Margaret Hodge was voted TP's MP of the month for February for her work holding HMRC to account of Goldman Sachs. Read her interview about it here.

Before Christmas, the outgoing head of the civil service, Sir (now Lord) Gus O’Donnell wrote a stiff letter of complaint to Margaret Hodge MP, the Chair of the Public Accounts Committee, Parliament’s most powerful select committee. Hodge, he asserted, had over-reached herself and the powers of her committee by calling officials of Her Majesty’s Revenue & Customs (HMRC) to account for a tax deal they had struck with Goldman Sachs.

O’Donnell was particularly aggrieved that Hodge’s committee had asked an HMRC lawyer to testify on oath about the Goldman Sachs deal. It was, he said, "a theatrical exercise in public humiliation", clearly exceeding the remit of the committee to question permanent secretaries in their function as accounting officers for their departments. Civil servants, the argument runs, are accountable to ministers, and ministers to Parliament. Only on the narrow function of financial accounting should a civil servant ever have to answer to Parliament.

O’Donnell’s letter brought out into the open a simmering tension between the civil service and Westminster’s politicians. Officials resent the new-found confidence and reach of Parliament’s elected select committees. In private, they complain of the chilling effect of scrutiny, of the hours spent preparing for select committee appearances, and of the breach in the constitutional convention that ministers should account to Parliament, and politicians to the people, rather than the officials who serve them. 

This convention is the key fault line in the subterranean SW1 debate that has spilled out into the open in the war of words over Hodge’s committee. At heart, the problem is this: Whitehall is now the only major institution of our public life that is unaccountable to anybody else. In theory, civil servants are accountable for their actions to ministers. But the tradition of civil service neutrality means that ministers have no formal say in the appointment or dismissal of mandarins, which makes a mockery of the idea that mandarins are internally accountable. Nor are they exposed to any meaningful external accountability, since it is ministers also who are held answerable to Parliament and the public for the actions of their departments. Ministers are meant to take policy decisions for their departments and not to run them as executives. But they are still asked to carry the can for officials when things go wrong.

This arrangement, which dates back to the 19th century, has shielded the civil service from genuine accountability for their performance, and in so doing prevented the effective modernisation of the management of the mandarinate. Permanent secretaries are not directly performance-managed by the Cabinet Secretary or the Head of the Civil Service (the two parts of O’Donnell’s role now having been split between Sir Jeremy Heywood and Sir Bob Kerslake). They preside over their own baronial manors, meeting as a club each week. There is no governing board for the civil service, as there is, for example, to hold the BBC management to account. The net effect is that there is no effective external pressure on the civil service to modernise, change and improve. Nor, when things go wrong, is there a mechanism for holding anyone accountable.  The situation is best summed up in the immortal words of Sir William Armstrong, the head of the civil service in the 1970s, who declared himself “accountable to my own ideal of a civil servant".

As it happens, this arrangement also suits politicians who want to blame officials for their own failures, since the civil servants can’t respond in kind.  Lacking clear demarcations of accountability, Ministers and officials can get locked into mutual blame and back-stabbing, each evading responsibility when it suits them. Indeed, there is more than a whiff of a settling of old scores in the recent spats over the public accounts committee.

The solution – as IPPR argued some years ago - must be to delineate those areas for which officials have operational responsibility and hold them publicly to account for them. There will be grey areas, to be sure, but a broad division of labour between policy and resourcing, which is the domain of Ministers, and operational delivery, which is the role of executive officials, is not in principle difficult to achieve. Parliament should be empowered to hold both Ministers and civil servants to account, and it should be for select committees to judge where ultimate responsibility lies in those fuzzy cases where Ministerial actions overlap with operational execution. Such reform should be coupled with more effective management of the senior mandarinate, who should be properly line managed, on contract, by the Head of the Civil Service, as now happens in New Zealand and elsewhere. Moreover, with greater devolution to Mayors and other elected leaders, Ministers and Whitehall can point accountability downwards, towards the people, when it should rest at that level.

Instead of rebuffing and resenting Margaret Hodge, the senior civil service should embrace the opening she has given them to modernise their accountability and management structures. Public life and the health of our democracy would be strengthened as a result.

Nick Pearce is the director of IPPR and a former head of the No 10 policy unit. Find him on Twitter as @IPPR_NickP

Tags: Gus O'Donnell, Mandarins, Margaret Hodge, Public Accounts Committee, Sir Bob Kerslake, Sir Jeremy Heywood, Whitehall