Rishi Sunak has sought to galvanise his government’s growth plan by breaking up its business department, despite warnings that the shake-up could prove a costly distraction.
Sunak used a reshuffle to fill the vacant post of Conservative party chair and to carry out major Whitehall surgery, creating three new departments to put a new emphasis on energy security and efforts to turn Britain into a “science superpower”.
“This is a massive reorganisation of government,” said Hannah White, director of the Institute for Government. She added that the Whitehall shake-up would eventually bring focus to priority areas but could cost “well over £100mn” and take years to bed in.
Downing Street declined to say how much it thought the overhaul would cost. But it said the changes would “ensure the right skills and teams” to focus on the prime minister’s promises to halve inflation, expand the economy, reduce debt, cut NHS waiting lists and crack down on illegal immigration.
The government is seeking to make up a 20-point deficit in the polls to the opposition Labour party at a time when the economy is expected to head into recession, with families facing the biggest drop in living standards for decades.
Liz Truss, former prime minister, this week urged Sunak to do more to boost the UK economy, including through deregulation and tax cuts, while Tory MPs and business leaders have called for a clearer growth strategy.
But Whitehall veterans are often sceptical about alterations to the “machinery of government”, warning that in the short term they tend to cause disruption and uncertainty among policymakers.
At the centre of the changes, Sunak broke up the Department for Business, Energy and Industrial Strategy (BEIS) — the subject of repeated Whitehall reorganisations — as he reconfigured his cabinet to focus on his political priorities.
In his first reshuffle since becoming prime minister in October last year, Sunak appointed Greg Hands, trade minister, to replace Nadhim Zahawi, who was sacked as Tory party chair last month, with a remit to prepare for an expected election next year.
Grant Shapps, previously business secretary, will head a new Department for Energy Security and Net Zero, a ministry charged with boosting Britain’s energy supplies and its transition away from fossil fuels.
Michelle Donelan, former culture secretary, will head a new science, innovation and technology department, combining the digital responsibilities of her old department with the science portfolio of BEIS.
Michael Gove, the levelling-up secretary, was “sounded out” about whether he would like to take the science job but decided to stay in his current role, according to government insiders.
The remainder of BEIS will be merged with Kemi Badenoch’s Department for International Trade to become the business and trade department.
Lucy Frazer, who was housing minister, will run a “refocused” Department for Culture, Media and Sport, which will lose its tech responsibilities, with a remit to “build on the UK’s position as a global leader in the creative arts”.
Tony Danker, head of the CBI employers’ group, said he “liked” the changes to the government’s structure. “It’s a clear statement of intent and a couple of big bets for growth,” he said.
But some business groups expressed concerns about the spread of linked policy areas — for example regulation, new energy technology and science — across three separate departments.
Downing Street confirmed that while Sunak wanted to focus on “innovation”, it wanted to “move on” from the “industrial strategy” adopted by Theresa May’s government six years ago.
Successive prime ministers have attempted to redesign the business department to reflect their own priorities. In 2016, it became BEIS under May’s government, to incorporate industrial strategy.
But in 2021, Kwasi Kwarteng, then business secretary, scrapped the government’s industrial strategy, saying that it was a “pudding without a theme”.
Badenoch’s new business and trade department is charged with “promoting investment and championing free trade”, taking on the duty of export promotion and trying to secure post-Brexit trade deals.
The dedicated Department for Science, Innovation and Technology has been charged by Sunak with “turning scientific and technical innovations into practical, applicable solutions” and “making sure the UK is the most innovative economy in the world”.
Ed Miliband, Labour’s shadow energy secretary, said: “Seven years after the disastrous decision to abolish the Department of Energy, the Conservatives now admit they got it wrong. Rearranging the deckchairs on the sinking Titanic of failed Conservative energy policy will not rescue the country.”