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December 12, 2005

Glorious Bureaucracy.

Two interesting reports on the costs of regulation and bureaucracy.

Firstly, in a real shock horror sort of moment, central government’s obsession with targets and micromanagement costs local councils a fortune:

Public sector bureaucrats are "sucking up" billions of pounds that could be spent on front-line services because of the Government's fixation with targets, rules and policy guidelines, a council chief claims today.
...

"Hundreds of millions of pounds are being spent on regulations and red tape which are strangling the ability of councils to continue to deliver first class services," Sir Sandy claims. Even those councils that have gained top marks are dogged by burdensome, over-zealous red tape."

He says: "Of all the major democracies and economies, our Government exerts the highest degree of central control over public service and local government. We must dismantle the control mechanisms of the central state."

The huge cost of regulation under Labour was highlighted last year by the Gershon efficiency report, which denounced the Government's fixation with centralised controls as "costly, frustrating and dysfunctional".

It said that the inspection and standards regime employed 155,000 people across 1,000 organisations and was causing "frustration in central government about its impact on performance improvement, delivery outcomes and the pace of change".

Something of a quelle surprise moment really. Business also bears large costs as BP points out:

"The [post-Enron] Sarbanes-Oxley legislation in the US probably costs us an additional $100m (£60m) a year in external costs. Of course that doesn't count the time we spend on it internally. We hope that cost will come down but these things are expensive. It's a somewhat futile claim for a large company to say it's too much. Most people would say that you can afford it. The fact is that we do it and we do it very efficiently and comprehensively.

Don’t get me wrong here, some regulation, some measurement of what is going on is necessary. But it is entirely possible that there can be too much. When the costs are greater than the benefits for example. As, I would argue, they are in both these cases.

In both of these cases I would argue, although not all that strongly, that the problem is the prescriptive nature of the rules. You must tick box y, check box x and perform action z. Far better to have general rules, hire good people and delegate to them. If they then screw up, then prosecute them. There will indeed be scandals, thefts, wastes and other undesirable things but perhaps the cost of these will be less than the strangulation of all initiative by the red tape.

December 12, 2005 in Business | Permalink

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Comments

If you would like a fairly stark example of this, remember Gordon Brown promising unprecedented spending increases on the NHS? The increase that has got to the front line ends up at around 2.4%. I've blogged the details.

Posted by: chris | Dec 12, 2005 9:20:07 AM

Tim,

I agree with your comment as far as it goes, but shouldn't we be trying to answer some more fundamental questions?

The first one I'd be asking goes as follows: "Is direct provision of this service by the state the most effective way to get it to the community?" Rapidly followed by: "If not, how else can we do this in a just and responsible manner?"

Now, maybe there are some services only the state can provide (defence, policing, justice, "offender management" etc) and maybe there are some better suited to state provision (can't think of any off the top of my head). But once we've trimmed away the unneccesary ones there would be more time and resources to improve the delivery of those essential ones.

Just a thought.

RM

Posted by: The Remittance Man | Dec 12, 2005 11:19:17 AM

Too many people ignore the fact that our government functions, in effect, like any other corporation. Its economic and managerial decisions simply impact on more than its employees and shareholders, but the same rules of commerce and global networking apply.

Posted by: thebizofknowledge.com | Sep 4, 2006 4:04:06 AM