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Chapter 1: Why do we need fewer civil servants?
2010, we spent 3.6 billion a year on consultants. You know, people reading our watch, telling us the time. Civil service, Stephen, is like an infinite wall. Infinitely high, infinitely wide. Every 10 billion pound we save is half a million junior nurses salaries for you.
is three million primary school places when you run in a business and the civil service is fundamentally a business needs to have a strategy a vision a plan and then you've got to execute the plan you want to have the best talent in the right swim lanes to deliver that what percentage of procurement that's government purchase of goods and services a went to British companies and B went to smaller companies and how did that change on your watch that's a great question so um
Government spends on public procurement 430 billion a year. 430 billion.
We're delighted to say that this year the rest of this money is powered by Octopus Energy. So we're joined by its founder and CEO, Greg Jackson.
Chapter 2: How can the civil service be made more efficient?
So Greg, I heard that the prices of solar and home battery storage are falling. So is it worth waiting before you invest in them?
First of all, we never know what's going to happen to the future price of energy. It could go up or go down. So I think when people try to do a really detailed payback calculation, the problem is you don't really know what the alternative is. But I don't know many people who've regretted getting these technologies because the one thing, whenever you get them,
is it helps insulate against the volatility of the market prices. And so as far as I can tell, the vast majority of people who've made that decision are happy with it.
Greg, thank you very much. Now on with today's episode. Hello and welcome to The Rest Is Money with me, Steph McGovern.
I'm with me, Robert Peston. And what we want to find out today is, is there a way to make the civil service more efficient, cut civil service numbers while simultaneously buying more from British companies, particularly small British companies that would have this virtuous effect of freeing up a ton of money for investment in public services, but also stimulate growth?
Yes, and we've got the perfect guest for this. We've got Stephen Kelly, who for many years has ran several big name tech and software companies, started his career at Oracle, went on to become the CEO of Sage Group, which is, of course, one of the largest software companies in the UK.
And then he was brought into the public sector by David Cameron to improve efficiency, try and bring down the number of civil servants, cut the spending and essentially improve productivity in the civil service as well, which he managed. So we want to know how he did it. Here is our interview with Stephen Kelly. Stephen, lovely to have you on the show.
Now, as we've just mentioned in the introduction, you were brought in by David Cameron to streamline the public sector.
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Chapter 3: What impact did Brexit and Covid have on civil service numbers?
What we want to know is we need that now. So how did you do it? What can we learn from you?
Yeah, and obviously very different times. That was back in 2010, so 16 years ago. And it was off the back of the credit crunch, 2008, and then a whole period of what was termed austerity. But with this, effectively, I think fundamentally the civil service can be massively improved and made a lot more efficient so that we deliver much better services to citizens. And that was the whole mission.
So between George Osborne and Francis Morton, David Cameron, they determined that they should bring someone in probably from the private sector who's got a lot of operational experience and create a role called the first chief operating officer for the whole of the UK government, 24 departments. And that encompasses all things like IT, commercial practices, procurement, digital services.
So the launch of things like GovUK, as well as major projects. So all the fun and probably of connecting for health and HS2 and Hinkley Point and all these sort of things. So it's a very wide range and anything touching taxpayer money would be effectively the responsibility of this role, working very collaboratively with the departments.
And I guess the headline numbers, the civil service started in 2010 with 492,000 civil servants, all very good people. But then when I left, it was 380,000. So over that period, we actually had a smaller civil service by almost 120,000 people. And when did you leave? 2015.
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Chapter 4: How can the government save £30 billion a year?
So that's more than 100, so about 120,000 reduction in just five years. How much of that was essentially when people just left of their own accord not replacing them and how much of it was active management essentially saying you've got too many people here or these people aren't up to it and we're going to get rid of them?
um it was probably probably about more than half were through natural wastage so that was a terrible phrase but effectively people retiring people coming up to the end of their tenure people going back to the private sector um and that was obviously a program put in place through hr to actually encourage some of that as well um but then also there was some restructuring and some some elements around the machinery government were modified
to actually accelerate a more efficient government with anything. You know, you've got almost 500,000 people and the status quo takes over. And obviously the culture up to that time, particularly through the years of, I guess, the Blair years of where the economy was growing fast, Typically, the civil service was growing in the same sort of trajectory with the economy.
So it was a kind of root and branch review, a restructure and a reform program that was put in place. But a lot of the actual personal exits in the human story was done through, again, another terrible HR phrase of natural attrition.
We can just ask on... that you spent most of your life in the private sector and you know most private sector employers say to me that there's always a risk if you shrink numbers through natural wastage that essentially you keep the underperformers, you keep the poor performing members of staff
Were you able to assess, you know, when you left, whether the quality of the civil service was what it should be?
Yeah, that's a great question, Robert. I think my, I guess my experience and why did I take this on? Because that's the genesis. I kind of grew up in the world of US technology and spent 10 years with a startup company at the time called Oracle.
the 80s and 90s and that was how to build global growth companies but then I had to do a number of restructures and again probably the US model was pretty focused and very on point in the UK when I came back to government my interest was could I actually apply the playbooks of what I learned in the US when I came back to the UK I did that in a public company called micro focus and
And then the intellectual challenge, my curiosity, was tweaked by thinking, could those same sort of business practices, the tone at the top, the strategies, be employed in one of the oldest institutions in the world, the British Civil Service? And it was the case.
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Chapter 5: What strategies did Stephen Kelly implement for efficiency?
So a lot of obviously the process, you know, inevitably when you're losing colleagues and in the first couple of months, actually there was a lot of, you know, retirement parties and leaving parties and all those sort of things. It does set the tone within the company and the culture and very important to me is a vibrant culture within all the sort of responsibilities I've had.
So we had to actually personally put our arms around the shoulder of the most talented people And actually during a time of major change, major restructuring, it is a great time for opportunity because people want to take it on more responsibility. So the best people actually rose to the top.
It's interesting you say that because you're suggesting that people were then happy with the changes because you would think that them knowing you were coming to essentially get rid of people would create a negative atmosphere amongst people and people would be thinking, oh, he's the, I don't know, the Grim Reaper coming in to get rid of jobs. So what you're saying is...
It was kind of easy to implement then?
No, nothing's easy, Steph. Nothing actually, wow, I've been in business for 45 years, nothing that you build of substantial value is easy to do unless you win the lottery or something. I don't do the lottery. It's a lot of hard work. I think the start point, you've got to have a vision for what Britain wanted to be. And then you've got to have a plan. We had a very clear vision.
And we used to, you know, honestly, with any institution, particularly like people who have been in the civil service 20, 30 years, they become institutionalized. And sometimes, I hate to say this, but in big companies, it's the same. They become saboteurs. They forget the enemy's always on the outside and they start picking kind of internal turf fights. It's just crazy.
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Chapter 6: How did procurement practices change under Stephen Kelly?
And what we sought to do was say, actually, the reason why you came through the turnstiles at Horse Guards or Caxton House was to improve public service. You've got that mission, that zest.
for better public services serving citizens and we want to reconnect you to that and we want to actually eliminate all the wastage all the noise the bureaucracy and create efficiencies to allow you to do that and and then what we did and we measure this and actually had the National Water Office auditor and I sat in front of Margaret Hodge of the Public Accounts Committee and Meg Hillier I don't know half a dozen times and
To say we had to measure. So number one, we had a vision. Number two, and that was a vision for Britain, why it's important, why we need to save money. And then we connected it to real life stuff. So we said every 10 billion pound we save is half a million junior nurses salaries per year. It's three million primary school places. Yeah, it's like a massive impact on the fire services.
And it gives the Chancellor of the Exchequer huge latitude if we're making great savings in the civil service and public service. Number one, to improve the services, but most importantly, to actually give the Chancellor latitude to invest in public services that we're all proud of. And that's the genesis of why we started in the civil service in the first place.
But you must have come up against resistance, though, from people. Because no matter how much you tell people, if we get rid of your job, that'll be a nurse or whatever. People care about themselves, too.
Yeah. Yeah, definitely. Definitely. And before I joined, this is back in probably about 2010-ish, just around this sort of election period.
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Chapter 7: What role did British SMEs play in government procurement?
I worked years back in the 80s for a guy called Peter Gershon. And he was chairman of Taylor and all these great things. But he'd done, I think, with Michael Barber in the Blair government, a similar role in about 2000. And I said, Peter, you know, what's it like? Because I have witnessed, because I've done stuff with the government, some amazing people from the private sector.
literally go back into government and sort of become zombies within six months, just lose their spark and energy. And I thought, well, I don't want to do that. So I sort of went to Peter and a couple of other people who had worked in the civil service and said, what can you tell me? What's the lessons you learned? And he said, interestingly, he said,
Civil service, Stephen, is like an infinite wall, infinitely high, infinitely wide. And someone like you, but just because your energy is going to every day wake up seven o'clock, you'll go in there and you'll bang, running, sprinting and smash into that wall. Fall crumpled on a heap. And then you'll dust yourself up and you'll think, no, you never fail. Failure is not an option.
Next day, you'll do exactly the same thing and you'll keep doing this. And then you realise if you keep doing it and you keep talking sense and keep doing the right things, eventually that wall has doors and windows, but they only open from the inside. So you have to be invited in. So I'll tell you one of the sort of guerrilla stories.
In the first two weeks, I had meetings with Treasury colleagues, and I was based in both Whitehall, 70 Whitehall and Horse Guards.
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Chapter 8: What lessons can current leaders learn from past reforms?
And the meeting was at the Scottish office, which is right at the almost Trafalgar end of Trafalgar Square end. And then I got sent up there, went to the meeting. No one there. And then I found that the meeting had been rescheduled down the other end of Whitehall. So I missed it. And I went back to my, everybody has private offices.
So I'm not sort of used to this because I'm just, I'll get my own coffee and stuff. But I had six people looking after me.
Did you not get rid of them in the process?
I had to, it's a good point. But they are, well, actually, some of them are the most talented people. And a guy called Simon French at PAMU, he was the guy running my private office. What a talent, now chief economist, doing great things for Britain. So these are super smart guys. And actually, I'd say all the civil servants, I was very privileged.
I've worked with some amazing people like Jeremy Hayward. Mark said, well, they're just brilliant people. But he said, oh... Well, I've heard that has been one of the tricks to play. Send you off to a different meeting, different location.
Oh, they did it on purpose.
Well, who knows? Who knows? I've never liked to speculate.
Here we are.
I'm telling you the story. It's real life. Yes, minister. Yeah, it is. It is. And some of it was. But fortunately, a few things. What did we learn from that time? The alignment between the ministers, we treated them as the board and we were the executive.
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