If you cut Sir Humphrey, does he not bleed?

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'T HE OWL of Minerva flies at dusk.' Thus William Waldegrave, Cabinet intellectual, High Tory and reformer of the Civil Service, in a recent speech on public service in Britain. No one had the faintest clue what he was on about: everyone instinctively recognised, however, that it was a wise and timely observation. For the fellow has a reputation. He is that rare bird, a Conservative intellectual in power.

There is no minister who has pondered more deeply the difficulties of reconciling Thatcherite reform with Our Ancient Institutions. Emotionally loyal to the Old Britain of Monarchy, gaiters and Peregrine Worsthorne, he was cerebrally converted to the New Britain of management accountants, techno-babble and Andrew Neil. Like all true Tories, he believes that to save the nation from the clutches of radicals, Conservatives must be reformers, so the two Britains need not be enemies.

Yesterday, we saw the fruit of his lobes. The task in hand has been reforming the top of the Civil Service - or, in the view of Mr Waldegrave's critics, saving Whitehall by wrecking it. The minister thinks he can preserve all that was good about the culture of Victorian bureaucracy - the integrity, impartiality, puritanical sense of public good - while introducing tougher contracts, more competition for jobs, performance- related pay, and so on.

This may look possible on paper but, as the BBC has discovered, cultures are delicate things. Humans encouraged to judge themselves one way quickly adapt, but in doing so, they change too. How, therefore, was Mr Waldegrave going to keep the Civil Service the same, while radically changing its culture? The answer, it turns out, is that he divides the head, the 3,500 brainy mandarins, from the plebeian body. The 'Senior Civil Service' - the chaps and chapesses ministers rely on so heavily - are largely protected while the rest continue to face more competition, less security and lower pay.

Take, for example, the ever-sensitive question of advertising the jobs of the top mandarins outside the Civil Service. The White Paper is nothing short of hilarious: departments and agencies 'will always consider advising opening posts when a vacancy occurs, and then will use open competition whenever it is necessary and justifiable . . .'. More weasel-words than in the Wild Wood.

The Senior Civil Service will not be subjected to fixed-term contracts for 'the great majority'. There will be individual contracts and fewer grades, but more pay flexibility and 'overlapping pay ranges'. Permanent Secretaries will have their pay determined by a 'remuneration committee' composed largely of outsiders. These will presumably be worldly City types who will recommend large increases, just as they do whenever called upon as non-executive directors in the private sector.

Do you think that, in turn, the business of dishing out Orders and Grand Crosses and knighthoods to senior administrators will cease? Nor do I. Will life in the Senior Civil Service be sweet? Pretty sweet. It would be untrue to say that Sir Humphrey has beaten the coarse types who wanted to apply the efficiency gun in his direction: it is more that he has stuffed them, skewered them and hung them upside down by their initiatives.

What, then, of the rest of the Civil Service, the 530,000 or so who will presumably be thought of as the Junior Civil Service? Here, the signals from the White Paper were confused, but the general trend is clear enough and highly dramatic. 'Market testing' - the jargon for trying to get Civil Service functions put out to private competition, and thus cutting jobs - will continue. It will not, naturally, be applied to the real, 'thinking' mandarins.

Nor is the language on market testing nearly as fierce as it was in the original 1991 White Paper, which insisted that 'few activities cannot (or should not) be subject to market testing, and therefore managers will be required to justify their decision not to market- test activities'. Now, it will be up to the departments and agencies to decide how best to deliver more services for the same money. This looked like a climbdown. In practice it will prove a shrewd way of breaking up much of what is now called the Civil Service. The reason is obvious: from now on, the protected elite of the Senior Civil Service, the managers, will get promotion and pay awards based partly on their success in squeezing the rest of the system. Market testing will represent golden opportunities for the SCS: the interests of the mandarins and of tax-cutting politicians will be identical and will fall heavily on the incomes and security of the lower ranks.

The Civil Service will, in short, start to resemble much more a series of private corporations. There will be less and less fellow feeling between Top Cats and the rest, indeed growing enmity. From the perspective of ministers, nothing will seem to have changed. But away from the centre, the changes will be dramatic. The White Paper states firmly that 'Civil Servants are servants of the Crown' (not, you note, of the people or even the taxpayers - this is a High Tory speaking). But, after this announcement, it is clear that not all servants are equal.

A radical restructuring of the Civil Service is in the wider interests of the country. Private computer companies, legal firms, surveyors, designers and cooks ought to be allowed to see whether they can do the same job more effectively and at a lower cost. The unbundling of the old bureaucracy is inevitable. If we had a Parliament with enough self-respect to demand proper oversight of the new agencies in which 64 per cent of civil servants now work, accountability might even be improved. But what is not tenable is to argue that, somehow, the vast old machine survives, organic, changed-yet-unchanged, like the constitution.

Mr Waldegrave warmly praised the 'Civil Service' yesterday. But that giant community, linked by grades and public codes, that national system which was the post- war Civil Service, is dead. It will be low-paid people well away from Whitehall who suffer the winds of change, and self-congratulatory chaps at the centre who speak the bracing language of adaptation and efficiency. The casualties won't be civil servants in the Sir Humphrey sense, and to that extent the High Tories have successfully defended their own.

But, it is reliably reported, the administrators in Newcastle and Plymouth are civil servants too. They are reported to take some pride in the fact, and indeed to bleed when cut, just like Sir Humphrey. Mr Waldegrave, forced to decide, has proved himself a radical - clever, and ambiguous and elegant, but a radical first. However he has also demonstrated that radicalism - unlike charity - rarely begins at home.