Whitehall overhaul fraught with risk, say former ministers

Rishi Sunak’s decision to carve up Britain’s business department into three pieces is the latest attempt by a prime minister to refashion Whitehall in their own image, but it is a task laden with danger.

Previous “machinery of government changes” have created turf wars, bureaucratic upheaval and cost taxpayers millions of pounds. Changes to Whitehall brass plates seldom survive for long.

With an election expected next year, Sunak’s shake-up of government departments will have to bed down quickly and to deliver on his economic growth objectives at breakneck speed.

“As far as I can see, it’s changing departmental boundaries but there’s no growth strategy,” Lord Gus O’Donnell, former cabinet secretary, told the Financial Times.

“It’s very disruptive. Every single restructuring I’ve been involved with gets in the way of departments delivering what you want them to do.”

Sunak insisted the dismemberment of the Department for Business, Energy and Industrial Strategy, created by Theresa May in 2016, will ensure the “right skills and teams” are focused on his political priorities.

Two new departments covering energy security and net zero, and science, innovation and technology, will be spun out of the business department, which will in turn be rebranded as the Department for Business and Trade.

Sunak’s aides said the prime minister does not favour the expression “industrial strategy” — a favoured concept of May — because he considers it out of date.

The business department, whose name and secretaries of state have changed with bewildering frequency over the past 15 years, will now have to come to terms with yet another reinvention.

The Department of Trade and Industry was renamed by Tony Blair as the Department for Business, Enterprise and Regulatory Reform in 2007. Later it became the Department for Business, Innovation and Skills.

Some prime ministers have wanted a business focused Whitehall ministry to serve as a counterweight to the Treasury. But Harold Wilson’s attempt to beef up the Department of Economic Affairs was deemed a short lived failure.

At least Sunak avoided coming up with an unfortunate acronym for his new Whitehall creations, as Blair did in 2005, with his abortive plan for a Department of Productivity, Energy, Industry and Science.

“Why has the name of my department been changed to Penis?” asked Alan Johnson, the incoming minister. The plan was dropped.

But veterans of previous Whitehall overhauls believe Sunak will face other problems.

Lord Michael Heseltine, regarded as one of the most successful Tory business secretaries, said it was better to co-ordinate policy in one building rather than splitting things up. “PMs change the name plates on the door but the civil servants behind the door are still the same,” he added.

Meanwhile Lord Peter Mandelson, a powerful business secretary in Gordon Brown’s Labour government, said: “I can see the case for an economic growth-driven reorganisation but it needed a consolidation of business, digital, science and tech, including universities.”

He added the decision to keep energy technology separate from the new science, innovation and technology department was another complicating factor. “International investors are likely to be bemused,” he said.

Sunak’s aides said the Whitehall shake-up would involve whole teams — for example the digital group at what will now be called the Department for Culture, Media and Sport — moving to new departments. That avoided setting up new teams from scratch, they added.

But Hannah White, director of the Institute for Government, a think-tank, said: “The potential benefit of political signalling and marshalling resources behind the government’s priorities needs to be weighed against the considerable disruption, distraction and delay caused by reorganisations.”

Business leaders raised concerns about how government strategy would develop in the future, with much policy affecting growth parts of the economy sitting outside the business department in the new science and energy offices.

“If you want to talk about advanced industries it’s difficult to know who that falls under,” said one. “Who is looking at the semiconductor strategy now? There is no overarching approach.”

Another business leader said that the Department for Business and Trade would need to move quickly to “establish an identity”.

Craig Beaumont, chief of external affairs at the Federation of Small Businesses, said that “done wrong” the creation of a new business and trade department would “create huge amounts of uncertainty for civil servants, with no gain for the future”. “There are many in-tray items that are now incredibly urgent,” he added.

However, Beaumont said that “done right” the new department could “drive action that will help propel UK productivity”. He added the government needed to guarantee funding for the department and its subsidiaries, such as the state-owned British Business Bank.

Stephen Phipson, chief executive of Make UK, the manufacturers’ trade body, said the new departments needed “to work together to create a powerful industrial and energy strategy”.

The evolution of the UK business department