Think tank urges restraint as Labour draw up plans to merge departments

When Harold Wilson came to power he created a new Department of Overseas Development, only for Edward Heath to come along and abolish it. Tony Blair then brought it back again with a slightly different name.

John Major abolished the Department of Energy and merged it with the Department of Trade and Industry. Mr Blair then demerged it again and threw in climate change for good measure.

Whitehall is littered with the old letterheads of government departments that have been merged, demerged, abolished and resurrected over the past 70 years.

But now a new independent report election is calling for the Prime Minister’s power to rearrange his departmental deckchairs to be severely curtailed.

It comes amid growing suspicion that Ed Miliband is considering a radical restructuring of government departments should Labour win power at the general election in May.

Mr Miliband has appointed Lord Falconer, the former Lord Chancellor, to examine how a Labour government could redraw the Whitehall map – including possible plans to reduce the size of the Cabinet and increase the power of Downing Street over the Treasury.

The moves – which have yet to be signed off – could also involve some smaller departments being merged into super departments similar to those that now exist in Scotland.

But the report from the Institute for Government (IfG) warns that the history of previous Whitehall reorganisations shows that such changes are often “rushed” and “leave little legacy beyond enormous disruption and a large bill for the taxpayer”.

It calls for any future restructuring to take place only after a detailed business case and cost-benefit analysis for change has been written, published and submitted to Parliament for scrutiny.

And it adds that the priority for any party elected in May should be to strengthen Whitehall’s capacity to collaborate while imposing strong central controls on departmental performance management.

“When money is tight, there can be no justification for ill-thought-through restructuring that costs millions and helps no one,” said Tom Gash, the IfG’s director of research, who wrote the report.

“The next government must seek genuine reform of Whitehall – and that doesn’t mean chopping and changing departments. It means dealing with Whitehall’s inability to focus on long-term priorities and its weakness in co-ordinating policy across departments.”

The report has been backed by Ian Watmore, who was permanent secretary at the Department for Innovation, Universities and Skills (DIUS) which was founded in 2007 and then merged with another department just two years later.

He said: “Machinery of government changes should only be considered when the end result is truly strategic; when the business case is compelling in the long term; and when the short- to medium-term dips in performance and increases in cost are properly understood.

“If all three of these are not in place then I would say, ‘No, think about it hard and then say no again’. I strongly welcome the recommendations of the report today.”

The research found that half the major changes to departments between 1979 and 2009 were implemented with less than four days to prepare for creating a new or remodelled department.

The cost of creating DIUS was estimated at just over £15m while the creation of Department of Energy and Climate Change in 2008 cost nearly £16m.

One civil servant who worked for DECC said: “The first few weeks were really difficult. The ministers were in one [different] building. There were messengers coming in with bits of paper because they didn’t have IT connected and so on.”