Why Labour - and Whitehall - need the NEDs
Chief Executive
It’s all heating up in the world of Whitehall wonks, triggered by the new Government’s appointments and firings. Re:State has already made the case for greater flexibility around appointments, noting that political alignment is a plus, as long as that appointment is made in the appropriate manner (though we have some questions about the appointment of a Labour Together staffer to the Cabinet Office propriety team).
But it is the wholesale dismissal of departmental non-executive director boards that has triggered a spat between former Tory SpAd turned substacker Henry Newman and former civil servant turned think tanker Jill Rutter (both of whom are well placed to speak on the topic).
Leaving that scrap aside, it’s worth reflecting on the role of departmental NEDs. Unlike company non execs, their government counterparts do not have fiduciary duties – it is an explicitly advisory, not legal, position. As such, it is not entirely unreasonable to want to appoint people sympathetic to a government’s agenda. But this works both ways – the previous Conservative Government appointed several people with political links to the Party (which is not to say they weren’t qualified to perform the role), so the new Labour Government is within its rights to move them on and appoint their own people.
However, more importantly, most NEDs are not political, and instead are people with successful careers in other sectors, most notably business, who bring much needed ‘outsider’ knowledge and experience to what is broadly agreed to be a pretty insular government machine. Dismissing these people does seem odd, and given the relative inexperience of the ministerial teams, may even be a little foolish – relying solely on civil servants and SpAds for advice and guidance is unlikely to provide sufficient challenge and out-of-the-Whitehall-box thinking.
Of course, the benefits of a cognitively diverse board will only be realised if the Secretary of State sees the value in it and uses it appropriately. In research interviews for our ‘Breaking down the barriers’ paper, we asked former cabinet ministers and permanent secretaries about the role of the NEDs, and it quickly became clear that for some ministers they were an invaluable source of insight, and for others irrelevant.
But perhaps most interesting from those conversations was the value that deeply expert NEDs could bring for permanent secretaries. One former perm sec of a department managing complex commercial deals told us that they “pulled on them quite heavily” and they were “high value”. Another told us that their board provided “wise council”; that it was “unbelievably helpful to have a group to help solve challenges and think about the future”. Several former perm secs named specific NEDs who they had asked to help on particular projects because they found them so useful.
The value to permanent secretaries of having an appropriately experienced sounding board should not be underestimated – though it is rarely discussed.
As a former Cabinet Secretary told us: “What you get is absolutely first rate consultancy at a bargain basement price.” Surely us Whitehall wonks can agree on that, at least, being a very good thing.