It is well documented that when whistleblowers are not listened to organisations can collapse, livelihoods can be lost, and people can lose their lives. There’s lots of research examining the treatment of whistleblowers when they try to speak up and what employers should do to be better.
But what about the bigger cost to society – and in financial terms – the cost to all of us, the taxpayers, when things go wrong and the government has to step in and pick up the pieces? Our new report – The Cost of Whistleblowing: Assessing the cost of whistleblowing failures to the public purse – does just that.
In the first report of this kind, we’ve examined the cost to the taxpayer from whistleblowing failures across three of the UK’s biggest scandals where a lack of accountability and a failure to listen to whistleblowers have been officially acknowledged. We found that failing to act when whistleblowers spoke up cost the government (at a conservative estimate):
Combined these three scandals alone have so far cost the taxpayer £426 million.
Why this research and why these scandals?
In carrying out this work we wanted to choose three public scandals that demonstrated different funding and structural models. We selected a public sector employer (NHS), a publicly owned butprivately run employer (Post Office) and a private sector employer (Carillion). Each illustrates the scale of the cost of ignoring whistleblowers to the public purse. We could have chosen any number of other cases from the Grenfell Tower fire to the Infected Blood scandal, or indeed the many other scandals that have received less public attention and yet resulted in costs to the taxpayer.
Unavoidable, Avoidable and Fallout Costs: developing a financial model
In calculating the costs of these scandals our approach has been to pick the earliest point that a whistleblower is known to have raised their concern and track costs occurred by both the employer and central government from that point onwards. We have used publicly available data – select committee reports, inquiry reports, media reports – all recording the cost to the public purse from these whistleblowing failures.
From here our financial model groups costs into three cost categories: Unavoidable, Avoidable and Fallout.
Our report has presented very conservative figures. We believe the true costs could be significantly higher. We have chosen not to include the Opportunity Costs of dealing with a whistleblowing scandal by the Government, Parliament or the organisations at the centre of the failure. For example, we have not included the time spent by Ministers and officials responding to debates and questions, nor the time spent by managers inside organisations dealing with the scandals. Nor have we included the costs to other organisations, regulators, accountants and those in supply chains.
Conclusions from the research
The key theme that has emerged from this study is that across all three scandals it has been the taxpayer, in the form of Central Government, that has been left with the financial burden of picking up the pieces when there has been a whistleblowing failure. In the case of both the Post Office Horizon IT and Countess of Chester Hospital scandals, Central Government has borne the brunt of the fallout primarily in the form of compensation schemes and public inquiries. Even though it was a private company, Central Government was also left with massive bills when Carillion collapsed – in the form of finding alternative contracts to complete public sector building work, paying out unemployment benefits for Carillion employees who lost their jobs and part-funding the liquidation costs.
Changes needed
Our report looks at whistleblowing in the wider frame of accountability and public spending. We propose that to limit the costs to the public purse and to learn the lessons from these scandals, the Government should consider a number of reforms including:
A duty on employers to investigate whistleblowing concerns: all three scandals could have been either prevented or the cost severely reduced if concerns had been listened to and acted on. There is no legal duty on employers- outside the financial sector-to have a whistleblowing policy let alone investigate their concerns. This needs to change and we need to expect more of employers in this space. Effective whistleblowing is good for business as well as reducing the burden on the taxpayer.
Expanding the range of people in the workplace who qualify for whistleblowing protection: including sub-postmasters, non-executives, trustees and job applicants so that legal protection is comprehensive. Other countries across Europe have no difficulty in protecting a wider range of whistleblowers.
Whistleblowing champions for all boards: all three scandals highlighted an accountability gap at the top. An ineffective board was asking the wrong questions or being kept in the dark by executives. In the public sector, including the NHS, this should be underpinned by a system where senior managers and directors are held to professional standards, subjected to a fit and proper persons test and banned from holding senior managerial positions where it has been shown they have ignored or victimised a whistleblower.
The Cabinet Office should take the policy lead on whistleblowing: to drive a more strategic and aligned approach which will benefit all departments, sectors and ultimately the public purse.
The importance of strong regulators: there needs to be a consistent approach to how regulators interact with whistleblowers and how they investigate whistleblowing concerns to build confidence and ensure that they act effectively.
Central Government is left to pick up the pieces: Parliament should establish a new committee to track and report on the implementation of recommendations that emerge from public inquiries.