Tuesday, 12 October 2010

Philip Green's Somewhat Bizarre Report

Download from here

Now, I sort of get what he's saying... If you're BHS or Tesco, you can use your size to gain more purchasing power and save heaps of money:-

There is no standard specification across departments.
•We found the following variations in price for laptops: Highest price: £2,000 Lowest price: £353 Differential: 82%.
•At this level of volume, the Government should buy direct from a multinational manufacturer.
So, what you then end up with is a centralised Department of Computer Purchasing which buys computers for everyone. The manager at a council puts in his 25 page, triplicate request into the department who then process the request and send out the laptop.

Is it going to save any money? Well, no.

The real problem that Green doesn't understand is that there's a huge difference in how retail sets its incentives and how government sets incentives. Something goes wrong in government and the press will be all over you, public enquiries and so forth. Make your department 3 times more efficient than the next guy? No-one cares.

So no-one in that purchasing department is really going to care because everyone above them and below them is spending other people's money. In fact, if they get tight on budget they can then plead poverty and ask for more next year.

That laptop isn't just expensive now. It's expensive + the expense of hiring some more bureaucrats to order it + the cost of the paper trail + the extra delay to people trying to do their job.

I've seen these things in large companies vs small ones, where the small company I worked for ordered PCs from Dell for less than the large company with its supposedly excellent buying power. Why? Because my boss owned the company and got me to spend 5 minutes shopping around for a PC. He cared about the price which some middle manager doesn't care that much about because he's spending his own money.

So, what's the solution to government spending? It's quite simple:-

  1. Privatise everything that can be made competitive. Let the public buy things. They'll soon find value.
  2. Reduce the laws and taxes to be as simple as possible. That way government has less to do.
  3. Take out all unneccessary functions of government. You want arts, you pay for them.
  4. Make government more accountable. If something is delivered locally, then people vote for it locally.
Other than that, accept that those last remaining parts of government will piss money away. I've read reports around the world, and no-one has cracked how to make government efficient, except by trimming it down, or giving the public quite direct powers to fire the useless.


  1. Good four point plan. Should item 4 say "then people vote for it and pay for it locally"?

  2. Mark,

    Not necessarily. You have to be careful with localism when the impact goes beyond the local area. Take somewhere like Weston-Super-Mare: it probably has far higher per capita healthcare costs because it's full of old people. Should those people pay for that cost? I don't think so.

    But, I'd argue that the people of Weston should vote for the person in charge of that function, at a local level(and not as just blurred into "council"), as it will sharpen them to serve those people well.

    The general point is that some things have to be done by government, but it's far better to have the power distributed and made more granular than it is now.

    And yes, I'm dead against councils choosing to spend money that they can't realistically meet. It always assumes that if they get deep enough in the crap that central government will step in.