John Redwood is an incisive commentator on economics and politics, writing his daily blog on www.johnredwoodsdiary.com. He has led two UK-based international industrial businesses, set up and sold on an investment management company and is a fellow of All Souls College, Oxford.
AI offers great opportunity to the public sector. Ministers tell us they are spending on it to boost productivity and drive change. We were told of a £3.25bn Transformation Fund for public services for 2025–8, with £2bn being spent this year and £1bn next. The recovery of lost productivity was always planned to take time, with AI mentioned as a way of helping do it. We were treated to another five-year hockey stick, with extra spending only leading to substantial savings in the final year. I never understood why we needed new investment in AI to recover 2019 levels of productivity when that was a pre-AI era. The Government should urgently recover the lost productivity on old technology and consider what additional gains there can be by spending on new technology.
The Government needs to live up to its words on AI and chart a way of using it that is fair to taxpayers and its staff. Throwing a few hundred million more into the IT budget and hoping the suppliers will spend it well for us is not a good strategy. What is the Government’s aim? Which parts of government will benefit most? Is there a central strategy or do different parts of the public sector make their own way through the AI procurement? Much of public administration is amenable to more computing assistance, but it needs to be done in a way which keeps the good staff, lets them oversee the technology rather than be replaced by it, and improves the lot of the users
Now we can see the breakdown of the planned Transformation spending for 2026–7, we see £547m is going on SEND, £271m on social care and £150m on asylum. This implies half the Transformation money is going to three hotspots where budgets are under severe pressure and will not primarily be on AI. There is only £25m this year for civil service improvement, £210m for HMRC computer schemes and £194m specifically earmarked for various cross-cutting digital programmes.
I have written before that efficiency and quality are two sides of the same coin. Higher quality and productivity have to be driven daily by senior managers. In government, ministers need to stress their importance. To achieve them, top managers need to learn daily from experience. What has gone wrong? What can we do better? What do we not need to do? Which complications increase the likelihood of mistakes and cover-ups, even where their ostensible purpose is greater safety or accountability? Intelligent use of AI can clearly change the frontier between what you can let a machine do and what has to be done by a person. AI cannot substitute for hands-on direction and responsibility for the service held by people.
When I was leading industrial companies, I gave myself two important tasks as part of the job to highlight the importance to my teams of quality and efficiency. I asked to be informed of all serious complaints and accidents so I could see what was going wrong and insist on remedies, with a view to designing out the risks. I was also the questioner for the future, asking my managers all the time what we could be producing next that would be better, how we could improve service quality and customer relations, identifying inadequacies and outdated practices in our factories and products.
Managers were often shocked to be told that most of what they are making today they will not be making in five years’ time. People get caught up in the here and now, but some have to look to the future. What look like good secure jobs today, backed by a steady flow of orders, can vanish tomorrow if leaders do not think ahead about what consumers will want and expect next. Making records in an age of downloads or selling carts in an age of cars does not create many jobs or need large factories.
Cost down or cost control is part of the daily life of any company that wants to survive in a competitive market. Left-wing critics think management is driven by an unhealthy desire to maximise profits, always looking for ways to do things more effectively. They need to understand that the main reason for cutting costs is to provide customers with keener prices. This is followed by the need to control costs to stay in the market, protecting the company’s jobs. If a company puts its prices up too far, or lets its costs run out of control as government often does, it will lose customers and jobs to its competitors.
Profits matter too, because out of the profits you can afford to research the future, launch the new products and services and above all pay for the new factories and computers you will need to deliver a good answer. Most profits do not go to rich shareholders. If no profits go to rich shareholders there will be no rich shareholders creating the company and the jobs in the first place. Profits go to new investment, to paying interest on borrowed capital and to paying dividends to the pension funds and insurance schemes of the many as well.
AI is seen by some as a major threat to jobs, as AI will be able to do more things better and more cheaply than employing a person to do them. For any individual company there is no choice if it wants to survive. If the computer is cheaper and better the company will need to use it more to stay in the market. Used properly, AI makes society richer, meaning we will have more to spend on new products and services still not yet dreamed up. The cost savings from AI get recycled, helping growth and prosperity. Real wages go up as jobs change and total output and income rise.
Just look at the energy of Amazon, one of the world’s largest companies, which understands all this. Last quarter it reeled off an incredible list of all the things it was doing to widen its reach and serve its customers better. In the retail space alone it launched the faster supply of medicines to people with bigger discounts on price, expanded its ultra-fast delivery service offering thirty-minute same-day delivery in some big cities, added millions of new products and many brands to its range, launched Amazon Supply Chain services so other companies could use the advantages of its efficient supply and delivery systems, announced Proteus, an enhanced robot lifting loads in warehouses, and developed Alexa for Shopping, an AI shopping assistant.
What did the UK Government develop and launch to give users of its services faster and cheaper services? Why did it go on ignoring complaints and putting up with poor service? Why did it greatly increase the costs without improving the quality? Why does it always boast about how much it spends on a service but not about how much service it delivers? Who was the voice in government for the future, seeking to apply the new technologies to delivering better solutions to users that they wanted? Why do so many in government see what little digitalisation there is as a new way to enforce compliance and make things easier for the service supplier, not the user?
When I was a minister, I was shocked at the unwillingness of parts of the public sector to learn from mistakes and to improve what was clearly poor performance. I had to keep repeating the need to answer incoming letters promptly and well. Today some emails take months to answer, some get lazy or unhelpful replies and some are never answered at all. When a disaster occurs like the Horizon scandal, the infected blood scandal, the avoidable deaths in hospitals scandals, the dumping of refuse in the countryside and the rest, there are attempts at cover-up, arguments over responsibility and long delays in providing remedies and compensation. If one of my companies had a worrying complaint I got them to settle urgently, to apologise, and to show the harm was not meant and the remedy was good.
Superb analysis of the failures of the public sector and some businesses
Excellent article - by someone who has experience both in running companies, and being a minister. It is indeed absurd that ministers boast about how much they spend on stuff, and cover up when things screw up. Keep up the good work!