Select Committee on Public Accounts Minutes of Evidence



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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