New Labour Goes Consulting Crazy

When the Labour Party were in opposition, they lambasted the ruling Conservative government for spending up to £500m a year on management and IT systems consultants. This was, they thundered, “a disgraceful waste of taxpayers’ money – money that should be spent on frontline services like hospitals and schools” rather than being handed over to a few already wealthy consultants. Now New Labour are in power, they seem to have changed their minds. However, New Labour have not just spent a mere £500m a year on consultants – they had much more ambitious plans than that. In their grand plan to modernise the delivery of public services, they seem to have sidelined the Civil Service and have decided to both make their new policies and implement them using their favourite management and IT systems consultants. This is turning out to be an expensive exercise – it will cost us, the taxpayers, well over £70bn – more than £20bn for management consultants and at least another £50bn for IT systems consultants

The vast amounts of taxpayers’ money being handed over to consultants could be seen as evidence of a dynamic, forward-looking government investing in modernising their country. At least, it would be positive were these massive investments successful. However, experience to date is less than promising. Judging by what has happened, New Labour’s investments in management and IT systems consulting appear to have just been a series of unmitigated and shameful disasters. So bad was the situation, that in an all-party committee of MPs criticised the British Government for both wasting taxpayers’ money and trying to cover up the truth about its financial mismanagement. The committee concluded that the British Government’s record on IT consulting projects was ‘an appalling waste of public money which Whitehall was trying to conceal behind a cloak of commercial confidentiality’. There have been so many disasters like the Child Support Agency – £1bn wasted on consultants, the National Offender Management Service – about £300m wasted and the Ministry of Defence – at least £500m spent on consulting that gave absolutely no results. The most shameful project of all must be the new NHS IT system which was planned to take 3 years to complete and cost just £2.3bn – it will actually take over 10 years, will cost over £12bn and won’t even work properly.

IT’S A MORAL, NOT JUST A MANAGERIAL, ISSUE

Management and IT systems consultancies are businesses. As businesses, their aim is profit maximisation. This means they must try and sell as much of their product as they can at the highest price possible. Just like any other business – manufacturers of soft drinks, breakfast cereals, photocopiers, paperclips, cars, burgers, cigarettes or whatever. When you sell management or IT systems consulting to another commercial company like a bank, insurance company or an oil company, you are playing a commercial game, where you both know the rules. You try and get as much of their money as possible by thinking up all kinds of ‘essential’ services and new IT systems you can sell them and you charge them as much as you think you can get away with. As everybody knows, that’s how business works. And anyway most banks, insurance companies and oil companies are hugely wasteful bureaucracies that have more money than they know what to do with.

However, having spent over twenty years selling consulting to many companies and government departments, I believe that this situation changes when a profit-maximising company like a consultancy sells its services to public sector organisations. Because here, every hundred million that is channelled into management and IT systems consultancies’ pockets means a hundred million less that can be spent on providing essential services in areas like health, defence, schools, social services and police. So if a management consultancy knowingly sells a project where it places twenty to thirty to forty inexperienced consultants in some government department or other, when two or three experienced consultants could have done the project more quickly and much more cheaply, you have to ask whether this is just nifty business or whether the consultancy could be accused of unethical practice. Similarly, if an IT systems consultancy manages to convince a government department that it should spend say £400m on building a completely new IT system, when it knows that an existing system could have easily been upgraded for less than £40m – is this just a case of the consultancy being canny businessmen or is it closer to theft of public funds? Moreover, if these consultancies also systematically overcharge the Government for their consultants’ time, bill for fictitious administration, charge the Government the full cost of travel expenses while retaining kickbacks from travel companies and make the Government pay for time consultants and their managers spend on internal consultancy activities – again the question, is this merely smart business or a fraudulent rip-off?

There is another dimension to the moral issues arising from how consultancies work in the public sector. If a consultancy or systems provider fails to achieve the promised results for a private sector company, nobody really gets hurt. But if inexperienced junior consultants set meaningless targets for the health service which lead to ward closures and less patients being treated. Or if consultancies produce IT systems fiascos for government departments that prevent people from travelling due to them not having passports, that leave over 176,000 immigrants stuck in limbo for months because their applications cannot be processed, that prevent courts prosecuting criminals, that cause families to lose their homes or that impoverish hundreds of thousands of low income households, then it seems reasonable to question the ethics of consultancies that are happy to take the cash and yet are seemingly impervious to all the suffering caused by their incompetence and greed.

THE PEOPLE AT THE TREASURY ARE NOT STUPID

At a dinner recently, I was sitting next to a gentleman who shall remain nameless. He had a knighthood and at various times had been a professor at a leading business school, a director of the Bank of England, a former member of the Cabinet Office Central Policy Review Staff (the ‘Think Tank’), a director of the Treasury and a director of a major bank. I started talking to him about my concerns over the amount of taxpayers’ money being handed over to consultants and the series of catastrophes that had ensued. I then suggested that the Government was being taken for a very expensive ride by its consultants. The gentleman looked disdainfully at me and said dismissively, ‘I find your arguments fallacious and lacking in intellectual rigour – the people at the Treasury and the Bank of England are not stupid’.

Having seen so much consultancy sold to so many government departments yielding so laughably little in the way of results, I’ve written a book to tell the story of what really happens when management and IT systems consultants are paid to bring their magic into public sector organizations. Now taxpayers can make up their own minds about the gumption or otherwise of the people at the Bank of England, the Treasury and the 2,500 other government departments who are contributing so generously to the welfare of already wealthy management and IT systems consultants by giving them almost unbelievable amounts of our money.