When Labor 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 taxpayer money, money that should be spent on frontline services like hospitals and schools” rather than handed over to a few already wealthy consultants. Now that New Labor is in power, it seems they have changed their minds. However, New Labor has not only spent £500m a year on consultants, but had far more ambitious plans than that. In their grand plan to modernize public service delivery, they seem to have bypassed the Civil Service and have decided to both make their new policies and implement them using their favorite IT and management systems consultants. This is turning out to be a costly exercise: it will cost us taxpayers more than £70bn, more than £20bn for management consultants and at least another £50bn for IT systems consultants.
The large amounts of taxpayer money given to consultants could be seen as evidence of a forward-thinking and dynamic government investing in the modernization of its country. At the very least, it would be positive if these massive investments were successful. However, the experience to date is less than promising. Judging by what has happened, New Labor’s investments in management consultancy and IT systems appear to have been a series of embarrassing and utter disasters. The situation was so bad that a committee of MPs from all parties 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 egregious waste of public money that Whitehall was trying to hide behind a cloak of commercial confidentiality.” There have been so many disasters such as the Child Support Agency – £1bn wasted on consultants, the National Offender Management Service – around £300m wasted and the Ministry of Defense – at least £500m spent on consultancy to absolutely no results. The most embarrassing project of all must be the new NHS IT system which was planned to be completed in 3 years and cost just £2.3bn; in reality, it will take more than 10 years, cost more than £12 billion and it won’t even work properly.
IT IS A MORAL QUESTION, NOT JUST A MANAGEMENT QUESTION
Management consultancies and computer systems are companies. As companies, their goal is profit maximization. This means that they must try to sell as much of their product as possible at the highest possible price. Just like any other business: makers of soft drinks, breakfast cereals, copiers, paper clips, 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 for their money as possible by thinking of all sorts of ‘essential’ services and new IT systems that you can sell them and charging them as much as you think you can get away with. As everyone knows, this is how the 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 organizations. Because here, every 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 the police. So if a management consultancy knowingly sells a project where it puts twenty to thirty or thirty inexperienced consultants in one government department or another, when two or three experienced consultants could have done the project faster and much cheaper, you have to ask yourself if this is just clever business or if 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 building a completely new IT system, when it knows that an existing system could easily have been upgraded for less than £40m, is it just a case of the consultancy being a shrewd businessman or closer to stealing public funds? Furthermore, if these consultancies also systematically overcharge the government for their consultants’ time, bill for fictitious management, charge the government the full cost of travel expenses while withholding kickbacks from travel companies, and make the government pay for the time that consultants and their managers spend on internal consulting activities, again the question is, is this just smart business or a fraudulent scam?
There is another dimension to the moral issues that arise from how consultancies operate in the public sector. If a consulting or systems provider doesn’t deliver the promised results for a private sector company, no one really gets hurt. But if inexperienced junior consultants set meaningless goals for the health service that lead to ward closures and fewer patients treated. Or if consultancies produce fiascos in the computer systems of government departments that prevent people from traveling because they do not have passports, leave more than 176,000 immigrants stuck in limbo for months because their applications cannot be processed, prevent courts from prosecuting criminals, cause families to lose their homes or impoverish hundreds of thousands of low-income households, then it seems reasonable to question the ethics of consultancies that are happy to accept. money and yet they are apparently impervious to all the suffering caused by their incompetence and greed
TREASURY PEOPLE ARE NOT STUPID
At a dinner recently, 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, a director of the Bank of England, a former member of the Cabinet Office’s Central Policies 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 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 looked at me scornfully and said scornfully, “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 ridiculously few 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 public sector organizations. Now taxpayers can make up their own minds about the audacity or not of the people at the Bank of England, the Treasury and the 2,500 other government departments who are contributing so lavishly to the welfare of the already wealthy IT systems and management consultants by giving them almost unbelievable amounts of our money.
