Examination of Witnesses (Questions 720
- 739)
WEDNESDAY 19 JANUARY 2000 [Afternoon]
THE RT
HON GEOFFREY
HOON MP, MR
KEVIN TEBBITT,
MR RICHARD
HATFIELD, AIR
MARSHAL SIR
JOHN DAY,
AIR MARSHAL
MALCOLM PLEDGER
AND MR
JOHN HOWE
720. I appreciate that. I raise it because my
understanding is that the United States have given thoughts to
that action in helping in some of these issues.
(Mr Hoon) What I was going to say before is that I
think that is classically an example where it is a cross-Government
response which is required. It is the kind of situation where
a different Department might well be in the lead and might well
say, "We see this as an opportunity for British forces to
be used in a particular way." Monserrat is not quite the
example that I suspect you were thinking of in terms of environmental
protection rather than trying to help once a disaster has occurred.
However, I am confident that we would be able to look at those
situations flexibly and appropriately should they occur.
721. One more on this part is that these graphs
which you have in terms of cross-Government working, I know there
has been success in terms of figures, but when I was in the Caribbean
in the summer on a trip for the Commonwealth Parliamentary Association,
I was told that defence personnel was out in some of those countries
helping with the anti-drugs work and helping to train up local
people but they were withdrawn. The reason, I was told, why they
were withdrawn was because of an interdepartmental dispute as
to who would pay for them, between Defence, International Development,
and Foreign Office. You are shaking your head but that is what
I was told. I express that as a point of interest.
(Mr Tebbit) May I pick up on a point I was making
before. We do not have a dedicated capability simply to do this.
Where we can make people available we will. Obviously we have
to charge some amount of money to the Department that is asking
us to provide that capability if it is not a straightforward defence
capability. Where we can do it at marginal cost we will, but if
we have to establish people who do nothing other than that work
then obviously it is more expensive. Even cross-departmentally,
where we are trying to work towards pool budgets in certain areas,
as of now as an accounting officer I have to look at the Department
with responsibility for that function to fund activities which
are specifically not defence. That said, we have done a great
deal on drug enforcement, drug intervention, and although I would
not like to go into too many details before this Committee, I
think our record is pretty positive.
Mr Cohen: Thank you.
Mr Blunt
722. Before asking you a few questions about
money, may I go back to the answer you gave about defence attachés
just now. You said there had been a review of the Foreign Office
about the future of defence attachés. When I hear language
being used such as "to emphasise priorities", "to
better inform us", I fear that the conclusion is that we
are going to have fewer defence attachés at the end of
this exercise. Is it going to be more, less or the same?
(Mr Hoon) We are going to have more but in different
places. One of the reasons why I was being slightly cagey is that
we have not yet had the opportunity of informing all the countries
where the changes will take place, but there will be changes.
The outcome will be more defence attachés than we have
as of today.
723. That is extremely welcome news and I hope
the Foreign Office contributes to paying for them.
(Mr Hoon) I cannot possibly comment on that.
724. When we reported on the SDR—although
I add that it was a more substantial document than the SDR itself,
and I fear it is almost an impossible challenge not to continue
that record with our report upon the White Paper—one of
the recommendations we made was that the Government should initiate
a study of the resources spent on security across the whole of
Government. There was not a reply to that particular recommendation
from the Department and in the White Paper you tell us: "We
prefer to exercise influence through diplomacy, advice and guidance.
Sometimes, however, force is necessary." As you start preparing
for the next Comprehensive Spending Review round, do you feel
that the Government, as a whole, is equipped with the necessary
quality of information to make judgments about the balance of
expenditure across our Armed Forces, our diplomatic effort, our
development spend, our trade support and intelligence, our security
intelligence effort, and across our home and civil defence?
(Mr Hoon) You are asking me a question about the Government
in its entirety. Certainly I am here as a representative of the
Government and I will do my very best to answer it. Clearly my
specific responsibility is to make sure that wider Government
is informed about the importance of the work that the Department,
for which I am responsible, is doing; and in the process of allocating
inevitably scarce resources between different Government Departments
there is inevitably an element of competition. That is not something
new. It is not something we invented since 1997. I am absolutely
confident that in the very careful process of allocating those
resources to different Departments, that the Government is thoroughly
and properly informed of our role, of the role of the Foreign
Office, and indeed the Department for International Department.
Perhaps what is different as well since 1997 is the way in which
this Government have sought to recognise that the modern world
is a rather more complex one than could be necessarily addressed
by specific Departments doing particular rather sectionalised
work. What we have sought to do is to provide cross-cutting budgets
that do affect a number of different Departments' activities and
can be drawn on through appropriate agreements. I think that is
something that we will develop.
725. Is defence diplomacy one of those areas?
(Mr Hoon) Yes, it is.
726. So that SEN, DfID and DTI, that money is
then allocated to the four Departments, is it, from central Government
budget?
(Mr Hoon) In a sense it does not quite work like that.
A particular Department has to be in the lead for various accounting
and responsibility reasons but certainly in the way in which that
money is spent there is no doubt that those other Departments
that you mention are fully involved in the process of reaching
decisions.
(Mr Hatfield) May I add something because it picks
up from your remark about Foreign Office funding attachés.
There has always been a broad sharing of most costs and that has
been maintained. During the review, as well as making a net increase
as a result of changed priorities, some of the specific changes
have been funded in a slightly different way, reflecting judgments
about what they are particularly about: MoD priorities, FCO priorities,
or joint ones. To pick up your point about defence diplomacy,
the defence diplomacy money supplied by the MoD is, by and large,
focused on defence priorities and conflict prevention—hence,
particularly central and eastern Europe—though we do spend
money in Africa and we do, of course, conduct activity in Africa
and elsewhere in support of other Government Departments. But,
by and large, the main money is provided by the Department in
the lead. That makes sense because we are not in a position to
decide policy priorities for conflict prevention in Africa in
a way that Foreign Office and International Development are. So
I think we are moving in the direction you are talking about without
having one big single pool. Of course, there may be some subsidiary
pools created for specific activities, where Departments agree
that they have very much a shared role. That is possibly for the
future.
727. Secretary of State, as you go into the
next spending round, do you go in with a view that the Ministry
of Defence has enough money to deliver your share for United Kingdom
security tasks and to do all that is asked of your Department?
(Mr Hoon) Certainly, on the basis of the money which
was allocated at the time of the Comprehensive Spending Review
and commitments that we set out in the strategic Defence Review.
I am confident that although there is a very considerable challenge
to make sure that we deliver on those priorities that we can achieve
it. But obviously, as I indicated to you earlier, the way in which
resources are allocated across Government does tend to be a competitive
exercise; and I assure you that I will be using the influence
that I have inside Government to make sure that we deliver on
the objectives of the Department.
728. As the Chief Secretary declined to come
before the Committee, I am afraid that we do have to ask the Government
on this, which is yourself. In a sense, we ask you that question.
Is the budget you have now enough?
(Mr Hoon) Yes, it is.
729. For the future?
(Mr Hoon) The budget we have now is allocated under
the existing formula.
730. I am sorry. Perhaps I should make my question
clear. You are going into a Comprehensive Spending Review round
which sets out the expenditure for the next three years. The normal
assumption would be that before the deal is cut the expenditure
is static in each Department and then everyone goes into the rounds
on an on-going basis. Could you survive if you had no increase
at all in real terms?
(Mr Hoon) Again, you are asking me to speculate about
the outcome of something that is only just beginning, in the sense
that we are only just providing the kind of information that the
Government in general requires to make these decisions. But all
I can emphasise to the Committee is the importance to me of being
able to deliver on the SDR. That is almost the first thing I said
to the Committee when I began. I read carefully this Committee's
reports and I recognise the concern that exists but it will be
my responsibility to ensure that the Ministry of Defence and our
Armed Forces have the resources required to do the job that we
ask of them.
Chairman
731. Because this Committee has asked every
Secretary of State from 1984 onwards the same question. Is this
the end of the cuts? Every one of them has said, "Oh, yes."
Some of them have been quite skilled, like the ones that Crispin
always used to advise, on leaving a little flexibility, but the
result was the same. This is the end of the line. No more cuts.
Then the next time they would come along and the bottom line would
be redefined. 20 years of redefining what the bottom line is has
resulted in the defence expenditure that we now have. So we have
no confidence whatever in what a Secretary of State would tell
us. It is fine telling us, but it is going into the Treasury and
having your nose bumped by people who see the world in rather
different ways. What we say, Secretary of State—and I think
the Committee is pretty unanimous on this—is that if there
are any further cuts, then you simply will have your problems
exacerbated even further. We simply do not want to see this happening.
Our defence cuts, with diminishing resources and diminishing commitments,
and smaller always meaning better—but, frankly, smaller
or less is only better in presentational term and not in real
terms.
(Mr Hoon) I shall take that as a sign of support for
the battles that I have in the future.
732. It has not worked in the past, I must tell
you!
(Mr Hoon) That is perhaps more a matter for you than
it is a matter for me.
Chairman: I appreciate that! Mr Brazier.
Mr Brazier
733. I thought that last answer, Secretary of
State, raised some interesting questions on authority and accountability.
Staying with money, we had a session last week, as you know, with
Mr Palmer, a lot of which focused on efficiency savings. How satisfied
are you that the so-called efficiency savings actually relate
to efficiency? Are you maintaining the same or better outputs
for less money rather than there being straightforward cuts in
output or service?
(Mr Hoon) I read very carefully your proceedings from
last week and it may come as no great surprise to you that when
I was trying to understand what was meant by efficiency, I also
approached it in a very sceptical way, because we all know that
efficiency can sometimes be used as a way of disguising cuts in
output. I could see running through the questions that you and
other members of the Committee were asking an appropriate degree
of scepticism. I assure the Committee that it is something which
rather reflected my approach, when I was being briefed about these
financial matters, when I arrived in the Department. Without being
naive, I have subjected those efficiency targets to some (I hope)
pretty rigorous analysis. I am persuaded that these are real improvements
in output at a lower cost rather than simply being a reduction
in what we do. You are right. If we simply reduce what we do,
then we are not being more efficient.
734. So you are satisfied then with the quality
of the information systems that keep you informed on what these
efficiency savings are about?
(Mr Hoon) It is important to emphasise that the purpose
of a devolved budget, which is what we have, is to encourage those
who are responsible for the budget to spend the money themselves
in a more effective and efficient way. I know the Committee have
looked at some aspects of efficiency and I know that you have
wanted more information about the range of efficiencies that exist
across the Department. Frankly, were we in the Department to require
that information of each and every person responsible for a devolved
budget, we would simply set up a very considerable amount of paper
shifting without actually helping people to spend their money
more efficiently. Indeed, in some ways, by requiring at all that
information to be collected at the centre, we would end up actually
reducing the efficient way in which we spend the money.
735. Let me give you two examples just to finish
on this point, Secretary of State—you may want to be more
specific on this—one from last week and one for this week.
We were told last week that there are about 1,200 of these projects.
Now assuming that they perform to an approximate normal curve
about a fifth of them, about 200 plus of them, will account for-four-fifths
of the money. If you have assured yourself that these really are
efficiency savings, surely it must be possible for the Department
to let us have the one-fifth that applies, the largest 200 largest
projects, simply by way of a heading in a sentence or two. You
were able to give us 20 headings as teasers but some of them were
little tiny items so one had a feeling that the selection had
not been entirely random.
(Mr Hoon) I think that is a little unfair. As I understood
the evidence last week—and indeed I know you have pursued
this matter on previous occasions—the idea was to give you
examples. The purpose of the example was to demonstrate that some
are quite modest contributions to efficiency but some can be quite
substantial ones. Indeed, the 3 per cent figure is not a consistent
figure across each and every budget. In some areas we judge that
it is difficult to achieve 3 per cent. In others we recognise
that there are greater efficiencies which are possible. There
is an allocation across the Department of efficiency targets according
to what we think is possible.
736. But we really cannot have even the largest
of them? That is just 200 headings, one sentence headings. That
would be too much to collect for the Parliamentary Select Committee
on Defence, 200 headings?
(Mr Tebbit) I gather that the PFO is looking to give
you more examples. I think I do know what the point is here but
there is absolutely no incentive for the 13 top budget holders
to collect efficiencies which are not real. There is no incentive
whatsoever for them to do so. They need to generate those efficiencies
because they know that if they do they can use those resources
to carry forward their programmes. They are not taken by anyone
else. They are not taken by the Centre. So they have absolutely
every incentive to achieve them rather than no incentive whatsoever.
Mr Blunt
737. They do not take them because they never
get the money.
(Mr Tebbit) They do get the resources. Our budget
is entirely presaged on at present a 1 per cent reduction each
year over the three years, offset by targets of 3 per cent efficiency
gains. The reporting system that comes in is on a basis of continuous
improvement. That is why it is not just a question of particular
projects but it is a culture of continuous improvement throughout
the organisation, e.g. on reletting contracts and on doing a host
of things. Examples have been given. Colin Balmer will give you
more. He is going to do a more detailed paper I know. The reason
why it is as tight as it is, is not because these are fake efficiencies
but because there are other pressures in the programme that have
arisen, partly as I say, because of the speed with which the operational
tempo of Kosovo hit us, making it more necessary to achieve earlier
all of those changes we were trying to attempt. And because of
other outside pressures that hit a budget normally in defence;
including defence inflation beyond ordinary inflation. Fortunately
we were able to have pay increases for our Armed Forces which
were above inflation. Fuel bills have gone up. The cost of Y2K
rectification was quite serious in defence. There are transitional
costs, as I said, in having to put the SDR implementation on a
very fast track to sustain what we were trying to do. Of course,
things offset the efficiency gains but nobody should think these
are cuts. There is no incentive for anybody to think they are
cuts.
Mr Brazier
738. Except that he cannot balance the budget
under the pressures he has mentioned if they do not ask for a
certain amount of efficiency savings. The efficiency savings were
programmed into the money which was originally allocated to you
as a Department and some of these pressures have arisen since
the allocation was made.
(Mr Tebbit) Challenges have not been issued evenly.
These are issues on the basis of negotiations between the centre
and the individual TLBs according to their business. So, of course,
the greatest savings are coming through the logistics area, the
procurement area, what we expected in terms of our policies. We
are not expecting the front line to generate such high efficiencies
but I do not want the front line to be inefficient. Nobody has
any incentive for that.
739. May I take you up on that specific point.
You said that the logistic area—you have obviously now a
unified logistics system—is there now a proper software
package which keeps the new Chief of Logistics fully informed
across all three services of how money is being spent?
(Mr Tebbit) Not yet. It will take him time to get
that in place. He has inherited three single service systems and
he has to put in place the changes necessary to do that. But that
will come. That is the objective.
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