House of Commons - Welsh Affairs

Select Committee on Welsh Affairs Third Report

THE WELSH OFFICE DEPARTMENTAL REPORT 1998

1. The Committee has held a short inquiry into the Welsh Office Departmental Report 1998 (Cm 3915), which reports on the performance of the Welsh Office and its associated public bodies in 1997-98 and sets out the Government's expenditure plans for 1998-99. We have received written evidence from the Welsh Office in response to a range of questions[1], and we have held a session of oral evidence with the Secretary of State for Wales and officials[2]. We appreciate the helpful manner in which the Department has responded to our inquiry. We also wish to record our thanks to Rachel Ashworth and Mark Clatworthy, both of the University of Cardiff, who have assisted us in this inquiry.

2. The Departmental Report 1998 covers only one forward year (1998-99) instead of the usual three, because of the Comprehensive Spending Review (CSR). The Chancellor of the Exchequer has now announced the outcome of the CSR, and the Secretary of State for Wales has said that he will publish a consultation paper on his revised spending plans for Wales in September. We shall look at the new expenditure proposals with close interest and may invite the Secretary of State to give us further evidence in the Autumn.

3. We make this Report principally to draw attention to the evidence that we have received. Below we point to some areas of the evidence which we consider to be of particular interest or concern.

Devolution: the future of the Departmental Report

4. The 1999 Departmental Report will be the last of its kind. The Government of Wales Bill provides that the Assembly shall make an annual written statement of its expenditure plans: it is envisaged that this will be the equivalent of the present Departmental Report, though the format will be for the Assembly to determine.[3] The Secretary of State will continue to be required to make an annual report to Parliament, but this will be a more modest publication.[4]

5. We asked the Department what were the implications of devolution for the Estimates. We have been told that they anticipate a simplified Estimate structure for the Secretary of State and the Welsh Assembly, but that they are still working on the details.[5] We urge the Department to consult fully with Parliament before finalising the form of the new Estimates.

Resource Accounting and Budgeting

6. The Welsh Office has produced "practice" resource accounts since 1995-96.[6] Full audited accounts are to be prepared for the first time for the 1998-99 accounts. The 1999-2000 accounts will be the first set of accounts to be published. The cost of implementing Resource Accounting and initial work on Resource Budgeting from 1993-94 to 2000-01 is estimated to be £1.5 million. Further work on Resource Budgeting could cost another £0.5 million, and the transfer of functions to the Assembly may add to the costs again.

NDPBs: expenditure plans and targets

7. For each executive Non-Departmental Public Body (NDPB) and for Cadw, the sole Welsh Office executive agency, the Departmental Report provides details of forecast outturn against expenditure plans for the year just completed and the expenditure plans for the year ahead. In addition it shows performance against target for past years (estimated for the year just ended) and, in some cases, targets for the year ahead. The 1998 Departmental Report contains no expenditure plans for the Welsh Development Agency (WDA), explaining that they were not available at the time of publication, even though elsewhere it is shown that a considerable increase in central government provision for the WDA is planned.[7] At £113.8 million, the WDA represents a major portion of Welsh Office expenditure. While we appreciate that the planned merger with the Development Board for Rural Wales (DBRW) and the Land Authority for Wales (LAW) will have required the WDA's plans to be radically rethought, it concerns us that expenditure plans were not in place at the beginning of the financial year.

8. Similarly, the Departmental Report contains no details of targets set for the year ahead for the WDA, nor for Cadw[8] and a number of other NDPBs (DBRW and the Wales Tourist Board, for example).[9] It seems that these bodies began the financial year without targets in place. This is clearly unsatisfactory. The Department does not foresee any reason why any of its NDPBs should not be able to include targets and expenditure plans for 1999-2000 in the 1999 Departmental Report.[10] We urge the Department to ensure that the Departmental Report 1999 include full details of targets and expenditure plans for the year ahead for Cadw and for all of its NDPBs, and, more crucially, that each have expenditure plans and targets in place before the beginning of the year.

9. It is apparent from the Departmental Report that the kind of targets being set, both for NDPBs and for the Department itself, varies considerably. Some NDPBs (for example, the National Museums and Galleries of Wales, the Sports Council for Wales) have achieved or exceeded all their published targets. Rather unconvincingly, some (WDA , the Welsh Language Board and the Royal Commission on the Ancient and Historical Monuments of Wales, for example) are forecast to meet their targets exactly. It may be that those who have met their targets have made great efforts to do so or it may be that the targets were easily achievable. Others (the Cardiff Bay Development Corporation and LAW, for example) exceeded some of their targets but failed to meet others by quite a large margin. This may be a sign of failure or it may simply indicate that they set more ambitious targets. While the Secretary of State told us that he attached great importance to the system of targets[11], it is not clear that anything very much is done when targets are not met. Target-setting is still evolving. The Welsh Office should establish clearly whether targets are meant to be achievable or aspirational, and should ensure some consistency in the achievability of the targets set.

Private Finance Initiative

10. The Departmental Report states that "the Department is making use of the Private Finance Initiative (PFI) where appropriate to improve services, and help secure better value for money".[12] It provides some information about PFI projects, existing and under consideration, but not in a very accessible form. In evidence, the Department has provided us with a consolidated list of Welsh Office projects and Welsh local authority "Pathfinder" projects.[13] The Department also describes in some detail the terms of the contract for a community hospital at Chepstow.[14] The Secretary of State told us that he was "very enthusiastic" about PFI.[15] In view of the growing importance of PFI commitments, we recommend that they be clearly listed under a separate heading in future Departmental Reports.

Consultancy

11. We questioned the Department on the amount it spends on private sector consultancy. The evidence shows that the Welsh Office itself spent £0.7 million on consultants in 1997-98, while NDPBs spent over £11 million.[16] Between NDPBs there was great variation. While the Welsh Language Board, for example, spent only £19,000 on consultancy (0.3% of its total gross expenditure), Cardiff Bay Development Corporation spent over £5.3 million (almost 9% of its gross expenditure). There may, of course, be very good reasons for contracting work to consultants. Nevertheless, we believe that expenditure on private sector consultancy should be watched carefully and recommend that the next Departmental Report list specific details of such expenditure for the Department and for each NDPB. We intend to examine this issue closely in the year ahead.

Training

12. The Departmental Report suggests that spending on training for young people and for adults will reduce in 1998-99.[17] The Department explain that this is because of a fall in the number of unemployed and is offset by New Deal programmes, which are centrally funded.[18] As we have seen in our recent inquiries, training is an important factor in attracting inward investment to Wales and making indigenous industry more competitive: it is not just a way of helping the unemployed. Training is key to the future prosperity of Wales: it is essential that its funding be maintained.

The LG project

13. There has been some concern in Wales about the size of the grants given to encourage LG to locate in Newport. The Department has provided us with details of the public sector costs of the LG project.[19] In addition to £69.5 million in Regional Selective Assistance from the Welsh Office, LG has benefited from £10 million in infrastructure work funded by the WDA, WDA property grants of £118.9 million and site development support of £17 million, land to the value of £14.2 million (funded by the WDA and Newport County Borough Council), TEC training support of £17.6 million, Modern Apprentice funding of £175,000, plus rent-free use of an electronics training centre worth some £618,000 over three years. This adds up to almost £248 million, or (on the simplistic basis of 6,100 jobs from the two plants involved) over £40,000 a job. The Secretary of State acknowledged that the provision for LG was controversial.[20] We believe there should be greater openness in the allocation of grants to industry, and this is a matter which we intend to address in our forthcoming report on Investment in Industry in Wales.

Grant take-up

14. The Departmental Report shows that there has been a marked decline in applications for Regional Selective Assistance and Regional Enterprise Innovation Grant.[21] The Department was unable to explain this fully, though suggested that it was in part because of economic turbulence in the Far East, affecting both foreign-owned companies and Welsh suppliers. We welcome the Department's commitment to promote awareness of the grants available to business. We intend to address this matter of grant take-up in our forthcoming report on Investment in Industry in Wales.

Agriculture

15. The Departmental Report shows that government expenditure on agriculture will fall by over 17% this year.[22] The Secretary of State explained that this was not by decision of the Welsh Office[23]: it is largely a result of a reduction in European Union receipts, though is also affected by a UK-wide reduction in the Hill Livestock Compensatory Allowances Scheme. It is, in our view, disastrous that government support for agriculture should be cut at a time when farmers are suffering so badly from a fall in farm incomes. We await with much interest the Government's reply to our recent report on the Crisis in the Welsh Livestock Industry.

Further Education

16. The Departmental Report shows that number of students in Further Education in Wales continues to rise and that this is not matched by a comparable increase in funding. The unit costs per student in have fallen from £3,313 in 1993-94 to £2,650 in 1998-99. This can be seen positively as an efficiency improvement of 20%, but it also gives rise to serious concern that the service to each student may be being reduced. It is unsatisfactory that the latest data provided on student:staff ratios was for 1995-96.[24] There is little point in providing such information if it is very out of date. We urge the Department to ensure that student:staff ratio figures for 1997-98 are available for inclusion in the Departmental Report 1999. There is growing evidence that the sector is seriously overstretched.

National Health Service

17. The Departmental Report states that "proposals to reconfigure NHS trusts ... are expected to release significant administrative savings, which can be diverted to patient care".[25] The Department's evidence confirms that "in excess of £7 million per annum is likely to be saved from management, administration and unnecessary duplication"[26], but that this will not be achieved until 2001-2002.[27] The transitional costs will be approximately £12 million, incurred mostly in 1999-2000. It would, in our view, be unreasonable to expect the trusts to meet these transitional costs out of existing resources.

18. Remarkably, the Departmental Report makes no reference to the financial problems facing the NHS in Wales. We draw to the attention of the House the evidence we took from the Director of the Welsh Office Health Department on the NHS (Wales) Summarised Accounts 1996-97 on 28 July 1998.[28] Those accounts show that Welsh Health Authorities faced an accumulated deficit of £13.7 million at the end of 1996-97. Mr Gregory told us that this had risen to some £24.4 million by the end of 1997-98. The growing accumulated deficit of the NHS in Wales is a matter of very grave concern. We recommend that the next Departmental Report contain details, estimated if necessary, of the financial performance of Health Authorities and Trusts.

Devolution

19. The Departmental Report gives the planned costs of devolution as £0.5 million (current) and £17.3 million (capital).[29] Because of the decision to site the Assembly at Cardiff Bay, the capital spending plans have slipped: less than £5 million will now be spent in the current year, half on the temporary accommodation at Crickhowell House, but part, it is hoped, on the initial phase of construction of the new Assembly building.[30] The Secretary of State assured us that the expenditure on Crickhowell House would "by and large be expenditure which will be of long term benefit to the Assembly".[31] We trust that the Department's new expenditure proposals will set out clearly the forecast costs of the temporary accommodation and of the new Assembly, and the savings to the NHS budget of relocation from Crickhowell House.

Equal opportunities

20. We questioned the Department on their equal opportunities policy.[32] 52% of Welsh Office staff are women, but they are still disproportionately in the lower grades. While there has been a marked increase in the percentage of women in higher grades, women still fill only 24% of the most senior posts. The proportion of Welsh Office staff who are from ethnic minorities is only 1%, in comparison to 5.7% in the civil service as a whole. While ethnic minorities represent only 1.5% of the total population of Wales, they form a significantly higher proportion in the Cardiff area, where the great majority of Welsh Office staff are employed. Furthermore, no staff from ethnic minorities are above Grade 7. While we welcome the Secretary of State's assurance that he would tolerate no discrimination, we are not convinced that the Department has pursued its equal opportunities policy with adequate vigour. It must ensure that there are no obstacles to the career progression of women and of people from ethnic minorities, and that it recruits widely from all sections of the Welsh population and from all parts of Wales.

Information technology

21. The Department is rapidly increasing its use of information technology to make information available to the public.[33] This is very welcome, though it comes, of course, at a cost. The estimated costs of the Department's web-site are £95,000 in 1998-99. Surprisingly, the Department still has no universal external e-mail facility. The Department is currently reviewing its Information Systems Strategy and we trust that this will be addressed.

Style

22. Finally, we make a few minor points on the style of the Departmental Report. First, the 1998 Departmental Report is printed for the first time in double columns. This is presumably thought to be easier to read, but in many cases it has had the irritating effect of distancing tables from the relevant text: they are frequently not even on the same page. Secondly, while we are in favour of presenting information in a consistent manner so that comparison year on year is made easy, we think that little purpose is served by reproducing information (such as the Assisted Areas map in Figure 4.01) which is unchanged from the previous year. Thirdly, we believe that the information contained in the Departmental Report would be made more accessible by the inclusion of an index. We recommend that the Department take these points into consideration when compiling their Report for 1999.

1 See Evidence, pp 1-14 and 28-33. Back

2 On Tuesday 19 May 1998. See Evidence, pp 14-28. Back

3 Evidence, p 1, A2. Back

4 Qq2-5. Back

5 Evidence, p 3, A6; see also Q4, and Evidence, p 31, A61. Back

6 Evidence, p 2, A5; also p 31, A59 and A60. Back

7 Cm 3915, Tables 3.01 and 3.06. Back

8 Except in one respect: see Cm 3915, Table 6.13. Back

9 Cm 3915, Tables 3.07, 3.09 and 3.11. Back

10 Evidence, p 31, A58. Back