Domenomics is a new and not very well known branch of economics that I have just invented and which is useful in understanding why the British public sector takes and wastes so much of our money on huge projects that almost always turn out to be catastrophically costly failures. .

Domenomics is named after that great triumph of public sector profligacy, the Millennium Dome. The Dome should have cost us about £399 million. But we ended up with a bill of close to £800 million.

In the private sector, unless you’re a banker, when you spend a few hundred million pounds or even a few billion pounds on a project, you’re expected to get some kind of return on investment. Also, if his costs start to skyrocket above his original budget, they’ll usually take him to his boss to explain why he’s eating up so much money. Unfortunately for us taxpayers, that is not how things work in the public sector.

Every public sector project will be slightly different and the excuses for overspending and managerial failure can be both varied and creative. However, despite their differences, many will follow a similar sad and predictable path.

Step One: The Three Ps – Personal vanity, politics and speculation. First, many large public sector investment projects are political decisions based largely on the personal vanity of ministers or the greed of their associates and patrons, rather than being justified by any semblance of economic or social necessity. For example, a prime minister wants to celebrate the millennium in style with his hangers-on, fellow showbiz cronies and other cronies; or a minister wants to be seen opening a shiny new hospital; or a minister has been duped by fee-hungry consultants into believing that a new £1bn computer system that he sings and dances about will magically ‘transform’ the performance of his department.

Step Two: The Big Lies of ‘Small Cost’. To get a project approved by the cabinet and accepted by the public, ministers will collude with career-focused civil servants to grossly underestimate likely real costs. They will usually enlist the help of profit-seeking private contractors, all eager for their lucrative share of the action should the project get the go-ahead. In polite terms, this tendency to downplay actual potential cost is called the “optimism bias”, because ministers are said to be “optimistic” about eventual costs. At a public sector vendors conference, a senior executive made the audience laugh out loud when he explained that they always presented their public sector projects at a price they knew would be accepted, because once they got the deal, they could jack up the cost. as much as they wanted and none of the officials involved would ever complain.

Step three: spend, spend, spend. Once a project has been started, it doesn’t seem to matter how much is spent. Politicians will never stop a project because this would mean losing prestige and possibly harming their political progress. Likewise, a civil servant will never waste time on a minister’s pet project, no matter how much of our money is bleeding to death. If a high-ranking official dared to criticize a minister’s show-off scheme or was seen to actually be involved in wiping out some disaster, then he or she could risk damaging his or her promotion prospects and even chances of success. obtain the OBE or knighthood. Wasting public money has never affected the career of a public official, but acting to prevent waste can be very damaging. Still, many large projects run for several years, so with an average of two to three years in each position, most senior civil servants will have been promoted without issue when the true costs of a project become apparent. So why rock the boat? On the other hand, if you have inherited a mess from someone else, you simply continue to spend, as you can blame any problems on your predecessor.

Step Four: Trick the PACman. With some of the worst projects, usually when it’s already too late to do anything, the toothless and politically subservient watchdog, the National Audit Office (NAO), will make a half-hearted attempt to figure out what went wrong and where. all our money is gone. The report of him will be watered down by the department that has wasted hundreds of millions or even billions and then presented to the Public Accounts Committee (PAC). The PAC MPs will then summon a couple of the senior officials involved, snort in histrionic indignation at the amounts of money that have vanished, and attempt to question those who should have been responsible as to why things went so horribly wrong. Knowing that they only have to face the PACs for an hour or so, officials will duck and weave deftly denying any responsibility for anything and inventing an extraordinary number of new excuses to absolve themselves of any blame. If the going really gets tough, and they rarely do, top officials will sometimes go so far as to admit that “important lessons have been learned.” The PAC chair will then announce that whatever project they are reviewing is the ‘worst example’ of incompetent management the PAC has ever seen. The Child Support Agency’s IT system was called one of the ‘worst public service scandals in modern times’ and we were told ‘the facts are unbelievable’; the Department of Transportation’s shared services project was implemented with ‘stunning incompetence’ was ‘one of the worst cases of project management seen by this committee’; Libra’s IT system for magistrates’ courts was called “one of the worst PFI deals we’ve ever seen”; Building Schools for the Future was ‘perhaps the worst case of using consultants’; and the Ministry of Justice’s latest C-Nomis project to track down criminals was ‘one of the worst reports I have ever read’. This is just to name a few; there are many more that the PAC has described using various negative superlatives that generally include the word “worse.” Once this farce is over, everyone will nod sagely and agree that “this must never happen again” and the exact same procedure will be repeated on the next project and the next and the next.

At the start of a PAC meeting in 2009, the president finally seemed to grasp the utter futility of the entire exercise when he told a senior civilian official: ‘You’ll come up with the classic line of defense, which of course you weren’t there, now all it is in order, they have learned their lessons, in the kind of school permanent secretaries learn when they come to this committee. However, I’ve had all of this before and frankly I don’t know if there’s any point in continuing. But they continued with the charade. At the end of the meeting, the president summed up: ‘Clearly this project was poorly managed, poor value for money, many of the causes of the delays and cost overruns could have been avoided. I could make a big eloquent statement about how we never expect this to happen again in the Civil Service, but I suspect I’d be wasting my breath.”