When the Labor Party was in opposition, they criticized the ruling Conservative government for spending up to £500m a year on management consultants and IT systems. This was, they thundered, “a shameful waste of taxpayers’ money, money that should be spent on frontline services like hospitals and schools” instead of being given to a few already wealthy consultants. Now that New Labor is in power, they seem to have changed their minds. However, New Labor has not only spent £500m a year on consultants, it had much more ambitious plans than that. In their grand plan to modernize public service delivery, they seem to have bypassed the Civil Service and decided to both make their new policies and implement them using their favorite IT and management systems consultants. This is proving to be a costly exercise: it will cost us taxpayers over £70bn, over £20bn for management consultants and at least a further £50bn for IT systems consultants .
The vast amounts of taxpayer money being given to consultants could be seen as evidence of a forward-thinking and dynamic government investing in modernizing its country. At the very least, it would be a good thing if these massive investments were to succeed. However, experience to date is less than promising. Judging from what has happened, New Labour’s investments in management consultancy and IT systems appear to have been a series of outright and embarrassing disasters. Things were so bad that a cross-party parliamentary committee criticized the British government for wasting taxpayers’ money and trying to cover up the truth about its financial mismanagement. The committee concluded that the UK government’s record on IT consultancy projects was “an appalling waste of public money which Whitehall sought to hide behind a cloak of commercial secrecy”. There have been as many disasters as the Children’s Support Agency (£1bn wasted on consultants), the National Offender Management Service (around £300m wasted) and the Ministry of Defense (at least £500m). of pounds spent on consultancy that yielded absolutely no results). The most embarrassing project of all must be the new NHS IT system which was planned to take 3 years to complete and cost just £2.3bn; in reality, it will take over 10 years, cost over £12bn and won’t even work properly.
IT IS A MORAL ISSUE, NOT JUST A MANAGEMENT ISSUE
Management consultancies and computer systems are companies. As companies, their goal is profit maximization. This means that they should try to sell as much of their product as possible at the highest possible price. Just like any other business: manufacturers of soft drinks, breakfast cereals, photocopiers, paperclips, cars, hamburgers, cigarettes or whatever. When you sell IT or management systems consulting to another business enterprise, such as a bank, insurance company, or oil company, you are playing a business game where you both know the rules. You try to get as much of their money as possible by thinking of all sorts of ‘essential’ services and new IT systems you can sell them and charging them as much as you think you can get away with. As everyone knows, this is 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 more than twenty years selling consultancy to many companies and government departments, I believe this situation changes when a profit-maximizing company, such as a consultancy, sells its services to public sector organisations. Because here, every one hundred million that is channeled into the pockets of management consultancies and computer systems means one hundred million less that can be spent on the provision of essential services in areas such as health, defense, schools, social services or police. So if a management consultancy knowingly sells a project where it places twenty to thirty or forty inexperienced consultants in one government department or another, when two or three experienced consultants could have done the project faster and much cheaper One has to wonder if this is just clever business or if the consultancy could be accused of unethical practice. Similarly, if an IT systems consultancy succeeds in convincing a government department that it should spend, say, £400m on building an entirely new IT system, when it knows that an existing system could easily have been upgraded. for less than £40m, is this just a case of consultancy being from shrewd businessmen or closer to theft of public funds? Furthermore, 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 withholding bribes from travel companies and making the Government pay the time that consultants and their managers spend on internal activities consulting activities: again the question, is this just smart business or a fraudulent scam?
There is another dimension to the moral questions that arise from how consulting works in the public sector. If a consulting or systems provider fails to deliver promised results for a private sector company, no one really suffers. But if inexperienced junior consultants set meaningless goals for the health service that lead to ward closures and fewer patients treated. Or if the consultancies produce fiascoes in the computer systems of government departments that prevent people from traveling because they do not have passports, that leave more than 176,000 immigrants trapped in limbo for months because their applications cannot be processed, that prevent If the courts prosecute criminals, who make families lose their homes or impoverish millions upon thousands of low-income households, then it seems reasonable to question the ethics of consultancies that are happy to take the money and yet seem impervious to all the suffering caused by their incompetence and greed.
TREASURY PEOPLE ARE NOT STUPID
Recently, at a dinner party, I was seated next to a gentleman whose name will remain anonymous. He was knighted and had at various times been a professor at a major business school, director of the Bank of England, former member of the Cabinet Office Central Policy Review Staff (the ‘Think Tank’), director of the of the Treasury and director of a major bank. I started talking to him about my concerns about the amount of taxpayer money being given to consultants and the series of catastrophes that had occurred. So I suggested that the government was being misled by its consultants. The gentleman sneered at me and said scornfully, “I find your arguments bogus and lacking in intellectual rigour; the people at the Treasury and the Bank of England are not stupid.”
Having seen so much consulting sold to so many government departments with so ridiculously poor results, I have written a book to tell the story of what really happens when IT systems and management consultants are paid to bring their magic to the public. sector organizations. Taxpayers can now make their own decisions about the audacity or not of the people at the Bank of England, the Treasury and the other 2,500 government departments who are contributing so generously to the welfare of the already wealthy IT systems and management consultants by giving them almost incredible amounts of our money.