APPENDICES TO THE MINUTES OF EVIDENCE
TAKEN BEFORE THE TREASURY COMMITTEE
APPENDIX 1
Memorandum by Mr Richard Parry, University
of Edinburgh
PUBLIC SERVICE AGREEMENTS AND THE CODIFICATION
OF RELATIONSHIPS IN WHITEHALL
1. Public Service Agreements stand in a
tradition of codes and contracts about the conduct of Treasury
business. As part of an Economic and Social Research Council project
into "The Treasury and Social Policy" (grant L124 25
1004) Nicholas Deakin and I looked at some of the ways that the
Treasury had tried to put its relations with spending departments
on a more secure basis in recent years. We assessed in particular
the Treasury's "Fundamental Review of Running Costs"
of 1994 (the "FER"), a report written by Sir Colin Southgate
and Jeremy Heywood. As with the PSAs, the FER sought a technically
sound way of organising relationships within Whitehall.
2. Central to the FER's argument on spending
was that the Treasury had to change its behaviour towards spending
departments. Its relationships with them are subtle and complex
and depend ultimately on the psychological skill of the parties
involved. The FER's approach was a search for tools, and it recommended
all the teams "to agree a `contract' with the department(s)
with which they deal, setting out the rights, duties and obligations
of each party in the relationship" (para 10.55). The content
of these contracts seemed straightforward—the information
the Treasury needs, the issues on which it expects to be consulted
or which it is content to delegate. But the item on "the
deadlines by which each party agrees to reply to the others' requests"
points to the fact that they were also an attempt to systemise
behavioural patterns which in fact proceed from the dynamic of
each situation.
3. There was some naivete« in the suggestion
that "the `negotiation' of such an agreement . . . should
help to enhance each party's understanding of the other's responsibilities
and requirements thus helping to improve their working relationship
more generally" (para 10.56), reinforcing the feeling that
the FER team lacked first-hand acquaintance with the realities
of spending negotiations. The contracts idea has proceeded slowly;
although eventually the "boxes were ticked" in agreeing
documents, our research found that spending departments did not
always find the concept of use and were generally sceptical about
the "quick fix" aspect of the FERs.
4. As part of its agreement to a three-year
expenditure framework, the Treasury returned to the notion of
contracts with departments in the form of the PSAs. Again the
principle is one of specification of objectives and how they are
to be achieved, in the light of manifesto priorities and other
statements. The PSAs are to be monitored by a Cabinet Performance
Review committee (PSX). This committee is to be serviced by a
Performance and Innovation Unit in the Cabinet Office, headed
by former Treasury official Suma Chakrabarti. And so there is
an institutional balance in the arrangements, in which we can
see as a fusion of two traditions:
(i) the performance review motif promoted
by the Prime Minister, in which the service of the manifesto becomes
a means of breaking down departmental interests and the newly
identified pathology of "departmentalitis";
(ii) the contract/codification motif as first
set out in the FER to express the Treasury's preparedness to devolve
control if stated terms are observed by the spending department,
but not otherwise; there is a personal link here in Jeremy Heywood,
since 1997 in the No 10 Private Office.
5. The text of the Agreements (Cm 4181)
suffers from the same problem as many of the Government's reports
and statements—it conflates statements of what has been
done, aspirations, performance indicators, and tests of whether
the government has succeeded in its first term. The Treasury's
33 performance targets (pp 114-116) are an impressive statement
of its broad concern about social and economic policy, but they
are compromised by the use of phrases like "continue to develop"
and "put in place policies". One of the most explicit
social policy targets, to "reduce the number of households
facing marginal deduction rates over 70 per cent by 2001-2"
is a modest statement of a policy direction already addressed
in more ambitious detail by the Working Families Tax Credit. The
DSS's PSA was only an interim one with a concentration on administrative
processes rather than outcomes. When the full agreement was published
in March 1999 (Cm 4315) it did get some way into targets which
mixed policy rules and their economic and social context, such
as reducing the number of lone parents dependant on Income Support
by 10 per cent by 2002. The Department of Health, building on
its earlier clinical and management work, was a pioneer in this
area and its PSA offers the clearest output-based targets of operational
value.
6. The spending control aspects of the PSAs
are limited, the White Paper stating that "should a target
not be met there is no question of money being deducted from the
budget for that department. Nor will additional funding over and
above that already allocated be made available simply because
a department is failing to meet its targets, but support and advice
will be given by the [Cabinet] committee" (p 2). The phrase
"no question" is a striking example of a phrase usually
associated with the Treasury, the department whose business has
traditionally been to say no, being turned against it. There is
equivocal language on the status of the targets—they are
intended to be met, but they are stretching, and progress towards
them will vary—and the White Paper defers much of the action
on the use of the PSAs. It provides a framework for the continuing
debate between the Treasury and the spending departments, but
neither determines the outcome nor guarantees that the process
will be benign.
7. At the same time the Treasury has been
becoming a more active developer of social policies than ever
before. It has been strengthened for this task by the evidence-based
consideration of policy options in the Work Incentives and Poverty
Analysis Unit and around the Sure Start programme. At the end
of the Comprehensive Spending Reviews, the Treasury was driving
and making policy and was imposing its own social policy priorities—in
particular for investment-based supply side spending that could
be justified as a national retooling, rather than unmandated transfers
to individuals. The welfare-to-work agenda was run from the Treasury,
and the Working Families Tax Credit embodied an unapologetic use
of tax expenditures and transfer of clientele from the Benefits
Agency to the Inland Revenue. The Treasury was glad to advertise
its involvement in the social CSRs (as in its 1998 Annual Report
(Cm 3917, para 1.2.20)) and is taking an important role in the
various New Deal "brands".
8. Set against this Treasury power is the
enhanced capacity of the Cabinet Office after July 1998 and the
declared determination of the Government to drive through coordination
from that office, in order that policy, in the Prime Minister's
Commons statement of 28 July 1998, meets "the corporate objectives
of government as a whole, rather than just the objectives of individual
departments" (Hansard vol 317 col 134). The White Paper on
the civil service, Modernising Government, launched on
30 March 1999 (Cm 4310), reaffirmed the need for "joined-up
government" but was again ambivalent on how the various mechanisms
at the centre would relate to one another. Whether by accident
or design, the Treasury is remarkably absent from the White Paper,
not being mentioned at all in the chapter on policy-making (chapter
2), and the Performance and Innovation Unit is sent well into
traditional Treasury territory by being given the task of examining
the "system of incentives and levers", which might include
"pooled budgets across departments, cross-cutting performance
measures and appraisal systems which reward team-working across
traditional boundaries" (para 2.9). Just as the Budget was
the Chancellor's policy system, this White Paper is the Prime
Minister's.
9. Our conclusion from the Treasury's FER
and the PSAs is that technical fixes to the problems of policy
co-ordination should not have too many claims put upon them. The
production of contracts documents can become an end in themselves
and become unhelpful rather than helpful to policy development.
The Cabinet Office and the Treasury—potential rivals for
the central co-ordinating task—have been charged with making
a success of a schematic system that may not be adaptable to changed
evidence and priorities. It is very important that the desire
to "declare victory" on the government's objectives
should not end up distorting the policy process. The quality of
relationships between the centre and spending departments—and
between the various components of the centre—are more important
than any single instrument, which can never in itself guarantee
policy success.
8 April 1999
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