Public sector ‘defensive spending’ is a clear moral hazard

We now know the total legal fees spent by NHS Fife in its recent and long-running industrial tribunal case. At £400,000 is a very substantial sum by any standards and it is difficult to see what the Scottish public got from this spending.

It highlights a significant and rising issue in the Scottish public sector – what might be called 'defensive spending'. Defensive spending is money spent by senior officials for purposes which might best be called 'self protection' or 'preventing accountability'. And it is almost certainly the fastest rising expenditure heading of the post-referendum public sector in Scotland.

It is almost impossible to arrive at an accurate total for defensive spending because by its nature it is secretive. It is also wrapped up with spending which is counted in the same category but which is a legitimate part of the core business for the government or public agency.

For example, across the Scottish public sector, £400 million was spent on legal fees and of course some of those will be unavoidable and serve an essential function in public life. On the other hand, some of that will be accounted for by strenuous efforts on the part of the Scottish Government to prevent document disclosure, such as the attempt to prevent evidence from the Hamilton Inquiry being published.

Likewise, when NHS Scotland spends £34 million just on in-house communications staff over the last five years, some of that will be providing specific and relevant information about the health service (though public health information is accounted for elsewhere) and some will be spent on responding to media enquiries.

And yet we also know that a lot will have been spent dealing with some of the most contentious issues in the NHS in recent times – the Eljamel scandal at Tayside, the C Diff issue at Vale of Leven, the Fife Sandy Peggie case and the Slorance case at NHS Glasgow – will have been about corporate PR rather than public health information.

In fact the Slorance case shows why this is such a problem to track. Andrew Slorance was a civil servant who died in contested circumstances in Queen Elizabeth University Hospital whose wife Louise believes there was negligence and has been pursuing it doggedly. It was then revealed that the NHS had authorised a surveillance programme to 'spy' on the conversations of people talking about the issue.

Clearly when the annual accounts come out there will not be a heading for 'espionage'. Untangling what could conceivably count as legitimate spending from spending which looks like it is primarily about protecting senior officials from scrutiny is very difficult.

It helps when there is an instance where there is only self interest, and that is probably demonstrated in the parliamentary inquiry into what is generally known as the 'Salmond affair'. Here there was really very little public interest in having information revealed and from extensive legal fees to the discovery that coaches were being paid to prepared witnesses to give evidence, almost all the spending was about protecting officials. (An honest witness only has to tell the truth…)

Here is where the problem lies; the power of the governing classes in Scotland means that their interests and the public interest have been combined into one. They take their actions to be inseparable from the public good and therefore defending them becomes a legitimate use of money dedicated to the public good.

This is a clear moral hazard. In any other walk of life you have to defend yourself with your own money. Corporations pay for legal fees and if shareholders are unhappy about it they can demand further information. Professionals pay insurance to indemnify themselves in the event of a claim of malpractice. Individual citizens have to stump up the money themselves.

But senior public sector officials can use unlimited amounts of money which is not theirs to defend themselves against their 'shareholders' (the public) and those 'shareholders' have almost no rights to demand accountability. Worse, when officials are pressed by the public on accountability (through an Freedom of Information request for example) they can then actually use the public's money against the public to try to prevent disclosure.

We need to create a clear precedent that senior managers should not be allowed to authorise spending to defend their own decisions. As soon as there is a self-interest involved they should recuse themselves. Perhaps a central and autonomous legal services department governed in the public interest (like a watchdog such as Audit Scotland) should take legal decisions on what kind of expenditure is in the public interest.

Where we stand now is unsupportable. Individuals are in a position of being allowed to cover up their own malpractice using seemingly unlimited amounts of public money with almost no scrutiny or accountability. That is a clear moral hazard to the public good in Scotland.