Timmy brings to our attention another example of bureaucratic misfeasance this time from the award winning UK Trade and Investment, the Whitehall body which promotes the UK’s trade interests.
In the email, leaked to the Daily Mail, Cahn said: “The FCO is heading for an underspend and wants to get money out of the door. If we spend money in this financial year on a one-off basis then we can have at least £1m.”
Parkinson’s Law is enthusiastically recommended, and a jolly good read it is too, I’m sure. The gist runs as follow: In any organisation, not only will work will expand to fill the time allotted, but expenditure will increase to match income.
If one year a department produces a budget surplus, then a central authority will assume that next year it will be safe to cut their budget by (at least) this amount if they want the same amount of work done, or to increase work without increasing the available funds. Naturally nobody wants their budget reduced as this makes their life more difficult and this produces an incentive to spend any surplus even if it is not necessary; witness the annual spike of traffic calming measures.
There are a couple of reasons for this. As Tim acknowledges, but I’m sure some of his readers are loathe to admit, the problem isn’t necessarily government, the more specific and general problem is hierarchy. Hierarchies are necessarily worse at distributing and making use of information than more egalitarian/market methods of distributing information.
First of all there are many incentives for subordinates to withhold information from superiors. From the benign, not wanting to pass on what is thought of as useless information, to the malign, as illustrated above. There is also usually a disconnect between those deciding on a course of action and those carrying it out. This means that feedback is always delayed and distorted, if it is available at all.
Not only are hierarchies poor systems for using information efficiently, they produce various other distortions which make people behave in immoral ways. As the Milgram Experiment shows, people will do terrible things if they are instructed to under the right circumstances. When Sir Andrew Cahn tells you to jump you ask who to invoice for overtime.
The only reason budgets are set this way (other than inertia) is that the people who set budgets can’t know what budgets are suitable, and the people who know what budgets should be can’t be trusted to actually set that amount. The centre cannot know what the correct budget is (if a “correct” amount exists) and the subordinates don’t have an incentive to spend as little as possible.
How do you change these incentives?
A one off solution would be to make the financial year end a month early. But that would only work once and after that a generalised mêlée of spending would occur in which nobody was sure what their budget really was. So we need to make it explicitly in people’s interest to ensure their department comes in under budget and to report it.
Here’s my simple solution.
What if half of year end department budget surpluses were handed over as a bonus to the staff? Half of the budget would be returned to the centre and half returned to employees. Ceteris paribus the following year’s budget would be smaller, but only half as much, and each employee would be a bit better off. Employees are more likely to care about their income now than the budget of an organisation they may not be working for next year.
UKTI currently have a staff of 2,300, half of £1m between them is £220 a head, that should be some incentive enough to stop them fucking about and a short break in Marrakesh. The other £500,000 would work out at slightly under a 1p rebate per head of population, but half a million here, a billion there, and pretty soon you’re talking real money.