Examination of witnesses (Questions 60 - 79)
MONDAY 11 MAY 1998
MR JAMIE
MORTIMER, MR
FRANK MARTIN and MISS GILL
NOBLE
60. Do you think that it
would be a good idea to charge service departments for your services?
(Miss Noble) I think it is more important that
the departments have the resources they need and we stick to our
respective bits of business and our roles are properly delineated.
If you think of that, then I do not think it would be reasonable
for us to charge for dealing, as it were, with the other half
of a query.
61. On the smaller items that we have been
talking about, on gifts, can you just give me an example of the
sorts of gifts we are looking at, of £100,000 or £1
million? What are we actually talking about?
(Mr Mortimer) In the three years we looked at
there were four gifts of over £100,000. They are described
in the footnote of the NAO paper, if I can find that.
(Miss Noble) One was biscuits.
(Mr Mortimer) Two gifts involving the Ministry
of Defence.
62. What were the gifts, do you know?
(Mr Mortimer) One was for £264,000 in respect
of the permanent loan of vintage aircraft to the RAF Museum and
another of £401,000 for a gift of stores and equipment to
the Government of Belize. There were two gifts from the Ministry
of Agriculture to UK aid organisations of surplus stocks of emergency
biscuits valued at £1.4 million and £400,000.
63. Have you any idea how much these changes
will cost the NAO in management time and are you thinking of compensatory
gifts yourself?
(Mr Mortimer) I do not see that they should lead
to any increase in management time in the NAO. The NAO, as auditors,
will be auditing these transactions whether Treasury approval
is given or not.
64. Can I ask you about the Minutes briefly.
Obviously the change to the Minutes enables the Financial Secretary
not to have responsibility so directly for these accounts and
indeed the departments do not have to worry about her looking
over their shoulder, but do you really think that change leads
to more accountability? It seems self-evidently that it will lead
to less accountability.
(Mr Mortimer) I think it will lead to better accountability
because it will be the people who are responsible in the area
concerned giving an account of what happened and how they respond
to PAC recommendations. I should say it is very difficult for
the FST herself, the Financial Secretary, to intervene. I know
she has very conscientiously looked through these Minutes and
she takes this responsibility very carefully. She is, of course,
very conscious that she responds for the Government in the annual
PAC debate but I have to say it is quite difficult for her to
make major changes when they are submitted to her for approval
at a fairly late date.
Mr Davies: Thank you.
Mr Wardle
65. I apologise for being late but I would
not have missed this for all the world. Mr Mortimer, I can recall
back in the autumn coming to the Treasury, listening attentively
to your helpful briefing, and I remember that you slipped into
that briefing a warning really that it would be counterproductive
to be in the slightest bit tough on the Permanent Secretaries,
the high paid senior civil servants, who came before this Committee
of elected representatives. You will recall the exchange. Whilst
I agree with you that there should be no discourtesy I think you
are going to find out this afternoon that I do not think tough
is misplaced. Can you tell the Committee and everybody here why
you think that MPs should hold back in view of the kinds of horror
stories that this Committee has seen since you offered that piece
of advice? Start with the Foreign Office, for example. Look back
at Oman/Jordan revisited. Look at the situation where we had a
financial officer, a senior civil servant, a rising star in the
Foreign office, who turned out to have had a couple of weeks training
in accountancy but was a good chap on his way up in general management
who was put in charge of these things. If I had not pressed these
points, or colleagues had not pressed these points, would we have
found out? I do not want to take all the time on this but as it
is my first opportunity, Mr Mortimer, for me to challenge you,
what is your answer?
(Mr Mortimer) It is obviously for the Committee
to decide what comments it wishes to make. It is quite right,
absolutely right, when there are cases of bad administration that
this Committee should be critical.
66. Then why did you offer the advice that
you did, trying to soften life up for the senior civil servants
coming in front of us, or have I missed the point?
(Mr Mortimer) I think I was picking up a point
that the Chairman made in the PAC debate that he wanted to congratulate
where things had gone well as well as criticise where things went
badly. I think the argument was that if one appears in that sense
to be even-handed then when the Committee does criticise——
67. So you were reinforcing where I think
the Chairman is pretty good at standing up in the House of Commons
and saying what he thinks, you were just reinforcing, were you?
I will tell you the problem with that in the light of your comments.
The problem with that is the kinds of horror stories we see in
front of us—I have no doubt there are thousands and thousands
of instances of wonderful work, and I mean it, I am not being
the slightest bit facetious about this, I mean excellent work
done for Great Britain plc by its government departments—tend
not to be what comes before this Committee. Would you agree with
that?
(Mr Mortimer) Absolutely.
68. Good, thank you. I would like to follow
on the theme when I rudely arrived so late that I heard Mr Hope
pursuing. You see, if you were a plc instead of the Treasury I
think you would have shareholders on your back in next to no time.
Do you see the Treasury in the role of banker or do you see the
Treasury in the rule of finance director and accounts department?
The NAO is undoubtedly the auditor, we know that, there is no
difficulty with nomenclature there. What do you actually see the
role of the Treasury as being in dealing with Government departments?
(Mr Mortimer) It is fairly similar, as I understand
it, I have not worked in the private sector——
69. I know.
(Mr Mortimer)——to a finance department.
Our role is summarised by the three key Treasury objectives in
relation to public expenditure which are to maintain firm control
of the aggregates, i.e. control the level of public expenditure,
promote value for money in the way public services are provided
and also to promote high standards of propriety, regularity and
accountability.
70. All worthy and I think very important.
The flaw in all of that is if you fall down on that task, whether
the world notices or not, the Government of the day can turn to
the taxpayer and say "we would like some more" or you
can take whatever the Government of the day has decreed should
be coming in so there is an endless supply of cash coming in to
yourselves. That being the case, how do you suppose in management
terms you can set out to meet the objectives that you have just
described?
(Mr Mortimer) The tools that we use vary according
to the three objectives. I can describe all of those in terms
of control, value for money.
71. No need.
(Mr Mortimer) The whole genesis of this exercise
is to consider how we can achieve those objectives most effectively.
72. But actually what Miss Noble told us
was that you were introducing these changes here in order to free
up more time because you are under time pressure. I do not always
agree with my Committee colleague, Mr Davies, I can tell you,
but I do agree with him that you ought to start thinking carefully,
as many large and smaller private companies do, to start charging
a fee for your services. Apart from anything else, it is the best
way of making you justify what you do. I will tell you what I
think is deeply unsound, and that is before resource accounting
comes in to say to people "we will change the rules on contingent
liabilities now". Why on earth do you do that before you
have got a balance sheet that the whole world can at look for
each Government department? Or to say "we will shift the
pressure on losses and special payments"? The moment you
ignore—— This is the management instant where in your
distinguished career neither you nor Mr Martin nor Miss Noble,
three distinguished careers, none of you have ever been at work,
been responsible for creating wealth and meeting people's payroll
through dint of your own efforts; the taxpayer will provide. Bearing
that in mind do you not understand at least that if you are going
to say to people "We will raise the thresholds. We will leave
the accounting officer to handle the smaller issues", that
all you are really doing is relaxing the management controls.
After all, the accounting officer is the chief executive of the
subsidiary of the government department, he has got virtually
no training in financial matters and his key man has had perhaps
two weeks of training. What would happen if BP ran its accounts
department on that sort of basis? Why do you think all these accounting
institutes put people through years of training when generalists
in the Treasury and elsewhere say "We can do it. We have
had a little experience. We have read the manual"? What is
the answer, Mr Mortimer?
(Mr Mortimer) We only have very limited resources
in the Treasury and we are considering how we can employ those
resources most effectively. For example, I mentioned earlier that
one of the things we do is try to make sure that departments have
good systems in place. This may mean proper systems for investment
appraisal.
73. Who is judging those systems?
(Mr Mortimer) In the case of investment appraisal,
for example, there is Treasury guidance, the Green Book prepared
by Treasury economists primarily.
74. Economists?
(Mr Mortimer) Yes.
75. You were an economist, were you not?
Thank you, that is helpful. I have nearly made all the points
that I want to, Mr Chairman. Would you not agree, Mr Mortimer,
that one way to save money for the Treasury, and therefore for
the taxpayer, and to improve accountability and competitiveness
and all those other things that you have spoken about this afternoon
would be to insist that the line management in Government departments
includes people with proper real world financial control? Is the
other side of that point not the fact that if you do not do that,
and in fact if you raise the threshold beyond which you do not
look at the little weaknesses in the system, then the system is
likely to get weaker rather than stronger?
(Mr Mortimer) I accept the thrust of what you
are saying, that you need people who are properly experienced
and properly trained. A lot of our guidance emphasises these points.
I should say, partly at the instigation of this Committee, we
have strengthened what we say for example in letters of appointment
to accounting officers on the importance of having proper financial
training.
Mr Wardle: Thank you. Chairman, may I just add a word. Thank you, Mr Mortimer, for dealing
with "tough" so evenhandedly.
Mr Page
76. I would like to follow on from the main
thrust of Mr Hope's questioning to you. I can quite clearly see
why you would like to see responsibility devolved down to those
departments to make sure that they come along and they tick the
appropriate box on their checklist before they come and approach
you and thus avoid all these unnecessary approaches. My experience,
and I agree it is not that comprehensive, is that officials usually
ask the Treasury when they cannot see clearly that it falls into
the yes or no box. My first question to you is have you held any
analysis of the approaches made to you and in how many you say
"yes, you can go ahead" and in how many you say "no,
you cannot"?
(Mr Mortimer) To the best of my knowledge we have
not done such an analysis but virtually all the cases evolve when
people come to us for advice. We try to develop a view and understanding
of the issues, so sometimes it is not quite as cut and dried as
that[4].
You get a dialogue and you try and think what is the appropriate
way of handling the case.
77. Mr Mortimer, if I can delicately put
it to you, I think I will not say you shot your argument down
but I think you have made quite a sizeable gap in it because you
do not know, from what you have just replied to me, when the department
officials approach you whether it is a try-on, whether it is laziness
or whether it is ignorance.
(Mr Mortimer) In the first instance when they
approach us that is true. We do not know whether they have thoroughly
considered the issues, so we can handle it very quickly, whether
they are confused, whether they have read the guidance or whatever.
I should say, we see it as an important part of our job to provide
help and guidance when there is a genuine lack of clarity.
78. Fine. You have moved slightly when you
say when they first approach you, but after you have gone through
it all is your view that the departments are trying it on, is
it ignorance or is it laziness?
(Mr Mortimer) Sometimes it will be one, sometimes
the other.
79. Yes, but you can see what I am getting
at.
(Mr Mortimer) It is very often ignorance[5].
I think departments are well capable of thinking through a lot
of these cases unaided if they have the application and determination.
4 Note by Witness: As simply accepting or rejecting
a proposal. Back
5
Note by Witness: In fact, it is not very often ignorance,
as opposed to very often ignorance. Back
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