooth transition to the private sector could now be said to be the normal expectation for a government minister’.[2] Something similar applies to senior civil servants. In the same period some 150 civil servants at director level or above, and about another thousand below director level, left to take up private sector jobs. It wasn’t yet normal for police commissioners – the three previous Met Commissioners had all been ennobled after retiring, and took up almost exclusively unpaid public service roles – but the recent behaviour of everyone else hardly suggested that for Sir Paul to take a private sector job was improper.

And while his choice of private sector job did not have to be vetted by ACOBA, if the committee had vetted it they would undoubtedly have waved it through. To take just two examples among dozens, the committee saw no problem in Vice Admiral Tim Laurence moving from running the Ministry of Defence’s estates to becoming a non-executive director of Capita, a £3 bn. outsourcing company which gets half its business from the government; or in Jonathon Powell moving from being Blair’s chief of staff to being managing director of the global financial services firm Morgan Stanley. It was hardly likely to have seen any problem with the former Met Commissioner becoming a non-executive director of a humble storage company.

It is true that ACOBA places some restrictions on ministers and civil servants who take private sector jobs. Admiral Laurence, for example, was not to ‘draw on any privileged information available to him’ in his previous job. The committee evidently believes that admirals have watertight mental bulkheads separating what they remember and can use from what they remember but can’t use. They would surely have credited a former policeman with the same invaluable capability.

The truth is that few dispassionate observers see ACOBA as anything but a fig-leaf for an unstoppable collapse of the boundary between the public interest and private interests at the highest levels of the state. It has no power to enforce its advice, or even to monitor whether its advice is followed. The routine condition it applies, when it does apply one, is to advise departing public servants not to become ‘personally involved in lobbying’ ministers or Crown servants for up to two years. It doesn’t discourage them from telling their new colleagues who to lobby, or how best to do it, or even from personally introducing them. Its injunctions assume a sense of commitment to the public interest, based on a code of public service that no longer exists. Today, as one senior civil servant candidly told an interviewer, ‘the line from the top is, if you want to get on, get out!’.[3]

ACOBA purports to be as much concerned that civil servants should not be influenced by the possible offer of a job to make decisions against the public interest, as with the risk that when they take a private sector job they will use their inside knowledge to give their new employers a competitive advantage. But in practice the committee is only really interested in the second of these risks. Perhaps it does sometimes decline to approve an application on the grounds that to do so would reward a civil servant for betraying the public interest in order to get the job, but the committee treats any applications it declines to approve as dark family secrets and doesn’t report them. And in many cases which the committee does approve, the civil servant has had extensive prior dealings with the company he or she wants to join. Mark Britnell, for example, who was director-general for commissioning in the Department of Health, was allowed to join KPMG, which went on to secure a major contract to undertake commissioning work for NHS London. His acting successor at the Department of Health also moved to KPMG, and was not even required to seek ACOBA approval, on the feeble grounds that he had only been acting.

The key to ACOBA’s plight is the opening sentence in its official remit: ‘It is in the public interest that people with experience of public administration should be able to move into business and other bodies…’ So the huge inflow of private sector personnel into the senior civil service through the revolving door is outside the committee’s purview, while shifting civil servants into the private sector is explicitly defined as being in the public interest. As the famous Wall Street figure Jack Grubman is said to have remarked, ‘what used to be conflict of interest is now defined as a synergy’.

ACOBA was established in 1975, in response to the first intimations that a new balance between the state and the private sector was impending. Its rules reflect an assumption that the state would remain the dominant partner. But the reality ACOBA now nominally presides over is nothing less than a radical outsourcing of the state, the wholesale privatisation of the functions of government. In one department after another, from healthcare and schools to social welfare, prisons and even policing, the functions of the state are being handed over to private companies, with a corresponding transfer of civil servants to the private sector. The ‘revolving door’ is really a two-way ‘churn’ of the senior executives who are engaged in planning and implementing this process, and ACOBA is no more than a well-bred charade which conceals what is really going on.

Failure to acknowledge this makes everyone who wrings their hands about the revolving door irrelevant. The anti-corruption NGO Transparency International, for example, became hopelessly bogged down in proposing ways to make ACOBA more effective without confronting the reality of the situation, or acknowledging its own immersion in market ideology. On the one hand it wanted ACOBA replaced by a more ‘representative’ body, with powers to make ministers and civil servants joining private companies take the constraints imposed on them seriously. On the other hand it thought it was ‘arguably unreasonable to prevent senior civil servants and Ministers from pursuing their careers freely’ because ‘they are individuals with ambitions, interests and families to support’.[4] It failed to notice that what was at issue was no longer preventing dishonesty in the handing out of government contracts, but facilitating a corporate takeover of the state that is endorsed by all the mainstream parties.  

The reality is that the senior civil service as it was originally conceived, and as it existed for a hundred years until the 1980s, has all but disappeared. The ‘higher’ civil service (as it used to be called) was designed in the middle of the nineteenth century to be a permanent defence against the state corruption that a fast-growing capitalist economy would otherwise entail. It was to be a cadre of people drawn from the same social class as ministers, able to mix with them on equal terms and as far as possible restrain them from giving in to the growing pressure of special interests. Today’s senior civil servants, in contrast, are tasked with reconceiving the public interest as a system of private interests, and to do this not mandarins but entrepreneurs and managers are required. As a result, between 2004 and 2008 well over half of all new appointments to the 200 top positions in the 4,300-strong senior civil service, and a third of those appointed to all positions, were people drawn from outside, mainly from the private sector.[5]  And two thousand senior civil servants, close to half the total, now own companies to which their salaries are paid, significantly reducing their tax obligations.[6] How far these are people recruited from the private sector we don’t know, but it is reasonable to assume that most of them are.[7]

In this context conventional ‘conflicts of interest’ are endemic, and give rise to less and less concern. Every so often they catch public attention, but are soon forgotten. In the case of ministers such as Liam Fox and his friend Werrity, or Jeremy Hunt and his special advisor Adam Smith, wrists are slapped: the minister is shuffled, or even takes a spell on the back benches but soon returns to office, while the private sector finds employment for the bureaucratic casualty. Why get worked up? The neoliberal state requires a new morality, which has duly emerged. In the 1990s a handful of ‘carpetbaggers’ were allowed to grab personal fortunes at the expense of millions of building society members. Before the 2005 collapse of MG Rover the ‘Phoenix Four’ and their CEO were allowed to take out £42 million out of the company, leaving its 6,500 workers with nothing.[8] Tony Blair Associates makes £12m a year from advising firms and governments that Blair did business with while prime minister (ACOBA found no reason to object), and pays just £315,000 in tax. And so on. Relatively speaking, why worry about a few dodgy deals at the government-business interface?

Another dimension of the shift that has made ACOBA as anachronistic as the Lord Privy Seal is the drastic gap in incomes and lifestyles that has opened up between people on even the highest public service salaries, and the business elite and celebrities. Even people with large private incomes have noticed it. In 1987 the wealthy Conservative minister for trade and industry, Alan Clark, noted sorrowfully that with ‘good claret at £100 – minimum – per bottle’, and only £700,000 in his cash account, he couldn’t afford to entertain. And that was only at the start of the Americanisation of incomes in the City which had begun with the ‘Big Bang’ the previous year.

Since then the gap has become steadily wider. According to the High Pay Commission, by 2010 the average pay of a Permanent Secretary, responsible for government spending worth five per cent or more of the national income, with far-reaching national consequences, was £163,000, while the average for the top executive of a FTSE 100 company was £4.2 million.[9] The problem is no longer the one identified in 1856 by the Northcote-Trevelyan Commission, of how civil servants were to relate to ministers on equal terms. It is now a question of how both they and ministers are to relate, with any semblance of equality, to company executives on twenty-five times their incomes.

This discrepancy has been at the bottom of many scandals, from the Jonathan Aitken and Neil Hamilton scandals of the 1990s to the parliamentary expenses scandal of 2009, as MPs have looked for ways to augment salaries that could not begin to support life among the new power elite. It has also been a significant factor in the exodus of senior civil servants into business – as one former civil servant told an interviewer, his motives for joining the private sector had been ‘the normal mixture of job interest, challenge, increase in power, money and fun’. It is not as though a senior civil servant on more than £100,000 a year can’t afford to pay for an occasional dinner at the Club Gascon. But there is a nagging difference between this modest degree of affluence and the lifestyle of someone on twenty-five times as much. The Blairs are not alone in their apparently desperate anxiety to close the gap.

Which brings us back to the minor and ultimately rather sad case of Sir Paul Stephenson and his decision to accept Lord Ashcroft’s shilling. Most people would find Sir Paul’s pension of close to £170,000 a year more than comfortable; an additional £35,000 (say £24,000 after tax) would hardly make a big difference, and is certainly not enough to buy anyone’s silence, supposing someone wanted to. But perhaps the former Commissioner of the Met – whom Neil Wallis considered ‘a plain, non-political copper’ – saw becoming a company director as simply the normal way of reconnecting to the power elite. It would almost suggest a kind of integrity to do it for such a simple reason.

Yet the real point of this story is not the way in which the ambiguous social status of senior police officers – a comic staple of TV police serials, from Morse’s Chief Superintendent Strange to Frost’s Superintendent Mullett – can dog them even in retirement. What really matters is the transformation of the state that has produced this effect – the fact that there is no longer a distinct notion of the public interest, nor a cadre of people who feel personally responsible for guarding it.

There is no longer a mandarinate. Max Weber’s concept of a career bureaucracy, dedicated to the public interest, working all their lives for modest salaries in return for job security and respect, has been made thoroughly obsolete. The state is increasingly conceived as a mere commissioning agency, handing out contracts to private companies, its senior ranks filled on a revolving basis and its institutional memory fast draining away – to the point where the loss of capacity degrades the commissioning function itself.  National policy-making, whether for energy or public health or transport or banking, becomes less and less coherent. The public interest becomes equated with whatever constellation of corporate interests has most influence with the government of the day.

Indeed the Cabinet Secretary, Sir Jeremy Heywood, seems to think the time has come to abolish the service’s policy-making role altogether, telling the Institute for Government in March that ‘if other parts of the public sector were to be market-tested, policy, too, should be open to contestability’. Asking for bids from potential policy advisors on specific areas hadn't yet been tried, he said, but the idea of doing so was a ‘perfectly legitimate challenge’.[10]  What all this will ultimately mean for our collective interest as a nation remains to be seen, but it’s hard to feel optimistic about it.

P.S (20th June): I have only just read Stuart Weir's excellent article making the analogy between the privatisation of the public realm – public services, public assets, public spaces – and the enclosures of the common lands in the 18th century; and one can certainly also see the senior civil service of the past as guardians of the commons.

The corruption of the values of public service that sets in when public services are either directly transferred to private providers, or forced to compete with for-profit service providers, is painfully illustrated in the accounts put together by Jenny Manson in Public Service on the Brink. Career senior civil servants of the old school would have put their positions on the line to prevent it. Now they know it is as much as their job is worth to try to do this, as one of them in the department of employment, Donald Derx, discovered soon after Thatcher took office. Nonplussed by Thatcher’s ideological blinkers on industrial relations he finally blurted out “Prime Minister, do you really want to know the facts?”, and promptly ended his prospects of promotion – he was not ‘one of us’.

Now there is no one left to defend the public interest. The ‘cannot culture’ in the NHS described by Professor Edwards is a mix of two influences – on the one hand the target and audit culture imposed by New Labour ministers, imported from private sector managerial doctrines, and on the other the beginnings of a competition culture as hospitals began to subordinate everything to keeping financially afloat in the emerging competitive market. The negative effects on patient care are obvious, but there is no longer a cadre of public servants with the ability, status and authority to intervene. The NHS has been cut loose from even formal protection by the senior civil service. NHS foundation trusts are independent businesses and Monitor, the regulator, has just announced a comprehensive review to remove all remaining barriers to competition in the provision of healthcare services.

The once rich and sophisticated public realm painfully built up over two and a half centuries is being dismantled in the space of a generation, with predictable consequences that hardly any politicians seem to comprehend. 

[1] Simon Goodley, Guardian 11 April 2012.

[2] Unelected OIigarchy: Corporate and Financial Dominance in Britain’s Democracy, Democratic Audit 2011, p.16

[3] Liz David-Barrett, Cabs for Hire? Fixing the revolving door between government and business, Transparrency International UK, 2011, p.5.

[4] Cabs for Hire? p. 18.

[5] House of Commons Public Administration Select Committee, Outsiders and Insiders: External Appointments to the Senior Civil Service, Seventh Report of Session 2009–10, Tables 1-3.

[6] Rajeev Syal, ‘2,000 civil servants paid via private firms to reduce tax bills’, Guardian 3 May 2012.

[7] Externally recruited senior civil servants earn substantially more than their internally recruited colleagues (Hutton Review of Fair Pay in the public sector:Final Report, HM Treasury 2011,Table D9) but even so, less than they could get in the private sector, giving them a stronger incentive to avoid tax.

[8] Or more accurately with £3 each (Simon Goodley, ‘Rover workers get £3 redundancy pay compensation after seven-year battle’, Guardian 2 May 2012.

[9] Cheques With Balances: Why tackling high pay is in the national interest, High Pay Commission, 2011, p. 61.

[10] Jane Dudman Guardian Professional, Tuesday 6 March 2012

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