Examination of witnesses (Questions 20 - 39)
MONDAY 11 MAY 1998
MR JAMIE
MORTIMER, MR
FRANK MARTIN and MISS GILL
NOBLE
20. Are you saying there
is or there is not a problem in departments about the nature of
their decision making accounting possibility?
(Mr Mortimer) There is sometimes, yes.
(Mr Martin) The problem is often newness in an
individual situation rather than sloppiness. It is in that sort
of situation that getting their act together is necessary. It
is very often in a situation where we actually will tell one person
in one department who in that department they need to speak to.
21. I understand that departments are not
getting their act together. I do not mind which words we use.
I am pretty clear that you are telling us that at the moment there
is a lack of clarity, a lack of accountability, people bounding
things between departments, although it is not all the time, it
is not systematic, but it is happening occasionally. Can you explain
why your withdrawal from this process is going to stop them doing
that? You say you are responsible and that there are flaws that
will simply be even less visible to us than they are at the moment
with your involvement.
(Mr Mortimer) Perhaps I can give an example involving
Highlands & Highlands Enterprise who had made some grants
and loans to a company that had gone bust. They wanted to write
off these payments and so came to the Treasury, but because they
knew Treasury approval was required in this case they had not
attempted to analyse the issues, they had not looked at Government
Accounting, they did not provide information on the timing of
the grants and the loans, they did not provide information on
what was known about the company.
22. They were sloppy.
(Mr Mortimer) That is right. If they knew that
they had to take that decision for themselves they would have
approached us, I feel quite confident——
23. That is my challenge to you, your confidence
there. I cannot see any evidence why you would feel confident
that your lack of involvement will improve their performance.
Can you explain why you not being there improves their performance?
I understand that you feel while you are there it allows them
to have poor performance.
(Mr Mortimer) At present they will feel that,
because they need Treasury approval, the Treasury in a sense might
do their job for them, the Treasury will sort out the issues.
24. Is that not about your performance?
If you see a government department behaving sloppily and coming
to you for all their solutions when they should be solving it
for themselves, why do you not just tell them this?
(Mr Mortimer) We do tell them that. But we also
need to give approval, so we need to be involved to a certain
extent at present.
25. I understand your feeling about that
and you have told us you are confident, but there are no concrete
proposals in here that would ensure that those departments would
become any more efficient and effective in doing what they are
supposed to be doing. I am worried that in effect what you are
doing is abdicating your control in that regard and leaving those
departments to be sloppy. I cannot see where your withdrawal puts
in place any alternative to improve their performance.
(Mr Mortimer) I did try and explain earlier to
Miss Griffiths that one way that we can help is by imposing conditions
about the need to have proper systems in place and I described
all the systems that had been introduced in agreement with the
Treasury to improve arrangements for write-offs of losses in special
departments, eg, in the Department of Health.
26. There are plenty of conditions there
at the moment. It is the fact that you approve their finances
that actually forces them to do what they are supposed to do.
My worry is that providing guidelines and instructions obviously
does not work, otherwise we would not have all these problems
that are going on at the moment. It is only coming to light because
you are forced as Treasury to sign off their accounts. Surely
the crucial part of the accountability is that you are going to
be leaving the system even more open to more sloppiness and more
things going wrong. Can you see the point I am trying to make?
(Mr Martin) Jamie has also emphasised that we
do not simply leave departments in the process of delegation and
I suggest that you are partly arguing against any delegation.
We actually do go out to the department and help them to build
up the necessary systems so that they can handle these areas satisfactorily
without our involvement. We will also monitor how they handle
these types of issues. For example, we might require an annual
report of all the cases that they have handled under their delegated
authority and we then sample check them and if we see problems
we will then help the department to improve.
27. I fully understand the point about delegation.
I think the more we can maximise delegation so that people have
control and ownership and accountability for their areas of responsibility
the better, but by taking yourselves out of the loop it feels
to me as if the PAC, on behalf of the taxpayer, are similarly
taken out of the loop, out of the accountability, so that in effect
the department will carry on doing its work for good or ill, depending
on how it is going, using your guidelines and instructions but
without needing to finally get the approval from you and that
final approval under any delegated system ensures that the delegation
is exercised, not improperly exercised.
(Mr Mortimer) I think it is fair to say that as
time has gone on the Treasury has attached more importance to
the value of adequate and proper systems in departments in all
sorts of areas. We are looking at capital projects for making
losses in special payments and we believe that in general this
is a better way of improving decision making, making sure that
departments follow good systems of procedure than requiring Treasury
approval in very small cases.
28. My worry about your presentation is
it is about belief and confidence and faith that this will happen.
I can see no mechanisms to ensure it will happen. One of the mechanisms
we do have to exposing any bad practice is being removed and I
do not see anything in its place that will ensure that those departments
act in accordance——
(Mr Martin) May I suggest to you that the route
through which the Committee learns of departments not doing things
effectively is not through the Treasury's operation of its delegated
authorities, it is through the operation of the Comptroller &
Auditor General and his reports to you. None of our proposals
will in any way reduce the visibility on these matters for the
Comptroller & Auditor General to investigate and report.
29. So in reality what you are doing is
passing over your responsibilities to the National Audit Office?
(Mr Martin) No, those responsibilities have always
been with the Comptroller & Auditor General.
30. So you are saying that the performance
of those departments matching those responsibilities is down to
the trawling of the Comptroller & Auditor General across departments.
The difficulty is that is not systemic, it can never be so. It
is always going to be a dipstick approach. I am worried that you
are taking out of the system the systematic and thorough going
accountability of the departments to the public via the Treasury
and just handing it over to the Comptroller & Auditor General
and I do not think it is his job.
(Mr Martin) Perhaps you could ask him!
Mr Leslie
31. I would like to follow those points
up because it seemed from what you were saying earlier that Parliament
becomes aware of any issues through the National Audit Office,
the C&AG and that things do not really change, but what we
are talking about is not the punitive reaction to any wrongdoing
within public accounts, we are talking about mechanisms to prevent
things going wrong in the first place and that is what I think
we are concerned may be going wrong. It is not for the C&AG
to run those particular aspects of government, it is for the existing
regulations as in the Treasury to prevent difficulties arising.
I want to pick up a few things because I am looking at your initial
memorandum to us which I have got listed as PAC35 and, first of
all, gifts. I am not quite sure why you feel the current regulations
are such a burden on the Treasury. You say that only four gifts
over £100,000 have occurred, you think, since 1993, but then
you say in the report, page 4, that "No central record is
kept of the number of gifts for which Treasury approval is requested."
Can you tell me why you do not keep any central record and, if
you do not keep any central record, how do you know that there
is not a big problem?
(Mr Mortimer) The appropriation accounts over
three years showed these four cases. Those were the cases in the
appropriation accounts. We do not keep a central record in the
Treasury of all the casework dealt with by all the separate teams.
32. Why not?
(Mr Mortimer) We have never found that keeping
such a record would really help us do our work. Within my own
team in TOA we are trying, now that we have got fully computerised,
to develop a precedents database, but we have not felt that a
full system recording all the casework would add significant value.
33. So how can you with impunity say that
we do not need this rule at all if you do not have any record
of the number of times that it is triggered?
(Mr Mortimer) We know roughly how often we are
asked for advice on gifts, which is possibly a dozen cases a year.
We do know how many gifts there are over £100,000 because
those are reported in the appropriation accounts and that is audited
and we know that there may be one a year.
34. Can you give us an assurance that you
will actually look at making a record of the number of times you
are (a) consulted, and (b) any regulations are breached?
(Mr Mortimer) If our recommendation is accepted
then the Treasury would not be providing approval for gifts. We
will be consulted and we are happy to continue to provide advice
to departments on all these issues, but the requirement for Treasury
approval would not arise at all. As I said right at the beginning,
I accept that these changes would not make an awful lot of difference
to the workload of the Treasury.
35. So why change them? It seems the safeguard
that is there we are changing for no obvious reason. Can I just
move on to something else on page 12, matters which you wish to
notify the Committee on Public Accounts on, staff benefits in
particular. The current arrangement is "Treasury approval
is required for expenditure on certain categories of staff benefits—chiefly
where there is uncertainty as to whether any such expenditure
would be considered by Parliament as an appropriate use of public
funds." What are you proposing to do? Further down here you
are proposing to delegate this to those individual departments.
(Mr Mortimer) Let me say, first of all, that
this is not about pay related benefits in kind because those are
already the responsibility of the OPS. So things like arrangements
for car schemes or whatever is the policy responsibility of the
OPS. What this is mainly about is the provision of staff benefits
such as the provision of sports facilities. We have produced clear
guidance on the rules that should be followed if a department
is considering introducing staff benefits of that nature and we
would propose that they would no longer have to come to the Treasury
for specific approval if, for example, they wanted to spend money
on sports or recreational facilities providing, of course, that
they were conforming with the guidance.
36. This is where I am getting a bit confused.
In the Comptroller & Auditor General's memorandum, PAC198,
p10, it says, "The Treasury are not proposing to change the
nature of this control but to transfer responsibility for its
operation in respect of the Civil Service to the Office of Public
Service," yet I have looked at the Treasury's memorandum
and they say that it therefore intends to delegate the responsibility
for deciding whether to approve expenditure on staff benefits
to the departments. Which is it? I cannot quite follow. There
is a bit of confusion as to who is going to take over this job.
(Mr Mortimer) I think the confusion arises in
respect of pay related staff benefits where responsibility now
lies with the OPS. It used to lie with the Treasury. If we leave
those on one side and we deal with other sorts of staff benefits,
then responsibility is being transferred from the Treasury to
departments.
37. I need to then ask the C&AG why
it says here that responsibility for the operation of this rule
is going to the OPS. It does not talk about individual departments.
Do you feel content with the nature of this change in terms of
the clarity about who is going to be responsible?
(Miss Mawhood) I think the reference on the staff
benefits was to the point that Jamie was making, which was that
responsibility for pay was transferred to the OPS. On the issue
about transferring these responsibilities to relevant departments,
I think we felt content with that as a sensible way forward.
38. That was not clear in the way I read
the memorandum. Can I move on very quickly to single tendering,
which I think is page 13 of the Treasury memorandum. Obviously
you two gentlemen have been here at many of our sessions where
we have had several occasions of various departments or public
bodies issuing and awarding contracts without competition sometimes
in very dubious circumstances indeed. I am very worried by the
fact that there is already a lot of slackness in the public sector
with regard to single tendering. Are we not possibly looking to
see that weakened further by this proposal?
(Mr Mortimer) The proposal here is to drop the
requirement for consulting the Treasury if a decision to let a
contract without competition appears to raise important issues
of principle which could affect purchasing policy generally. In
fact, departments do not tend to consult us on that point. We
feel that this is a rather unnecessary requirement. I quite agree,
I have listened to various cases where departments should have
had a competition. The Treasury advocates the importance of competition
in all its guidance. It is one of the most important sentences
in the Government Accounting chapter on purchasing. Our purchasing
teams advise going to competition as well. But at the end of the
day our purchasing policy relies very much on departments having
ultimate responsibility and accounting officers having ultimate
responsibility for their purchasing decisions.
(Mr Martin) Can I just add one point. In fact,
in terms of the totality of Government purchasing, the occasions
on which single tender action are used are infinitesimal, they
are very, very small indeed. There are very few occasions. That
is primarily because of the European Community regulations governing
competition which put very, very tight constraints on the use
of what is called negotiated award of contract. There are very
few occasions when single tender action is used.
39. We still see quite a few of them. What
I am concerned about, as you said, is there is a rule in place,
the departments do not bother consulting or letting us know right
now and, therefore, that rule is unnecessary. Why are they not
abiding by that rule?
(Mr Martin) What they have not consulted us on
is a particular aspect of the rule about cases where letting the
contract without competition appears to raise important issues
of principle which could affect purchasing policy generally. It
is that area that they have not consulted us on. Under various
delegated authorities agreed with individual departments they
will consult the Treasury on a request to act by single tender
action. It is this particular aspect of the rule that we want
to change.
Mr Leslie: But if
departments do not do these things it appears that the rule is
unnecessary.
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