Examination of witnesses (Questions 1 - 19)
MONDAY 11 MAY 1998
MR JAMIE
MORTIMER, MR
FRANK MARTIN and MISS GILL
NOBLE
Chairman
1. This afternoon we welcome Mr Jamie Mortimer,
Treasury Officer of Accounts, to discuss the Treasury's memorandum
of 31 October on Treasury controls. Perhaps you would like to
start by introducing yourselves, Mr Mortimer, and then I will
kick off with the first question.
(Mr Mortimer) Good afternoon, Chairman. On my
right is Miss Gill Noble who is Deputy Director in the Treasury
Spending Directorate, and on my left is Mr Frank Martin, Second
Treasury Officer of Accounts.
2. Thank you. You are used to the procedure.
Paragraphs 6 and 22 of the Annex to your memorandum contain proposals
to relax the requirements on departments to seek prior Treasury
approval before giving away public assets or increasing contingent
liabilities. Your intention is that this will encourage better
decision making by aligning more closely responsibilities for
decision taking with accountability to Parliament. Surely it is
the case, is it not, that departments have always been accountable
to Parliament for such decisions?
(Mr Mortimer) They are accountable to Parliament
for such decisions, but they have to seek Treasury approval for
those decisions in many cases. What we are saying is that we think
it would be right and sensible to reduce in some cases the requirement
for Treasury approval. They are accountable in the sense that
the accounting officer needs to appear before this Committee and
give an explanation for the decisions taken.
3. So how will you monitor that departments
are using these delegations responsibly?
(Mr Mortimer) It is not the Treasury's role to
police whether all delegations are observed. The National Audit
Office audits the activities of each department and the National
Audit Office can qualify accounts or can comment on accounts if
delegations are not properly observed. In fact, the Treasury gets
a lot of information about departments' activities from all sorts
of sources and this should enable us to get a very good view of
whether departments have got adequate systems, whether they are
taking sensible decisions, whether particular cases that do come
to the Treasury above delegated thresholds are being handled properly.
So the Treasury does get a great deal and would still get a great
deal of information.
4. I have some concerns about the fact that
we are bordering on the line between delegation and abdication
there, but others may wish to come back on that. In paragraph
6 of the Annex to the memorandum you also propose to raise the
threshold for reporting to Parliament individual gifts from £100,000
to £1 million. What are your reasons for that?
(Mr Mortimer) The reason is that, although there
are not many cases of requests for approval that come to the Treasury
each year, the Treasury does not find that it can add any significant
value when requests for approval do come to the Treasury. We think
that it would be sensible, therefore, to increase the threshold
significantly to £1 million. We do accept that there is some
sensitivity in relation to gifts, so we are not suggesting that
the threshold should be higher than that. But we feel that departments
are in a much better position than the Treasury to take into account
all the concerns and come to a sensible judgment.
5. But you are intending that the £100,000
trigger for the totality of gifts will stay in place.
(Mr Mortimer) For the totality of gifts to be
£1 million as well. If the aggregate of gifts exceeds £1
million then the aggregate figure would be recorded and individual
gifts (of which there are hardly any) of over £1 million
would also be reported separately.
6. But there are hardly any under the current
arrangements. My concern is that I am not sure how much you are
going to save by this and in those areas where there exists a
system, whether it is a controlled system. Again I will move on.
Others may take that up. What advantages do you see in the proposals
(in Part II of the Annex to the memorandum) for taking the Treasury
out of the loop that applies to this Committee's reports?
(Mr Mortimer) We think that departments are in
a better position, to draft responses to Treasury minutes[2]
so that, if anything, they will take their obligations a little
more seriously. I think they already take them very seriously.
In many cases the Treasury cannot add a great deal of value to
the quality of departmental responses. I should emphasise that
we are not abdicating a Treasury interest. The Treasury remains
very interested in what departments have to say in Treasury minutes.
We will certainly provide guidance on how PAC recommendations
should be dealt with. Many of the issues that arise in PAC reports
concern important systems issues and have wider implications for
other departments and the Treasury would want to retain an interest
in how departments respond. We do not see that the Treasury really
has a role in checking all the nitty-gritty, checking every single
paragraph, checking the precise drafting. We think that that could
be better done by departments.
7. The first two questions I put to you
were more important in principle than in magnitude. This one worries
me seriously. I am concerned about implications for follow up,
for monitoring, issues which this Committee has already identified
as being weak in the current system. Do you not see that this
could lead to a further weakening of what already is the weakest
part of the current system?
(Mr Mortimer) I am not convinced that that would
be the case, Chairman. If it was clear to departments that their
reports were being produced by them alone then I think they may,
if anything, take greater care about the responses they made to
specific recommendations and ensure that they were followed up.
I should say that the Treasury shares your concerns about follow
up. So by suggesting that the Treasury would not present Treasury
minutes we are not saying we are not interested in these things.
We are interested in the follow up and we are keen that departments
address your concerns carefully.
8. I do have serious concerns on that point.
I am quite sure others will want to follow on from it. What are
the implications of these proposals for the Treasury's central
responsibility for financial relations with Parliament, and for
your role in particular as Treasury Officer of Accounts? Do they
mean, for example, that you are going to have fewer resources
in future?
(Mr Mortimer) These proposals, if accepted, would
not make a great deal of difference to staffing requirements in
the Treasury. The effect on staffing would be marginal. I am talking
of no more than, say, a handful of person years, if that, but
what it would mean is that the Treasury would be able to focus
more effectively on strategic control, and by strategic control
I mean the things that are relevant to the Treasury's objectives
in terms of controlling aggregate spending, improving value for
money, and securing high standards of propriety, regularity and
accountability. I think to a large extent these Treasury objectives
are shared by Parliament, so in doing our job a little more effectively
and focusing on the key points I hope we will be protecting Parliament's
interests as well. I do accept that some of the controls that
are in place are carried out on behalf of Parliament. For example,
there are many hundreds of requirements for Treasury approval
or consent set out in legislation and those will remain. We cannot
change those without changing the legislation. The Treasury presents
Estimates which is a basic parliamentary requirement. That will
continue in place. There are many other controls as well which
we will be observing, and helping, having proper regard for Parliament's
concerns and interests. The key motivator behind this is really
the need for the Treasury to do its job a little more effectively.
It will not make a radical difference, but we think it will be
helpful and it will allow us to concentrate on what is important.
Chairman: Mr Mortimer,
it does strike me that all of your responsibilities devolve from
the interests of the taxpayer and the primary representative of
the taxpayer is Parliament and through it the PAC. Let us widen
out the questioning. Miss Jane Griffiths?
Jane Griffiths
9. Will this more hands-off approach from
the Treasury lead to better decision making and better accountability
in the departments?
(Mr Mortimer) We think it will lead to better
decision making because it will align more closely responsibility
and accountability. We do get fairly nitty-gritty questions coming
to us very often where the department just has not thought through
the issues, has not prepared the papers properly, has not read
the guidance, has not consulted its experts and they send the
questions to the Treasury rather in the hope that the Treasury
will sort out the issues and deal with them. We think that if
responsibility clearly lies with the department then they will
actually take more care in the way they handle fairly small issues,
which is what we are talking about here, and that will lead to
better decision making.
10. Let me just pursue that a little bit
more. If there is now a trend within departments for them sometimes
not to prepare themselves very well and to try to shuffle off
that responsibility on to the Treasury from time to time, how
do you believe departments will prepare themselves better from
now on if under the current set-up they do not?
(Mr Mortimer) For example, they may introduce
more effective systems for handling cases. If you take, for example,
losses and special payments in the Health Service, we have given
the department unlimited delegation in respect of most losses
and special payments except for medical negligence cases, but
it is on condition that they have effective systems, that they
have good guidance, that senior management are involved in decisions
about losses and special payments, that there is a proper reporting
procedure, that there is a report prepared annually and the report
is submitted to the Treasury, that there are little action check-lists
so that if someone wants to write off more than £1,000 they
have got to check that they have carried out various checks and
passed various tests. So by encouraging departments to address
these issues themselves properly and effectively through the ways
I was just describing I think that should lead to better decision
making.
11. It does seem to me a little bit worrying
that we are being told we have to hope that departments will sort
themselves out, but for the time being let us hope that they do.
Let me pick up, also, under the proposed changes the point about
individual gifts for the threshold to be raised from £100,000
to £1 million. You said in earlier replies that the number
of individual gifts over £1 million would be negligible and
I can accept that, but what impact do you think this proposal
will have on the number of gifts reported to Parliament?
(Mr Mortimer) The number of gifts separately identified
and reported to Parliament is very small. We looked at the appropriation
accounts for three years and we could only find four gifts reported
to Parliament, only one of which was over £1 million. Therefore,
on that basis it would make a very small difference to the number
of gifts separately reported. There are a lot of gifts made each
year, but if they are under £100,000 then they are not separately
identified.
12. So there is not a problem at the moment?
(Mr Mortimer) I am not saying that there is not
a problem. What I am saying is that the Treasury does not feel
that it adds a great deal of value by second-guessing departments
in cases of gifts and that there will be a small improvement in
decision making and in the way the Treasury goes about its work
if the threshold was to be raised significantly.
(Mr Martin) There is still also a considerable
amount of visibility to Parliament through the fact that the value
of all the gifts will be noted in the accounts and will be open
to scrutiny by the Comptroller & Auditor General and if he
sees it necessary he will report to Parliament. So this change
does not alter the final visibility of gifts to Parliament.
13. Under the proposed arrangements whose
responsibility will it be to ensure that the Government's responses
to this Committee are produced in a timely fashion?
(Mr Mortimer) If you accept our proposals the
responsibility would lie on the shoulders of departments. They
already have this responsibility, of course, in respect of replies
to recommendations from departmental Select Committees and we
believe that they are capable of fulfilling their obligations
in respect of the PAC as well.
14. So you believe that they are capable
of fulfilling their obligations.
(Mr Mortimer) And they should do, yes.
15. Clearly they should do, but is there
clear evidence that now they have the systems in place which will
enable them to do that? It is important that this Committee does
get a response.
(Mr Mortimer) There is, for example, guidance
on dealings with Select Committees called the Osmotherley Rules
and this provides very clear advice generally on how departments
should deal with Select Committees. The Treasury also circulates
guidance on how you should respond to recommendations from the
PAC and we would certainly plan to continue producing that guidance
and revising it as necessary.
16. My point was not so much about whether
there is guidance available but if there is reason to believe
that the departments are set up to comply with that guidance.
(Mr Mortimer) Yes, I think they are. I think on
the whole they have a good record in respect of other Select Committees
and they have a clear responsibility, to follow the guidance and
I am not aware of any reason why they should fail to meet that
responsibility.
Mr Hope
17. I want to pick up the question of the
arrangements for Treasury minutes. Paragraph 17 of the report
to the PAC lists a number of problems that are going on at the
moment, ie, less scope for the department. You say in your proposal
that you wanted to do X but the Treasury wanted to do Y and so
they ended up doing Z. It also says there will be less scope for
departments to say, "We were not sure whether to do X or
Y so we consulted the Treasury to let them decide" and that
your proposals are designed to try and resolve those problems.
First of all, why do these problems exist at the moment? Why are
your relationships under the current system so poor with the departments
that there seems to be, as you are putting it here, endless muddle
and confusion with people passing the buck between you and the
Treasury?
(Mr Mortimer) I do not think there is any muddle
and confusion.
18. It says it in here. I am quoting your
memorandum to us about the problems going on inside the Treasury
and its relationships with departments at the moment.
(Mr Mortimer) I do not think there is endless
confusion, but there are cases where the department do not take
their decision making responsibilities as well as they should.
As I tried to explain earlier, we think that if they had clear
responsibility they would address the issues rather more carefully.
I could give examples of the sort of issue that does arise and
where we think that there is to-ing and fro-ing between the Treasury
and the department, which is unnecessary, very often on relatively
minor matters, where not much money is involved, and where the
department is in a better position than the Treasury to form a
judgement on the issue.
19. So in effect you are telling us that
we have sloppy departments and you do not want to be the fall-guy
any more for their sloppiness. Why does your withdrawing your
involvement help sort out sloppy departmentalism?
(Mr Mortimer) I am not trying to argue that there
is general sloppiness. I am arguing, however, that there are cases
where decisions are not taken properly. If departments know that
they have sole responsibility for taking a decision I think they
will be more careful in examining the issues, reading the guidance,
getting the appropriate specialist advice and then coming to a
sensible conclusion.
2 Note by Witness: In fact, the Treasury believe
that departments are in a better position to draft responses to
PAC reports, not Treasury minutes. Back
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