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  • Geoff Mulgan

How should government manage big risks – pandemics to financial shocks?

The COVID-19 crisis has been an extreme stress test for governments around the world, with widely varying performance so far. I’ve already described in another blog some of the early lessons and the possible implications for government in the future.

Here (in this extended version of a blog on the States of Change site) I address a broader question that will again come into view once the intensity of the crisis passes and we move into what could be a protracted period of partial returns to normality: the question of how governments should in general handle risks, crises and disasters like COVID-19.

The blog shows how risk was handled, and suggests what went wrong in the run-up to the current crisis. Since I wrote it the UK print media, which had been very gentle with the government during the crisis, started to do more serious analysis, which has confirmed all that I write below.

The New Statesman ran an excellent piece by Harry Lambert titled: 'Why weren't we ready?'. On 19 April, the Sunday Times ran a devastating analysis of complacency at the top (which the government has subsequently responded to). Then on 20 April the Telegraph reported on the exercise to simulate a pandemic - Exercise Cygnus - in October 2016 which involved all major government departments, the NHS and local authorities across Britain. This was part of the Emergency Preparedness, Resilience and Response plan, a core function of the NHS and a statutory requirement of the Civil Contingencies Act (CCA) 2004 (one result of the risk strategy described in my blog below). The bland and bureaucratic NHS England board paper can be found here - a model of how not to handle risk.

These various reports unfortunately confirm the thrust of my piece: that government had been distracted by other issues and so took its eyes off the long-term. What had been a comprehensive approach to risk and preparedness had been allowed to atrophy. I haven’t revised what follows.

The question of how governments handle risks is one I found myself heavily involved in twenty years ago. In the year 2000 a strike by fuel drivers almost brought the UK to a standstill. It turned out that in the age of just-in-time production stocks of fuel would barely last a couple of days. Food deliveries and hospitals would grind to a halt. Luckily the strike was quickly settled. Then, less than a year later, the UK faced a severe outbreak of foot and mouth disease which brought the countryside to a standstill. In the end, some 6 million cows and sheep were slaughtered to stop the disease.

Both crises showed up the weaknesses of government’s systems for handling risk. I was then running the UK government Strategy Unit and we were given the task of looking in a fresh way at how risks of all kinds were handled.

We examined how big companies and other governments handled things; tried to make sense of what had and hadn't worked in the past; and made recommendations. None of the conclusions were earth-shattering - but they did lead to significant change. Inevitably, organisations that are focused on the present tend to ignore potentially harmful risks, particularly low probability but high impact ones. So it was vital to counter that tendency by paying more attention to risks, which meant institutionalising processes for better understanding and preparing. We then helped put in place pretty comprehensive machineries within departments and the centre of government for doing just that:

· Scanning for potentially high impact if low probability events – from pandemics to financial crises, attacks on critical infrastructure to extreme weather events.

· Preparing decision-makers – through simulations, scenarios and models.

· Creating a central Civil Contingencies Unit, networked into local government, that could be quickly mobilised in a crisis.

· Ensuring budget allocations to deal with some of the obvious growing threats, such as increased flooding.

These were part of a coherent approach to what we saw as the three main levels of risk - strategic, programmes and operational (all of which have become very visible during the COVID-19 crisis). One main conclusion was that although it was essential to think about risks all the time, you could never expect to predict exactly which ones would hit or the shape they would take. So the key was to build in resilience and adaptability so that when the crises hit you could respond fast and flexibly.

Another related conclusion was that it was vital to put senior decision makers, including politicians, through emotionally compelling simulations where they would act out how they might respond in the heat of a crisis (Singapore, for example, did this particularly well). Purely paper based exercises often missed the vital dynamics (an observation confirmed in the UK this year).

Taking risk seriously also meant challenging some economic orthodoxies, including the emphasis on efficiency and optimisation. To be resilient against risks requires some spare capacity or redundancy in the system. Yet the dominant ideas of the 1980s and 1990s were suspicious of anything that appeared to diminish current efficiency. This led to interesting arguments with the then regulators of sectors like energy who were highly resistant to the idea that they should be regulating key infrastructures with a view to withstanding high impact, if low probability events.

Finally we tried to ensure there was good independent advice on what would be a proportionate response to uncertain risks - so that ministers wouldn’t be punished for taking risks seriously (like the French minister who spent heavily in response to H1N1 in 2009 and was then punished for wasteful overreaction). This is a dilemma constantly faced by the WHO which in retrospect overreached to H1N1 and underreacted to COVID-19.

In the five years after the enhanced risk management measures were introduced in the UK there were no major crises. This probably had more to do with luck than brilliance. But overall the measures, though dull, were effective, and were praised by the National Audit Office amongst others. Of course they were very un-newsworthy: crises which don’t happen don’t make headlines, and the big crisis which did then hit five years later – the financial crash of 2007/8 - paradoxically proved the virtue of these measures. Despite having quite a sophisticated approach to risk overall, the Treasury had resisted applying the risk management methods we’d advocated to economic policy. Their justification was that if they did any contingency planning for recessions and shocks, and it leaked, this might accelerate the very recession being prepared for.

So for most of the last two decades the UK system was fairly well prepared for shocks and during most of that period pandemics were the top-rated risk (a Level 5 threat), alongside nuclear attack, but deemed much more likely. As a result, there were regular exercises to model how the health service would cope with a surge of infections, and studies to examine, for example, the ethical dilemmas that would be faced by hospitals. Crises like swine flu, and later ones like SARs, were the staples of these kinds of risk exercises – though usually (as in the Hollywood movies) it was assumed that the threats would be more deadly than COVID-19.

So what went wrong and why, when the COVID-19 crisis hit, did the government seem so unsteady rather than prepared?

There are some obvious reasons. The UK looks bad partly because many east Asian countries have looked so impressive. They were helped by having dealt with SARS and MERS, and with government structures that were much more nimble, far quicker to test, and far better at mobilising data. Some of the UK strategy plans by contrast had not been updated for many years, and, as far as I know, none had really taken account of how smart phones and data could be used now.

Other factors include the weakness and inexperience of political leaders - the result perhaps of sacking so many senior Tories with proven competence and replacing them with loyal ideologues.

Austerity had also led to a hollowing out of government – including the closure of the pandemics preparation team and the government regional offices that would have been so vital for coordinating responses. And, of course, Brexit had hugely diverted civil service resources away from literally everything else.

There are also subtler reasons for the wobbles. The UK switched strategy rapidly – from a mitigation strategy which assumed that the virus would spread and kill many, to a suppression strategy that involved forced isolation - under pressure from public opinion. It’s highly unlikely that any of the senior decision makers had taken part in serious simulation exercises on pandemics over the last five years. If they had, they would have quickly discovered that the strategy produced by the experts was not politically viable. The communications people – and politicians – would have seen that it was impossible for a Prime Minister to appear to accept such high levels of mortality.

Here the key point is that there is no viable strategy which simply ‘follows the science’. Epidemiological science is a vital input. But it is often ambiguous and often at odds with other relevant kinds of knowledge – from practical medical knowledge about how hospitals work to economic, psychological and social knowledge (as I discussed in this recent piece with Jo Chataway). It’s become apparent in the UK that there was too narrow a channel of scientific advice – and that the advisers tried to second guess the politics and got it wrong, and that the politicians and their political advisers, through inexperience, didn't know how to challenge the scientific advice.

The programmes have also looked unsteady, with some of the policies apparently decided in a hurry and quickly unravelling. Again, the civil servants moved very fast, and impressively in some ways, but there didn’t appear to have been much preparation. As so often in British government, the policy design was quite high quality, but detached from knowledge of implementation. This is even more true at the operational level where supplies of ventilators, tests and protective equipment have come under intense scrutiny. In respect of the long-term, the government had taken its eye off the ball.

It’s easy to criticise, especially from outside, and I don’t envy those stuck at the heart of government during the crisis, many of whom have done extraordinary work. But pandemics were the most likely shock of all, and government should have done more to prepare.

Preparing for risks is costly. It takes people and resources away from immediate priorities. But ultimately protecting people from risk is the heart of what government is for, and good bureaucracy manages risk systematically. Indeed, times like this remind us why boring, competent, reliable and forward-looking bureaucracy is so vital to helping us live our lives freely. They worry so that we don't have to.


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