Between May 2005 and June 2009, there were over 90 reorganisations to central government. But a report released today by the National Audit Office has found that these cannot demonstrate value for money, given that most had vague objectives and that costs and benefits were not tracked.
The average annual cost of reorganisations is almost £200 million, around 85 per cent of which is for the reorganisation of arms length bodies. Since 1980, 25 central government departments have been created, including 13 which no longer exist. By comparison, in the United States only two new departments have been created over the same period.
Central government bodies are weak at identifying and securing the benefits they hope to gain from reorganisation. There is no standard approach for preparing and assessing business cases setting out intended benefits against expected costs. By not identifying anticipated benefits clearly, public bodies run the risk of carrying out reorganisations unnecessarily. More than half of reorganisations do not compare expected costs and benefits of alternative options, so there can be no certainty that the chosen approaches are the most cost effective.
Furthermore, no departments set metrics to track the benefits that should justify reorganisation – making it impossible for them to demonstrate that the eventual benefits outweigh costs.
The ability of central government to identify reorganisation costs is poor. There is no requirement to set reorganisation budgets so no department and only a half of arms length bodies began implementation with a reorganisation budget in place. In addition, there is no requirement for bodies to disclose the costs of reorganisations after they happen – meaning the true cost of reorganisation is often hidden.
The decisions to reorganise departments and arms length bodies are often taken at short notice and with inadequate understanding of what could go wrong. This approach leaves management teams – particularly in departments where reorganisations often start on the day they are announced – planning and implementing reorganisation simultaneously. Only a quarter of arms length bodies had project plans in place before they announced reorganisations. Reorganisations of departments are generally announced before project plans are in place.