A MODEL OF COST‐CUTTING IN GOVERNMENT? THE GREAT MANAGEMENT REVOLUTION IN UK CENTRAL GOVERNMENT RECONSIDERED
| Author | RUTH DIXON,CHRISTOPHER HOOD |
| DOI | http://doi.org/10.1111/j.1467-9299.2012.02072.x |
| Published date | 01 March 2013 |
| Date | 01 March 2013 |
doi: 10.1111/j.1467-9299.2012.02072.x
A MODEL OF COST-CUTTING IN GOVERNMENT? THE
GREAT MANAGEMENT REVOLUTION IN UK CENTRAL
GOVERNMENT RECONSIDERED
CHRISTOPHER HOOD AND RUTH DIXON
New Public Management (NPM), particularly in its early stages in the 1980s, is often said to
have concentrated on cost-cutting and efficiency, but few studies have examined how far NPM
succeeded in cutting costs. Focusing on UK central government, often claimed to be a leading case
of NPM, and analyzing three sets of data (for running costs, tax collection costs, and paybill), this
study finds little evidence of real running cost reductions in the early NPM era. It concludes that,
contrary to stereotype, 1980s NPM in UK central government does not offer a model for the scale of
administrative cost-cutting currently planned, and even the cutbacks of the 1990s fell far short of
those current plans. The conclusion for the academic study of NPM is that something more than a
minor revision of the received view of NPM as a cost-cutting movement is needed to explain these
observations.
BACKGROUND: UNIVERSALLY ACKNOWLEDGED TRUTHS ABOUT NEW
PUBLIC MANAGEMENT?
After a long period of fiscal expansion in benign economic conditions, the financial crash
of the late 2000s and continuing sovereign debt crises have put reduction in operating
costs in government at the centre of the policy agenda, along with pressures to cut
programme spending. For example, the UK’s 2010 public spending review planned for
a 34 per cent cut in administration budgets across central government between 2010–11
and 2014–15 (Cm 7942 2010, p. 9). So can the history of ‘New Public Management’ (NPM)
shed any useful light on how operating costs can be cut on such a scale in public services?
What is the evidence of cost reductions achieved under NPM?
That question is pertinent because among the voluminous writings about NPM since
the mid-1980s, it is a truth (almost) universally acknowledged by NPM’s advocates
and detractors alike, that the NPM movement was heavily motivated by the hope
and expectation of pursuing ‘efficiency’, typically interpreted as cost-reduction. For
example, Christensen and Laegreid (2001, p. 1), who have produced many accounts
of the development of NPM, describe NPM as ‘a global reform movement...inspired
by...economic theories and normative values whose main focus is on increasing efficiency’
and later (p. 15), observe that ‘the main ideas of NPM were focused on economy and
efficiency, and the organizational changes made were efficiency-focused’.(The same words
are used to describe NPM’s essential qualities in Christensen and Laegreid 2007, p. 4).
Indeed, a standard criticism of NPM is that it took the pursuit of ‘economy’ (in the sense
of cost limitation) so far that other important if perhaps more subtle administrative values,
such as quality, political control, co-ordination, and resilience, risked being undercut or
weakened. For example, Beck Jørgensen and Anderson (2011, p. 336) declare that ‘In the
UK, the home of NPM, the counter-reaction was prompt and strongly focused on values.
The dangers of one-sided values and of efficiency crowding out other – classical – values
were pointed out (Stewart and Walsh 1992; Butler 1994; Greenaway 1995)...’. Similar
Christopher Hood is Gladstone Professor of Government at All Souls College, University of Oxford, UK. Ruth Dixon is
in the Department of Politics and International Relations, University of Oxford, UK.
Public Administration Vol. 91, No. 1, 2013 (114–134)
©2012 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden,
MA 02148, USA.
A MODEL OF COST-CUTTING IN GOVERNMENT? 115
points were made by Maas and van Nispen (1999) and indeed, in a comparative analysis,
Suleiman (2003) goes so far as to claim that NPM’s attacks on traditional bureaucracy in
the name of efficiency served to undermine democracy itself by weakening one of its key
constitutional underpinnings.
For the UK more specifically (conventionally argued to be one of the leading countries
espousing NPM changes; see, for instance Christensen and Laegreid 2011, p. 9), Pollitt
(1993, pp. 177–87) has argued that there was a difference between the earlier and later eras
of managerial reform. He saw the early version as a ‘neo-Taylorist’ approach to public
services management under the Thatcher Conservative government, especially in its first
two terms from 1979 to 1987, with ‘efficiency’, typically construed as short-term cost-
limitation, pursued in a single-minded way at the expense of other values. But Pollitt and
others argue that from about 1990 (and perhaps associated with the ostensibly milder style
of Conservatism pursued by the government of John Major, Thatcher’s successor, and later
by Tony Blair’s ‘New Labour’ regime), the emphasis started to switch to a new ‘quality’
agenda alongside that of cost control simpliciter. (Indeed, Pollitt (1993) originally reserved
the term ‘NPM’ for the later era.) Such a change was said to be reflected in developments
such as the 1991 Citizen’s Charter which set out quality standards for various aspects of
public service performance, the introduction of new audit and inspection systems across
the public sector, and the targets/league tables approach to handling quality in public
services which reached its apogee under New Labour after 1998 (see, for example, Pollitt
1993, p. 177; Pollitt 1998, p. 54).
RUNNING COST REDUCTIONS: HARD QUESTIONS, SOFT FACTS
Now the notions of NPM as a movement originally motivated by the desire to pursue
efficiency by cutting costs and as having morphed into a ‘quality’ phase later on are
‘facts’ often referred to, as noted earlier. But there is a remarkable dearth of empirical
evidence about the extent of any such cost reductions. Well over a decade ago, Pollitt
(1998, p. 54) pointed out how flimsy were the empirical underpinnings of the claims
for greater efficiency associated with NPM, even in major evaluations of management
changes in Australia and New Zealand (Pollitt 1995). At about the same time, Roberts
(1997) questioned the dramatic cost savings attributed to the UK’s executive agencies
programme by those campaigning for the introduction of similar ‘performance based
organizations’ in the USA in the mid-1990s (such as David Osborne and the 1996 National
Performance Review, claiming operating cost reductions of 3–5 per cent a year with no
loss of service quality; quoted in Roberts 1997). Roberts pointed out that such claims
were based not on actual cost reductions but on unverifiable claims made by the agencies
themselves about savings from planned increases in costs, which the managers involved
had every incentive to exaggerate, and that the reported numbers on actual operating
costs pointed to a very different story. More recently, the UK’s National Audit Office
pointed out in a review of government efficiency programmes since 2004 (HC 291 2010,
p. 20) that the calculation of the baseline against which efficiency savings were assessed
was the responsibility of each department, and such counterfactual baselines allowed
‘savings’ to be claimed even while actual spending increased (p. 14).
Nor has the evidence gap on putative NPM cost savings been greatly closed in work done
since Pollitt’s and Roberts’ comments in the 1990s, as shown by Andrews’ (2011) recent
systematic review of statistical testing of efficiency claims. Most of the studies Andrews
found focused on the effects of competition on productive efficiency (rather than the
Public Administration Vol. 91, No. 1, 2013 (114–134)
©2012 Blackwell Publishing Ltd.
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