Interview: Gareth Davies

The last time Gareth Davies (pictured above) worked closely with Ian Watmore, the head of the Cabinet Office’s Efficiency and Reform Group, was when Davies led the change programme at the short-lived Department for Innovation, Universities and Skills. Watmore was the newly-formed department’s permanent secretary, and the pair were faced with the thorny task of forging a coherent organisation from parts of the former trade and education departments.

“We had a £20bn budget, new policy responsibilities, the best part of a thousand staff, a new cabinet minister who obviously wanted to hit the ground running – and there was no organisation behind it,” Davies recalls. “It was incredibly difficult to quickly get a sense of momentum whilst putting in place our corporate objectives; probably one of the most challenging projects I’ve taken on.”

DIUS is long dead now, and the coalition government has so far largely resisted the temptation to tamper with the departmental architecture; nonetheless, in some ways history seems to be repeating itself. Once again working for Watmore, Davies has been tasked with forging a single unit from the disparate parts of several discrete bodies.

From OTS to OCS
The Office for Civil Society (OCS) brings together the Social Exclusion Taskforce, the Office of the Third Sector (OTS), and some of the staff from the Strategy Unit (the rest have gone over to Number 10 to join its restructured Policy Unit). The new unit, Davies explains, will push delivery of the Big Society agenda across government. Hence its need for both policy wonks and voluntary sector experts – or, as Davies puts it, “strategic thinking and a real grip on policy implementation and delivery”. Such units, he adds, should combine people with analytical, strategic skills with experienced professionals who understand the front-end of service delivery: “If you get that mix right, the combination of fresh thinking with more practical experience, that’s when you get the creativity.”

For his part, Davies has always worked at the strategic end of that spectrum. After eight years with Price Waterhouse Coopers – “working on privatisation and regulation, on the boundaries of the public and private sectors”, he says – he joined the Strategy Unit in 2001, then spent several years advising Tony Blair on policy. After moving to DIUS, he comments, he worked hard to “keep people’s eyes on the big prize” and put a strategic vision at the heart of the department’s development. “When you’re being buffeted from side to side by events, it’s important to raise your eyes to the horizon and remember why we’re all here; what we’re actually trying to achieve,” he says.

Strategic thinking, Davies believes, is best done at one remove from the daily dramas of governance and politics. “It’s easy to get dragged into the question of the day or the latest delivery challenge; into the urgent rather than the big, important questions,” he says, arguing that Whitehall departments should “insulate” their strategic teams from such distractions.

The tactics of strategising
It was the need to create an insulated space at the heart of government (for what Davies calls “long-term horizon-scanning; developing fresh thinking on policy areas”) that initially prompted Tony Blair to establish the Strategy Unit. But since then, the landscape has changed. For one thing, says Davies, departments have improved their own strategy capabilities; for another, “there’s a shift in demand as to what’s needed”.

Like Tony Blair’s ministers during his first term, today’s departmental secretaries of state have comprehensive sets of policies to enact and don’t need a stream of new ideas from the centre; after all, the Strategy Unit was only formally established in Blair’s second term, when the government’s initial momentum had faded. However, the Big Society agenda is in urgent need of a concrete set of policies, followed by concerted action across government: hence the need for a central body to crystallise the agenda and enlist the help of relevant departments.

“What’s needed now, at the start of the administration, is the thinking and drive around the Big Society agenda, and that’s where we need that strategic capability,” comments Davies.
The OCS, says Davies, has three main roles: “thought leadership” around the Big Society agenda; continuing the OTS’s work to support the voluntary and community sector; and delivering on relevant coalition programme commitments, such as those on the Big Society bank and the introduction of ‘community organisers’. The Big Society’s fields of policy also fall into three main groups: volunteering; localism; and opening up public services.

Free time
Boosting the number of people volunteering, by definition, requires enabling and persuasive techniques rather than the application of regulations or leverage; and here, Davies has high hopes of the ‘nudge’ agenda, which involves changing the environment in order to push people gently in the desired direction. The nudge – or “behavioural insights” – team sits within the OCS, and Davies says it will work to identify the barriers to volunteering and change public perceptions. “We know about the importance of social norms: the more people know that their friends and relatives are getting involved, the more ready they are to give time and money themselves,” he comments. “What can we do to improve awareness of how many people do volunteer?”

The OCS also leads on the ‘civic service’ policy, which involves increasing volunteering rates within the civil service. A white paper is scheduled for March, says Davies, adding that he wants to “make it easier for individual civil servants to volunteer their time” and hence enable the civil service “to take a leadership role” in the drive to increase volunteering.

A localism policy for local people
Another of the OCS’s main themes is localism – particularly its work with the communities department to devolve decision-making powers, and its collaboration with the Home Office on elected police commissioners. Perhaps most innovative, though, is the community budgets pilot scheme: the successor to Labour’s ‘Total Place’ project, this involves testing out ways of combining the departmental funding streams that surround a complex, cross-cutting issue – first, the challenge of “problem, chaotic families” – in order to produce genuinely integrated local services.

There are 16 pilot projects, and Davies emphasises that the OCS is letting local professionals take the lead. “We’re turning it around so that rather than saying from Whitehall: ‘We think you should put together these budget lines,’ we’re saying to local authorities: ‘Make a bid to us. What are the barriers which are stopping you from working most effectively in your local area?’” The pilots, he adds, are identifying “the services they want to pull together locally” and “the key ‘asks’ of Whitehall: the barriers [between budget lines and organisations] that Whitehall needs to unpick.”

Each pilot has a “champion” in Whitehall to “fight their case”, Davies explains, and the government is keeping an open mind: a dozen or so budget lines may be involved, and the OCS is willing to factor in values for future savings that preventive work might yield for a wide range of public services. The execution, he says, is “incredibly complicated; it’s one of those things that’s conceptually easy to talk about but practically very hard to do”. The potential rewards, though, are as dramatic: “Rather than having money coming down through silos, it’s about trying to orientate it around problems and, hopefully, do more for less.”

Open day
The OCS’s third theme, that of opening up public services, brings together the rather timeworn agenda around encouraging greater public sector procurement from the voluntary sector and social enterprises; the government’s drive to broaden outsourcing and contracting out; and a still more radical ambition to allow parts of the public sector to leave government for a future as service-delivery contractors.

The first of these themes, Davies suggests, represents a major opportunity for voluntary and community sector (VCS) organisations whose incomes are declining as council grants shrivel. “It’s clearly a very difficult time for the sector,” he concedes, but the government aims to “open up contracts and provide better opportunities for charities and social enterprises to work with government”. The OCS runs a £100m “transition fund” designed to help VCS bodies to prepare themselves for government contracting, he says, and the proposed Big Society bank will “provide a third leg of finance for the sector. With payment-by-results contracts [bidders will] have greater working capital requirements, so we’re looking at how we can use dormant bank accounts to leverage money out into an institution.”

None of this, however, explains why the OCS will be any more successful than its predecessor, the Office for the Third Sector, in persuading public commissioners to buy goods and services from VCS bodies, SMEs and social enterprises. Asked how the OCS intends to boost procurement from the kind of bodies that symbolise the localism and Big Society agendas, Davies argues that the answer lies in persuading public sector buyers to understand and value the wide range of benefits that smaller, community-based and charitable organisations can provide.

“What’s important here is thinking about what the full set of social returns are when you’re thinking about buying public services,” he says. “It’s not about preferring one [type of contractor] over another; it’s about thinking about what the users need, then thinking about how you structure the contract on the back of that.”

If commissioners fully value some of the softer skills and local knowledge often found within VCS organisations and social enterprises, then Davies believes that these smaller, community-based operations will win contracts – especially if payment systems shift their focus from rewarding activity to rewarding results. “If you think about some of these services – working in social care, in the community – then efficiency isn’t always about economies of scale; it’s about a real understanding of the end user, and their concerns and needs in a local context,” he says. “Sometimes these guys have real advantages over some of the larger players.”

Mutual advantage
In a time of such unprecedented pressure on budgets, the OCS will not find it easy to deter public sector commissioners from going for what looks like the cheapest option. Yet success in broadening the range of contractors to government will be crucial if the OCS’s mutuals policy – under which arms of the public sector are encouraged to hive off as employee-owned contractors – is to create a raft of successful, sustainable mutual organisations.

Cabinet Office minister Francis Maude has already made it clear that teams of public servants considering bidding to become a mutual would be well advised to find an external partner that can help them with business advice, technical expertise, management skills and capital; the OCS is also pairing its pilot mutuals up with ‘mentor’ organisations that can advise and assist them.

So, what should nascent mutuals look for in a potential partner? People and organisations that understand “the barriers that emerging mutuals are facing, and therefore what they need to make available to help them”, replies Davies. There will always be “great leaders: people who go against the grain to make things happen”, he adds – but new mutuals shouldn’t be dependent on charismatic leaders for their survival: they’ll need partners who can help them build the processes, skills and assets to survive in the market even when inspirational managers move on.

Both Maude and Davies are clear that opening up public services will involve more delivery by both profit-seeking and socially-motivated organisations. There is no intention to skew markets to favour the latter – the aim, says Davies, is to create a “level playing field between different forms of provision” – and the minister is quite happy for businesses to create joint ventures with mutuals; even, perhaps, to take them over.

So, when mutuals are pitched into competition with – and exposed to the possibility of takeover by – big private companies, what guarantee is there that they won’t quickly be pushed aside or bought out? Two things, replies Davies. First, “Mutuals have a strong sense of social mission and common purpose; that’s good for motivating and attracting employees. It’s also good for customers”. And second, “It’s about getting commissioning right: ensuring that commissioners have a strong sense of what they’re trying to buy.”

In other words, the OCS is depending on mutuals’ desire to remain mutuals, and commissioners’ willingness to value the wider benefits they can deliver? “Quite,” replies Davies. “And that’s the challenge, both to us here in the OCS and to Whitehall more generally: to get the policy structure right.” Creating a thriving set of formerly-public sector mutual bodies is, he argues, “a supply and demand issue: getting the right demand from the commissioners, and the right supply in terms of investment and business readiness.”

The battle of ideas
Expanding public procurement from social enterprises and the VCS proved difficult in happy economic times; and when money is tight, budget-holders rarely become more adventurous. But Gareth Davies’ team have the political wind behind them, and a set of ideas that could change the game: payment-by-results schemes that reward softer, intangible skills, for example, and the Big Society bank to channel investment cash into mutual bodies.

What’s more, the OCS is operating at a fearsome pace; one dictated by the tough delivery deadlines set out in the Cabinet Office business plan. “It’s all about implementation: procurement reform, the bank, community organisers and the rest,” says Davies. “Once we’ve got through that, we’ll be thinking about how we capture lessons to improve them over time.”

In the end, though, the success of the OCS’s work will depend on the readiness of civil servants across Whitehall to embrace what Davies calls “a new way of doing business”. Gone are the days of vast public investments, managed through rigid public bureaucracies. “It’s a move from top-down targets; managing trajectories; being able to go to the Treasury for ‘x’ million pounds,” Davies explains. “Now it’s much more entrepreneurial. It’s not about telling people what to do, but using incentives; it’s about doing deals with a range of different bodies in different sectors, not running it all through one delivery chain.”

“That’s quite a shift in operating model,” he concludes. “It needs different skills; a different outlook.” It seems that, as he forges a new team for his old boss Ian Watmore, Gareth Davies has found a challenge even bigger than the one the pair last faced at DIUS. Let’s hope the tale proves a longer one – and boasts a happier ending – than the story of the ill-fated Department for Innovation, Universities and Skills.

CV Highlights
1994    After A-levels at Wallasey Comp near Birkenhead, awarded a degree in Politics, Philosophy and Economics from Oxford. Joins PWC as a consultant
2001    Recruited by the Strategy Unit as deputy director
2003    Becomes senior policy adviser in Number 10
2007    Made director of the change programme at DIUS
2009    Joins Cabinet Office as director of the Strategy Unit
2010    Made director-general and executive director of the Office for Civil Society