Examination of Witnesses (Questions 60 - 79)
MONDAY 2 MARCH 1998
MR ROBIN
MOUNTFIELD, CB and MR
MICHAEL HERRON
60. But they were, as it happened.
(Mr Mountfield) It was not our belief at that
time that they were substantially too optimistic. Indeed, we believed
that having already been reduced as a result of our efforts to
urge HMSO to be realistic, we believed that they were probably
of the right order. Now, the question of how far problems of accounts
and so on between HMSO divisions impacted on that, our view at
that time was that although numbers were not very reliable, they
were not a major part of a diminution in the value of the business
and indeed that remains our assessment. 10
61. At that time, the time at which you
sent out the Information Memorandum, and after you had become
seriously concerned through your closer contact with the business
about how effective it was being as a business, did you then go
to ministers and suggest that there were serious problems and
suggest that they might like to think again in terms of value
for money? In your position as the accounting officer for the
sale, did you at any point around about this time suggest to ministers
that you were seriously concerned that the sale could go wrong
as a result of the state of the business?
(Mr Mountfield) As I think I said before, I would
regard it as my duty as accounting officer that if I believed
that the course that ministers were set on was clearly worse value
for money than retention then I would have needed to seek an instruction.
The fact that I did not do so you may take as an indication that
I did not believe that that advice was right.
62. But, as it happens, just ten days before
the sale, the business ceased trading effectively.
(Mr Mountfield) No, that is not the position at
all.
63. Sorry, but explain to me what failing
to pay your creditors is if it is not ceasing trading?
(Mr Mountfield) The position was this: that HMSO
operated under the trading fund legislation and had a statutory
limit of £50 million on its borrowing. A significant part
of that had been absorbed earlier in the year by the decision,
as part of the restructuring programme, to have a significant
voluntary redundancy programme. As a result of that, as it went
into one of its worst cashflow periods, and seasonally it was
one of its worst periods, it was approaching the £50 million
limit. At that point, it was clear to us and to the purchaser
that it would not be possible for bills to go on being paid in
the normal course without breaching the £50 million limit.
64. Is that not just like having your bank
say they will not honour your cheques?
(Mr Mountfield) No, it would have been perfectly
possible for us to seek a Treasury agreement to extend the limit.
65. Then why did you not do that?
(Mr Mountfield) Because we negotiated instead
with the purchasers a deal in which --
66. To hand over the rest of the purchase
price.
(Mr Mountfield) --in which we handed over £3.8
million which would have been cash in the business which would
otherwise have reverted to us at the point of sale. The effect
of that, as the NAO Report clearly says, was to yield a £2
million benefit or thereabouts to us because the amount of bills
that they had to settle was greater than the £3.8 million
they would otherwise have had.
67. And just a final point, Mr Mountfield,
and then I will close on this: why on earth did you decide to
sell the business just in the very period of its worst turnover,
the time of the year when it had its worst trading time?
(Mr Mountfield) No, it is only worst in terms
of the short-term working capital requirements. That naturally
fluctuates at various points of the year.
68. If you had sold it at any other time
of the year, you would not have had to hand over £3.8 million.
(Mr Mountfield) I do not think it would have made
any difference.
Mr Leslie
69. Mr Mountfield, it is very difficult
to know where to start because there is such a catalogue of errors
and problems. It seems to me, as Mr Clifton-Brown said earlier,
that it is indeed one of the most outrageous scandals I have certainly
come across since the General Election, a story of what I regard
as poor overall management from the Cabinet Office and a very
lax input, if I might say, from yourselves into the whole running
of the sale process, a botched sale process actually if you look
at how the restructure was supposed to be part of preparing HMSO
for sale. You seem to have, as I regard it, given away quite a
large amount of taxpayers' assets inasmuch as I regard the sale
price you achieved as quite low and, probably most importantly
for today's Committee, you have left the Government, the public
sector with all sorts of problems, all sorts of liabilities that
you have retained. It is a bit of a mess, is it not?
(Mr Mountfield) No, I do not accept that at all.
First of all, on the point of mismanagement, we were not managing
the business, as I have sought to explain. As to the extent to
which we intervened during the sale process, there were a number
of points where we did intervene during the period from the start
of the sale process in late 1995 through to the point of sale.
For example, we reached agreement with HMSO that they would consult
us on all major investments, which they did, so that we could
ensure that their full value, if any did go ahead, would be added
to the sale price. We urged the use of consultants to check that
the methodology in the business plan was right and the effect
of that was to pull down to the level in the Information Memorandum
the forecasts that were put out. We intervened decisively in the
Uzbekistan affair. As soon as that came to our attention, we took
steps to make sure that no further mistakes were made --
70. Can I just as an aside interrupt you
there on the Uzbekistan thing? Where is all this stock, the stationery,
this £5 million? Where is it sitting right now?
(Mr Mountfield) I am afraid I do not know.
71. You still do not know? You still have
not figured it out?
(Mr Mountfield) No. The stock of course was sold
with the business, so I am afraid that is not really my responsibility.
In May and again in July we urged HMSO to use Binder Hamlyn, who
were our Long Form Report advisers, to try and help reconcile
the imbalances which had the effect of reducing the net imbalance
from the very high figures we discussed earlier down to about
£400,000.
72. So you have detailed a variety of different
ways you say in which the Cabinet Office, your Department, have
been intervening, but you say that you were not responsible for
the management of HMSO, but that was your choice, was it not?
(Mr Mountfield) No, so far from being a choice,
it was the formal constitutional position.
73. Yes, but you had determined that constitutional
position. You had decided to give discretionary delegation on
all management matters to the HMSO directly.
(Mr Mountfield) No, that is not a delegation within
our control. This was the formal position which ministers had
decided long since.
74. But it did not have to be like that.
If you had wanted to have carried out a more interventionist operation
within the management of HMSO, you could have done, could you
not?
(Mr Mountfield) The position was quite clear,
that the ordinary management of the business was for the management
of the business to carry out.
75. I realise that, but you could have had
a much greater role than you did.
(Mr Mountfield) It would have been possible for
us to advise ministers to intervene more decisively in the management
of the business, but they took the view no doubt, as we did, that
we were not particularly better qualified to run the business
than the professional managers who were there already.
76. Well, that is the point I want to establish,
that whether it was a ministerial decision or whatever in terms
of the Government and the Cabinet Office's capacity to take part
in the management decisions going on in terms of control, planning,
systems and so on, you could have had a greater role, but you
chose not to.
(Mr Mountfield) No, it was the ministers who decided
that they would leave the management with the management.
77. But if the decision had gone the other
way, that would not have necessarily been the case?
(Mr Mountfield) Obviously we would have done whatever
ministers wished us to do.
78. So if you had wanted to have appointed
new managers to give a fresh external slant on the way that the
business was being managed, if you had wanted to have appointed
corporate doctors for all sorts of other ways of looking at beefing
up the whole restructuring process which was much more efficient
and effective, you could have done that, could you not?
(Mr Mountfield) No, I think the position is that
it would have been ministers who would have had to do that.
79. Yes, but when I say "you",
I am talking about you as the Cabinet Office, ministers, civil
servants, whoever, but the Government could have had a go at it.
(Mr Mountfield) Well, I have to draw a rather
sharp distinction between my responsibilities as an official and
those of ministers.
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