Cutting Government Administration Costs

In our new paper we show that cutting administration costs is difficult both for the government to do and for the public to evaluate.

A Model of Cost Cutting in Government: the Great Management Revolution in UK Central Government Reconsidered by Christopher Hood and Ruth Dixon, has now appeared online in Public Administration. It’s behind a paywall (Update: now free access – thanks Wiley!)  but a 4-page summary is on our project website.

In our paper, we showed that the UK coalition government faces a considerable challenge in its plans to cut administrative costs in central government by just over one-third (34%) between 2010 and 2014.  We looked at previous attempts at cutting running costs in government.  Looking at government data from the past 30 years, we found no example of administrative cost-cutting remotely close to the scale of the current government’s targets set out in the 2010 Spending Review.

Figure 1 redrawn from Hood and Dixon 2012

Figure 1 (redrawn from Hood and Dixon 2012) Running costs of UK civil departments 1980–81 to 2008–09 after removal of reclassification changes (shown corrected for inflation in 2009–10 prices)

Even Margaret Thatcher, who came to power promising to cut bureaucracy, did not cut the administrative costs of central government despite drastically cutting civil service numbers. Administrative costs also rose in real terms under Tony Blair’s government despite several efficiency programmes. The only exception was the late period of John Major’s government between 1992 and 1997, in which administrative costs, civil service pay and tax collection costs each fell by over six per cent in real terms. The current government would have to do five times as well as John Major’s performance to hit its administrative cost-cutting targets.

It was not straightforward to create the graph above, because of frequent changes in reporting conventions and classifications of what counts as ‘administration’.  We could correct for minor changes, but the gap in the graph above in 2000 was because whole swathes of civil service staff, such as prison officers and immigration officers, were taken out of the ‘administration costs’ category. This made it impossible to compare costs ‘before’ and ‘after’ that reclassification.

Such reclassifications continue – in 2011 tax inspectors and job centre staff were reclassified as ‘front-line’ rather than administration. These may well be reasonable changes to make, but such reclassifications are not ‘savings’.

The bottom line

The government has set itself an ambitious target for cutting administration costs by over one third, which past experience shows will be difficult to meet. However, it may be difficult to evaluate its progress towards this target, if it continues to reclassify what it means by ‘administration’.

Related links

We also wrote a blog-post on Politics Inspires that gives some further discussion of data issues and civil service pay.

This research forms part of a study funded by the Leverhulme Trust entitled ‘Yesterday’s Tomorrows: What Happened to the Future of Government?’  The project aims to track and explain developments in executive government.

Update 11 October 2012: An article about the paper was published on the online Guardian Public Leaders Network on 10 October 2012 and our post appeared on the LSE British Politics and Policy Blog.