THE ABOLITION OF THE CIVIL SERVICE DEPARTMENT

  65.    Throughout the 1970s the Civil Service Department was criticised for being ineffective. Following this criticism, the House of Commons Expenditure Committee undertook an enquiry into the Civil Service, and in 1977 published a report recommending that some of the CSD's functions should be reallocated to the Treasury. In responding to the Report, the Prime Minster, James Callaghan, made it clear that any decision on machinery of Government issues was for the Prime Minster, and that he had not yet reached any view about the functions of the CSD and the Treasury.

  66.    In session 1980-81, the House of Commons Treasury and Civil Service Committee re-opened the question, undertaking an enquiry into the future of the CSD and recommending measures which might be taken to improve the department's standing. In 1981, the new Prime Minister, Margaret Thatcher, responded to these recommendations by emphasising her Government's commitment to good management of central administrations, to a smaller Civil Service and to the pursuit of efficiency. Later that same year, the Prime Minister announced that the Civil Service Department was to be abolished.

  67.    When the CSD was abolished, its functions were redistributed as follows: the Treasury took control of manpower, pay, superannuation and allowances, and took responsibility for the Central Computer and Telecommunications Agency, the Civil Service Catering Organisation, HMSO and the Central Office of Information. A new Management and Personnel Office was set up under a new Second Permanent Secretary in the Cabinet Office, and this new office took responsibility for management, organisation, staff efficiency and personnel policy including recruitment and training. The Permanent Secretary to the Treasury and the Secretary to the Cabinet became joint Heads of the Home Civil Service. The transfer of these responsibilities was effected by Order in Council on 1st December 1981.

THE FINANCIAL MANAGEMENT INITIATIVE

  68.    The Financial Management Initiative (FMI) had various forerunners in the decades which preceded it. "Accountable management" in the late 1960s was one (see paragraph 50 above). Another was "MINIS" in the early 1980s (see paragraph 64 above). A third was, perhaps, the introduction in 1981 of a computerised budgeting system (called MAXIS) in the Department of the Environment; the computerised system involved a network of 120 cost centres, each controlled by a manager with budgetary responsibility for running costs. However, the Financial Management Initiative was actually launched in 1982 in the White Paper, Efficiency and Effectiveness.

  69.    The initiative involved relatively junior Civil Servants accepting responsibility for their own budgets. According to the White Paper, the initiative was designed:

  "To promote in each department and organisation a system in which managers at all levels have:

  (a)  A clear view of the objectives, and means to assess and, wherever possible, measure outputs or performance in relation to those objectives;

  (b)  Well defined responsibility for making the best use of their resources, including a critical scrutiny of output and value for money; and

  (c)  The information (particularly about costs), the training and the access to expert advice that they need to exercise their responsibilities effectively."

STRUCTURAL REORGANISATION IN THE 1980S

  70.    The tendency towards structural change continued in the 1980s. Perhaps the most significant changes were as follows. In 1980 the Central Computer Agency was reorganised and renamed the Central Computer and Telecommunications Agency. In 1981 the Civil Service Department was abolished (see paragraph 66 above). In 1983 the Department of Trade was abolished: some of its functions were merged with those of the Department of Industry to create the Department of Trade and Industry (again). Others of the Department of Trade's functions were transferred to the Department of Transport. Also in 1983 the Central Policy Review Staff (set up following the Reorganisation of Central Government White Paper in 1970-see paragraph 41 above) was abolished. In 1987 the Management and Personnel Office (which had been set up within the Cabinet Office following the abolition of the Civil Service Department in 1981) was abolished and its functions transferred in part to the Treasury and in part to the newly-created Office of the Minister for the Civil Service. And perhaps most significantly, in 1988 the move towards Agencies began.

THE UNIONS IN THE 1980S

  71.    In 1981 the Government unilaterally abandoned the Priestley system (see paragraph 15 above) of pay comparability. The Pay Research Unit was abolished and, as part of the settlement of the 1981 Civil Service strike, the Megaw Committee on Civil Service pay was set up to examine the principles and the system by which the remuneration of the non-industrial Civil Service should be determined, taking into account conditions of service and other matters relating to pay, including management, structure, recruitment and grading. In 1982 the Megaw Committee reported, and its recommendations on such matters as informed collective bargaining and performance related pay caused considerable anger in the Civil Service unions. The Unions saw the recommendations as calling into question the traditional Whitley system of negotiation. The anger of the unions was exacerbated in 1984 when the Government decided to ban unions affiliated to the TUC from its security organisation, the Government Communications Headquarters (GCHQ). Following the 1984 Trade Union Act, many public service staff associations set up political funds, and by the 1990s the Civil Service staff associations were more clearly seen as regular unions and full members of the TUC.

THE IBBS REPORT AND THE NEXT STEPS AGENCIES

  72.    Sir Derek Rayner's successor as Adviser to the Prime Minster on Efficiency and Effectiveness and as Director of the Efficiency Unit (see paragraph 62 above) was Sir Robin Ibbs. In 1988, under Ibbs' directorship, the Efficiency Unit was asked to 'assess the progress achieved in improving management in the Civil Service'. The Unit's response to this request took the form a report entitled Improving Management in Government: the Next Steps. This report became known as the Ibbs Report or the Next Steps Report.

  73.    The Report stressed the need for more urgency in the search for better value for money. In order to achieve this, the Report recommended that the Civil Service should be reduced to a small "core" of policy makers, with other officials being transferred to work under free-standing agency boards. To facilitate this, a number of agencies should be established to carry out the executive functions of Government within a policy and resources framework set by a department. The report said that the choice and definition of suitable agencies was for Ministers and senior management in departments to determine (explicit reference was made to the "hiving off" proposals of the Fulton Report in 1967). In order to ensure that the proposed changes were properly planned and supervised, the Report recommended the appointment of a full Permanent Secretary as "Project Manager".

  74.    In a statement on 18th February 1988 the Prime Minister accepted the recommendation of the Report that to the greatest extent practicable the executive functions of Government, as distinct from policy advice, should be carried out by units clearly designated within departments and referred to as "agencies". Peter Kemp (now Sir Peter Kemp) was appointed as the Next Steps Project Manager, with the status of a Permanent Secretary within the Cabinet Office. The process of "agencification" (as it became known) began with a flying start. By 1990, 34 agencies had been created, employing 80,000 people and costing around £3,000 million per year to run. Each agency had been set up with a Framework Document, agreed by the responsible Minister, setting out the tasks allocated to it, its financial targets and quality of service targets. The performance of each agency was reported through the publication of annual reports. Some of the earliest agencies to be created were the Royal Mint, the Civil Service College (see paragraph 77 below) and HMSO. The Next Steps programme was considered by the House of Commons Treasury and Civil Service Committee, and in general received cross-party support.

THE ABOLITION OF THE CIVIL SERVICE COMMISSION

  75.    In 1991 the Civil Service Commission was replaced by Recruitment and Assessment Services and the Office of Civil Service Commissioners. The role of the Commission had been subject to a great deal of change in the years before the Commission's abolition, particularly in relation to pensions and to recruitment.

  (a)  Pensions: Before 1972 Civil Servants were qualified to receive a pension only if they had received a Commissioners' Certificate of Qualification under the 1956 Order in Council which ruled that the qualifications of all persons proposed for permanent appointment should first be approved by the Commissioners and that no person should be so appointed until the Commissioners had issued a certificate . In 1972, the link between the certificate and the pension was broken when the Superannuation Act provided that all service was pensionable, and that all Civil Servants qualified for a pension after five years' service.

  (b)  Recruitment: In 1983 an Order in Council transferred to individual departments responsibility for recruitment to grades below executive officer level (subject to selection on merit by fair and open competition). Following the Next Steps Report, the role of the Commission changed further. Planning began for the creation of the Recruitment and Assessment Services Agency, which was to handle the whole recruitment process. In 1991 another Order in Council transferred to departments and executive agencies responsibility for recruitment to all grades below Grade 7 level (the old Principal grade). The previous requirement for certification by the Commissioners was replaced by a requirement for written approval from the Commissioners on the rules for recruitment (designed to ensure selection on merit on the basis of fair and open competition).