Examination of witnesses (Questions 320 - 339)
WEDNESDAY 3 JUNE 1998
MR A TURNBULL, MR R MOUNTFORD and MR V THOMPSON
320. Was what you have
just said put in writing, that it is clear that if we do it the
other way round it will be better value for the exchequer? Please
advise me this is what you want to do nevertheless. This was not
put in writing, was it, even though that is your view?
(Mr Turnbull) I will tell you what
was put in writing. What was put in writing was that accelerating
would reduce the proceeds for the ROSCOs. That was in the papers
which ministers considered and on the basis of which they took
the decision.
321. You said that the maximisation was
not the only objective and you read out the Act to illustrate
that and I accept that. If maximisation of proceeds were the primary
objective, in your view how should this process have been managed
as opposed to how it actually was managed? The brief was maximise,
privatise but maximise the proceeds within a reasonable time frame
of five years.
(Mr Turnbull) I would not have set
the objective in terms of maximising the proceeds of the ROSCOs
alone. You have to look at the total impact. This was a completely
interlocking thing. Whatever went first, whether it was TOCs,
Railtrack or ROSCOs, was going to bear the risks and the fact
that it had then happened would then change the whole--
322. I understand that. What would your
advice have been specifically? What would you have done first?
(Mr Turnbull) The advice was that
the priority of achieving an early outcome and getting to the
point where you did not have half-finished privatisation was quintessentially
a ministerial decision. I would have said it was for the minister
to decide.
323. No, no, I know ministers said they
wanted to do it as quickly as possible and then they said they
wanted to maximise the take; they wanted to privatise within the
next few years or whatever, so they changed the balance of objectives,
but they wanted to maximise the take. You would have then suggested
they did it in this order. What would you have said?
(Mr Turnbull) I would have said
that if they wanted to wait until all the TOCs were sold and then
sell the ROSCOs they would have to deal with the problem that
they were selling them before their customers were known. However,
when were the last TOCs sold? They were sold in February 1997.
The answer is that if they had waited in that sequence they would
never have finished this thing before the election. You may take
the view that they should never have finished it because you did
not agree with it, but that was their objective. Going in that
sequence would have taken so long that they would never have achieved
the wider policy objective.
324. With hindsight, do you not think it
was the duty of the Accounting Officer to put these things down
clearly in writing?
(Mr Turnbull) I think the Accounting
Officer fulfilled his duty which was to say they had clearly a
policy decision to take. He warned them that changing the sequence
would carry some penalty with it and they then took that decision
with their eyes open.
325. That was not put in writing and the
issue of clawback was not put in writing either, was it, any options
for clawback, say if clawback were above 50 per cent appreciation
or whatever?
(Mr Turnbull) The loss of proceeds
was put in writing.
326. But no clawback discussion.
(Mr Turnbull) Now we are talking
about clawback. I thought you said the loss of proceeds was not
put in writing and I am trying to make sure it is on the record
that it was put in writing. On the clawback, that too was put
in writing. There is criticism from the NAO that this was put
in writing late in the process; maybe they are right on that but
it definitely was put in writing and explicitly considered and
then the decision was taken which is recorded here.
Chairman
327. My memory from the report is that the
loss of proceeds was judged to be from £100 million to £300
million.
(Mr Turnbull) That was a calculation
that was done in the Department at the time. I do not think those
numbers were in the papers which went to ministers. I do not think
a particular number was put on this although it is fair to say
it was recognised that everyone understood it was of that order
of magnitude.
328. It might be worthwhile if we could
have a note on that issue|super|1 because it does concern me specifically
that if the minister was led to believe £100 million to £300
million was the shortfall and it turned out to be £900 million
I still think it is a different issue.
(Mr Turnbull) We need to debate
this £900 million at some point.
Chairman: We will. We will come to
that.
Maria Eagle
329. I am sorry to be a pain but I want
to take up some of the same issue in respect of the Accounting
Officer's duties because I have been a bit confused by your interpretation
of the personal obligation of the Accounting Officer in cases
such as these. You have said that where the policy is very clear-and
nothing could have been clearer than this, as you have said; it
was in the legislation and nothing could be clearer-that you would
be satisfied with that as an Accounting Officer. However, my understanding
is that regardless of how clear the policy is, if in your view
pursuing it in a way which ministers are intending to do would
cause a loss to the public purse then it is your obligation to
point that out and that is a personal obligation. Is that not
the correct interpretation?
(Mr Turnbull) The correct interpretation
is that you have to carry out the policy once settled in the best
way possible.
330. Yes, I understand that. You have a
personal obligation in respect of this. If in your view ministers
are going blindly ahead and pursuing it without the relevant thought
for value for money, it is your role to point that out, is it
not?
(Mr Turnbull) Yes. If they have
settled a policy and they are pursuing that policy in a way which
is inconsistent with securing good value for money, then you have
to point it out. But you have not demonstrated that was the case.
331. What happened in this case was that
there was a memorandum advising ministers that selling the ROSCOs
earlier than was originally intended may lead to a loss of proceeds
but that the Accounting Officer did not think that it was then
worth asking for a written direction when ministers said they
were going ahead anyway.
(Mr Turnbull) Because that was at
the point at which they were going to settle the policy. There
are two duties. One is to give ministers the information and advice
they need in order to make a decision about policy and it has
to have regard to things like manifesto commitments and legislation.
When the policy is set the Department, led by the Accounting Officer,
has to carry out that policy with due regard to efficiency, effectiveness,
etcetera.
332. The question is where that comes in
in your understanding because it seems to come in in a slightly
different place to where it comes in in my understanding. What
happened here was that the ministers were advised, quite rightly,
that if they sold the ROSCOs early in order to achieve the policy
they wanted within the timescale they wanted they would lose some
proceeds. They were advised.
(Mr Turnbull) But they might get
some benefits afterwards.
333. There may be other benefits but in
terms of the bid price they were going to get they were going
to lose out. They were told that and they said they wanted to
go ahead anyway. Your obligation of course is then to carry that
out, but you have a different obligation as an Accounting Officer
and that is to the extent you can judge by looking at the information
you have at the time. If you judge that there is going to be some
big loss to the public purse by pursuing that in the way in which
you have been instructed to do, you then have an obligation to
seek a written direction to protect yourself and say you are pointing
this out to them, if they tell you to go ahead you will go ahead
but there it will be on record. Is that not correct?
(Mr Turnbull) Yes, that is correct.
They then have to apply those principles to this particular case.
334. You seem to have been saying that the
clarity of the policy was such that there was then no obligation
on the Accounting Officer to come back and exercise his judgement
after the policy was set.
(Mr Turnbull) He was given very
clear policy, announced to the House, to sell the ROSCOs in 1995.
That was the policy. |super|1 Note: See Evidence, Appendix
7, page 60 (PAC 350).
335. But it would still have been correct
if his view had been at the time that the sale proceeds would
have been an awful lot less than they might have expected to have
been otherwise, it was still open to him and in fact an obligation
upon him, to point that out and seek a written instruction if
he felt that his personal responsibility as Accounting Officer
was being prejudiced.
(Mr Turnbull) Yes. The Accounting
Officer took the view that there was a properly constituted policy
decision to accelerate the sale and an objective was set to sell
the ROSCOs within 1995. His duty then is to set the process up,
the team in the Department, the provision of proper advice, the
conduct of the procedures of the sale, to get the best level of
proceeds in the circumstances of that policy. Only if he thinks
that something that he is being asked to do by the minister-and
I gave the example of not going through a competition or awarding
this to some particularly favoured bidder-would trigger—
336. Or not bothering to value the businesses
or not bothering to think about clawback. These all lead to losses
do they not? They all lead to lack of information.
(Mr Turnbull) We can dispute the
"not bothering". I have to say to you that I do not
believe that if we had followed to the letter the various NAO
recommendations about best practice on valuation it would have
made one penny piece difference to the result. Clawback is a more
open question. It may be that it is good practice and there is
a recommendation in this report about the position of valuation.
Discussions are now going on between the Treasury and the NAO
to find an agreed guidance. They are not addressed just to DETR,
they are addressed to departments generally. We will sort out
an agreed guidance on valuation. Maybe we did not follow that
but I do not think valuation would have altered the results at
all.
337. It may have enabled the Accounting
Officer to make an informed judgement about whether or not he
ought to be seeking a written instruction from ministers.
(Mr Turnbull) No, I do not think
so.
338. It seems to me that what we have here
is quite properly a policy which says flog this, flog these companies
as soon as you possibly can. Never mind valuing them, never mind
ensuring we get value for money, just go and flog them. In those
circumstances the Accounting Officer ought to have been even more
careful than normal when he was being told that. I am not convinced
that he was.
(Mr Turnbull) You put this in a
pejorative way. I say that there was a clear policy decision—
339. I have no doubt about that.
(Mr Turnbull) -to sell to a certain
timetable because that timetable was important to the whole privatisation
timetable about which you can have your own views. The Accounting
Officer has to ensure that the process is then conducted and proper
thought is given to the issues, the right advice is got in the
Department or bought in to get the best outcome that he can, given
the policy that has been set.
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