SPEECH: ‘GETTING WHITEHALL READY FOR GLOBAL BRITAIN’ - THE RT HON DR LIAM FOX MP - INSTITUTE FOR GOVERNMENT - TUESDAY 14TH JANUARY 2020 09:30hrs

For any enquires about this speech please contact David Goss (david.goss@parliament.uk).

 

‘GETTING WHITEHALL READY FOR GLOBAL BRITAIN’

THE RT HON DR LIAM FOX MP

INSTITUTE FOR GOVERNMENT

TUESDAY 14TH JANUARY 2020 09:30hrs

On Tuesday 14th January 2020 at 09:30hrs (UK time), The Rt Hon Dr Liam Fox MP, will be speaking at the Institute for Government in London on the theme of “Getting Whitehall Ready for Global Britain”.  He will then be in conversation with Bronwen Maddox, director of the Institute for Government, followed by an opportunity for audience Q&A.

 

The speech was recorded and can be watched at this link: https://www.youtube.com/watch?v=kI5sDlkptQQ

Last Sunday, Dr Fox was interviewed ahead of the speech by Sophy Ridge (Ridge on Sunday, Sky News).  The interview can be seen at: https://www.youtube.com/watch?v=D0kF4GJiNXQ&feature=youtu.be

 

Speaking at Institute for Government in London on Tuesday 14th January 2020 at 9:30am (UK time), The Rt Hon Dr Liam Fox MP is expected to say:

Please check against delivery:

BEGINS

A BRITAIN FIT FOR BREXIT - THE STRUCTURE AND CULTURE OF GOVERNMENT

Let me begin by thanking the Institute for Government for giving me the opportunity to speak this morning.

You are, as you should be, at the very heart of the debate about how our country and its system of government should evolve and adapt to the historic events unfolding in only a few weeks’ time.

A CHANGING BRITAIN………..

As Britain prepares to leave European Union, and to disengage with its administration and institutions, there will clearly need to be changes in the way the United Kingdom organises its own governmental structures.

New roles and new responsibilities will require new ways of doing business.  With a new government in place with a strong mandate at such a key moment in our history, this is an opportunity to slaughter the sacred cows to which successive governments have too often given a last-minute reprieve in order to buy political peace.

Of course, not everything will change simply because we are leaving the EU.  Far from it.  The United Kingdom will remain a key player in a number of crucial global institutions.  We retain our permanent seat on the UN Security Council, we will take up our independent seat at the World Trade Organisation and we are central participants in the IMF, the World Bank and the OECD.

We are also at the heart of NATO which will be a key institution for the development of foreign and security policy, something I shall be talking about in Washington in the coming weeks.

Yet while there is a strong element of continuity there will also be substantial change, especially in the dynamics of global trade, economics and security.

Britain must be both confident and flexible if we are able to take advantage of this changing picture, where old assumptions are continually being challenged, new markets blossoming and the tectonic plates of global influence shifting markedly.

These changes, and a general move away from concepts of multilateralism, present challenges and opportunities for Britain’s foreign, security, trade and aid policies.  How should we organise ourselves to ensure that we can take full advantage of the freedoms conferred by Brexit while minimising any new risks which might emerge?

……..IN A CHANGING WORLD

Let’s begin by understanding the scale of the change itself.

This year China’s middle class is expected to number 600 million and by 2030, only a decade from now, China will have over 220 cities with a population greater than 1 million people.  The whole of Europe will have 35.  Between now and 2050 Africa, on its own, will represent 54% of world population growth and it is predicted that there will be 1.1 billion middle class Africans by 2060, a vast new global market.

For the UK, the already thriving economies of South and East Asia and, increasingly, Africa, will become more important especially as their economic development will require the service capabilities that are so prevalent, and potentially exportable, in our own economy.

This major shift, not just in global demographics, but in the rise of the collective wealth of developing countries, will determine where the great economic opportunities of the future will be and where we must be too.  And this economic and trade pattern of engagement must also be reflected in our foreign and security policies.  Why?

As I have often said, trade is not an end in itself but a means by which we spread prosperity.  That prosperity underpins social cohesion and social cohesion underpins political stability.

Ultimately, it is that political stability which is the building block of collective security.  It is a continuum which cannot be broken without unwanted consequences and an understanding of this reality is key to developing the structures that will make a post Brexit Britain fit for the challenges ahead.

As Secretary of State for International Trade, I regularly pointed out that 57% of Britain’s exports are now to outside the EU, compared with only 46% in 2006 but also that the IMF estimates that, in the next 10 to 15 years, 90% of global economic growth will originate from outside the European Union.

This is not to diminish the importance of the EU as a market to the United Kingdom but to make us understand that we cannot afford to simply identify how much of the current institutional relationships we want to preserve but instead have to determine what we will need to prosper in a rapidly changing global environment.

We cannot let the practices and patterns of the past, to constrain the opportunities of the future.

Clearly, there are major implications that emanate from this global explosion of change and they will form the basis of our political discourse in the coming years.

But how should we think about organising Whitehall to deal with these issues?

REFORMING WHITEHALL

There are three current government departments that will be crucial in the delivery of the global Britain posture post Brexit- the Foreign and Commonwealth Office, the Department for International Trade and the Department for International Development.

The Foreign & Commonwealth Office, where I began my Ministerial career, has seen decades of degradation in the U.K.’s overseas capability as the Treasury has taken advantage of Britain’s Euro centricity to penny pinch to fund domestic consumption.  Unsurprisingly, the selling of global property assets has had a cumulative diminution in Britain standing abroad with no benefit, economically or politically at home.  When the Coalition Government come to power in 2010, having worked as a Foreign Office Minister in John Major’s government, I was horrified at how hollowed out the FCO had become.  This process must be reversed.

The Department for International Trade which I set up 3 ½ years ago has developed considerable capability in trade policy and negotiations but will need to be built up further if we are to undertake simultaneous trade discussions.

It is notable, for example, that a free trade agreement with Japan, which will have to be an early and important priority post Brexit, has been virtually absent from public discourse.

Despite developing a sophisticated Export Strategy, the department is also too light in its overseas network if we are to be able to help British businesses to promote the exports and investment that will be a crucial part of our future national income.

A successful trade policy is not simply about “trade deals”, as too many commentators and politicians seem to believe, but generating income from selling more British goods and services abroad.

Global Britain cannot be done on the cheap nor can it succeed if it is seen as primarily a Whitehall exercise rather than a global one.

It is just worth noting that, under our current arrangements, we have more British staff in DfID in Kenya than the Department for International Trade have in the whole of African Continent from Cairo to Cape Town.

This brings me to the third element of our overseas influence which is the Department for International Development.  There is no doubt that it is regarded as a hugely successful global brand – just not always a British one, despite the valiant efforts of recent Secretaries of State. 

I was particularly struck at the last Commonwealth Heads of Government meeting in London where African leaders, in particular, were keen to talk to DfID officials rather than their Foreign Office counterparts.

A country can have only one foreign policy, not two, and this is an opportunity to correct the problem without undermining our legal commitment to spend 0.7% of GDP on overseas aid.

So, how do we reshape Whitehall to institute these changes? Clearly, there are a myriad of potential combinations of current departments so I will limit my considerations only to these issues and leave aside those such as security, justice and immigration which are also hugely important.

There has recently been much speculation that some government departments might be amalgamated.  This may or may not come to pass.  If this is to happen, there are, for me, four potential main options: firstly, bringing together the FCO and DfID into a single department; secondly bringing the FCO and DIT into a single department; thirdly, bringing DIT and DfID into a single department or fourthly a much more complex change where, for example, some of the elements of BEIS are amalgamated with DIT alongside the creation of a new Department for Energy and Environment on one hand and Agriculture and the countryside on the other.

A new Department for Infrastructure, effectively implementing regional policy and the current industrial strategy would also be in line with many of the government’s priorities.

There are merits and demerits to each of these ideas.

Merging the Foreign Office and DfID (like it was under John Major) would satisfy the need for a single foreign policy which will be crucial in navigating the changing global environment.  It would also be possible to combine the two departmental platforms abroad, not simply to seek efficiencies in delivery (although this would be possible in some cases) but to operate a more effective and sometimes greater footprint where we seek greater influence.

Britain would still be able to fulfil its obligations in terms of GDP expenditure on development and retain its global reputation as a world leader.  There would inevitably be some tension about geographical priorities but this is exactly the sort of issue that needs to be resolved. 

Such an arrangement need not be seen by DfID as disadvantageous and indeed, there could be some synergy in such a relationship.

If, for example, the department where to have two cabinet ministers (in the same way that the Treasury have  the Chancellor of the Exchequer and the Chief Secretary) its influence could be much enhanced as well as having the beneficial side effect of providing a suitable political counterbalance to the Treasury in Cabinet.

Of course, there would likely be strong push back from the highly vocal and politically well-organized NGOs and charities in the aid sector, but this should not constitute a reason for failing to consider such a natural alignment.

Then we come to our second option. Foreign policy and Trade are operated from within the same department in a number of countries but usually much smaller than the UK.  In fact, I had previously advocated this in my 2016 Conservative leadership bid.

However, the reason that the Department for International Trade was set up as an independent body was that there was a widespread feeling that when trade policy was operated by the foreign office then it would always play second fiddle to diplomatic activity if time and manpower were at a premium.

This is entirely unsurprising as the primary function of the FCO is the exercise of foreign policy through the diplomatic service.

There is also the increased risk of trade being used as a political lever at a time when we need to give predictability, support and reassurance to British business to operate in sometimes challenging and difficult political environments.

But again there could be considerable synergy if the department were to be represented by two cabinet ministers.

The third option, that of merging trade and international development also has its attractions.  The increased freedoms in tariff policy that Brexit will bring combined with well targeted foreign direct investment could enable developing economies to mature more quickly and provide them with a more predictable means of trading their way out of poverty.

This is particularly true in the service sector where many of the skills that Britain already possesses in spades will be those most needed by those economies seeking to compete freely and fairly in global markets.  It would give clarity to our message that we wish to see developing nations trade their way out of prosperity rather than permanently depending on the largesse of more affluent western nations.  It would not, however, on its own deal with the current dislocation of investment or the duplication of sector teams which is the problem at the DIT/BEIS interface.

The fourth option, would involve more substantial change and the options are too numerous to mention here although a strong case can be made for many of them.

NEW OPPORTUNITIES FOR THE YOUNG

My own preferred option is the first, bringing FCO and DfID together, combined with a beefing up of DIT capability both at home and overseas.

This should be combined with the rapid expansion of the current (small) programme of “overseas apprenticeships” run by DIT.

This would see new opportunities for young people (and those who wish to take a new career course) to work in and with our overseas networks and to experience for themselves the sort of opportunities that are out there for a genuinely global, open and connected Britain.

It should be extended out from DIT to both the FCO and DfID as a matter of priority to create a cadre of young people who will be able to see for themselves how our future needs to be shaped by the era of globalisation rather than an over dependence on the EU, its structures, its duties and its interests.

RESISTANCE

Now, in each of these scenarios there will be warnings aplenty that machinery of government changes will divert civil service energy at a time when they need to be completing the Brexit settlement.

The sublime irony is, of course, that this advice will be coming from many of the very same people who sought to thwart Brexit itself.  It is true that machinery of government changes can be diversionary, but this is also the time for significant internal change to match the scale of the external challenge.

With a new government elected, with a strong majority, in a Britain about to abandon some of the institutions to which it has been shackled for the last 40 years, this is no time to give undue weight to traditional self-interest. 

Of course, as my friend William Hague set out in The Telegraph this morning, change for changes sake would be a wholly unjustified diversion, unlikely to produce any more benefits now than similar projects have done in the past.

Yet these machinery of government changes can only ever be part of the story.

We should also take this opportunity to determine whether the current civil service model is appropriate for the tasks ahead.  We must ask ourselves whether the current UK civil service has the appropriate structures, culture and skills to maximise our potential or whether change is required and, if so to what degree.

Ever since Gladstone’s implementation of the Northcote-Trevelyan model the Civil Service has been intended to be a permanent and politically neutral service where officials administer policies determined by elected ministers.

Yet there are worries that the service remains drawn from too narrow a social base, retains too much of a “good all-rounder” culture and understands too little about modern management methods.

The perception that it is unduly favoured by the honours system and that it has too few technical skills in an ever more technical economy are regular criticisms.  Of course, these are nothing new.  In the series of government initiatives from the committee of Lord Fulton in 1968 to Robin Ibbs “Next Steps” in 1988 changes have been made or suggested with varying degrees of success.

Perhaps the greatest change in recent times has been the advent of Special Advisers in government departments.  From the informal powers of those such as Alan Walters in Margaret Thatcher’s government to the formal powers of Jonathan Powell and Alistair Campbell in Tony Blair’s government, influence has increased although in a somewhat haphazard way that has lacked proper transparency. 

Governments have considered more radical change, including the coalition government under David Cameron, but as Sir Robin Day might have put it at the time the permanency of the civil service is more than a match for “here today, gone tomorrow politicians”.

Most ministers will give accounts of working with some of the finest, most talented and loyal staff that anyone could ever ask for and I can certainly attest to that, not least in the Department for International Trade which I had the privilege to lead for three years.

Yet most ministers will also have had experience of less capable officials, some quite senior.  Even more frequent is the complaint from the private sector that the civil service has too little understanding of their culture and processes.

At DIT we developed plans to rotate members of our sector teams through their private sector counterparts while offering a reciprocal rotation through a department which had developed technical understanding of trade policy and which could be of great benefit to the private sector in return.

This needs to be developed further and resistance to change in both directions overcome.

THE BREXIT EFFECT

A number of senior former civil servants, some in the unelected House of Lords, made clear their passionate opposition to the implementation of the Brexit vote despite the clearly stated aim of the government to do so.

It is not difficult to believe that they were simply the tip of the iceberg, much of which was submerged inside a civil service with a deep antipathy to the whole concept of disengaging with the European Union.

Those of us who witnessed events from close quarters will never be able to tell how much of the foot dragging and institutional inertia was due to the civil service itself and how much was a result of political instruction from those senior politicians – former colleagues of mine - in the government who were never able to reconcile themselves with the result of the democratic referendum that they themselves instituted.

Some will say that the Conservatives won the 2019 General Election and that Brexit will happen so we can forget about this episode and put it behind us.

I believe we should not do so for while it is not indicative of a dysfunctional civil service per se it is at least sufficient evidence to show that in some areas of policy impartiality is at a premium.

The case for change is now too strong to resist.

INTERNATIONAL MODELS FOR REFORM

So, if that is true, where should we look for potential alternative models.  I rule out at the beginning moving to a US style system where a huge number of appointments are party political.  I do this for two reasons.

The first is that I believe the culture is simply too far removed from that which we have traditionally had in the UK and would amount to revolution not evolution – which as a Conservative I reject.

The second is a purely practical one where the smooth and orderly running of government can be greatly impeded by the pace at which such political appointments can actually be made in practice, an issue which has been particularly marked in the current Trump administration.  It is hard to see where any net benefit could occur here [UK] from such a change.

But, the French system has its attractions as something of a hybrid between the American “winner takes all” approach and the non-partisan model on which the Whitehall civil service is based.

In France, the President and Prime Minister both have the power to appoint some of the more senior positions in the civil service and also have their own “cabinets” of personally appointed advisers.

In contrast to the U.S. System, only around 500 senior civil service positions tend to be forcibly vacated post-election in France allowing the incoming administration to fill sensitive ministries such as finance, foreign affairs, interior and justice without undue disruption across other parts of the system.

The Swedish system also has much to commend it. Although impartiality and meritocracy in terms of appointments to the State administration are written into the constitution, Ministers have the right to appoint state Secretaries, the top officials, into their departments.

Even other Westminster based systems have important differences that we should consider.  In Canada, the civil service combines a non-partisan element alongside greater political oversight with the Prime Minister appointing around 70 of the top rank, known as Deputy Ministers.

In Australia, the Prime Minister has the power to appoint and dismiss the equivalent of our Permanent Secretaries and Ministerial Private Offices are staffed almost exclusively by political appointees who are employed under different legislation from that governing civil servants.

All of these are ideas for reform to which we should give serious and urgent consideration.  Our arrangements have generally served us well but in a much-changed political environment it would be foolish to behave as though the relationship between government and civil service is set in stone.  The trick will be to keep the best of what we have and update it without introducing unnecessary instability that would threaten continuity and collective memory.

THE ROLE OF THE STATE

There is also another crucial debate to be had which is a separate, but connected, issue to the ones I have outlined.  That is what the role of any reformed state should be.  Are we simply trying to improve the efficiency of delivery of the mechanics of the state or are we willing to contemplate a Britain where the state steps back, acting as an empowering agent and allowing the free market to operate effectively?

For example, in providing better regional infrastructure, with funding and priorities set by government, do we really need an “Industrial Strategy” to determine where and what sort of subsequent development takes place rather than leaving it to the private sector with both national and international investors.

You will not be surprised that I instinctively favour the latter approach. This is a debate we must have, and we now have a political environment where we are more able to contemplate the changes we may need to be able to deliver on the promises we have made to deliver greater prosperity to all parts of the UK.

CONCLUSION

We can all now be certain that we will leave the European Union on the 31st January. 

That debate is over.

The question now is how we position our country for the opportunities and challenges that lie ahead.

A crucial part of that debate is how we shape the structure of our government itself and how we update our civil service in response.

We need to ensure that we speak with a clear voice on the issues that really matter, with a single foreign policy and a strong overseas network to further our diplomatic aims and take advantage of the opportunities that will come with changing patterns of global trade.

We need Whitehall structures designed for our post-EU future and a civil service that is able and willing to wean itself quickly away from two generations of Eurocentricity.

On top of all this we need clarity about the intended role of the state itself in a challenging and competitive world.

Some will see these as great challenges. Some of us see them as golden opportunities.

Thank You.

ENDS