Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 80 - 99)

TUESDAY 7 MARCH 2000

MR ANDREW LIKIERMAN, MR ADAM SHARPLES, MRS ROSAMUND DUNN AND MR DOUG RAYNER

  80. That is reassuring but from what Mr Likierman said you seem to be suggesting when the resource accounts come out from the Ministry of Defence in 2001-2002 they clearly will not be sufficiently well developed to give the true picture and we are going to have to wait for another few years before the accounts really give a fair and true position to the Ministry of Defence; is that really what you are telling us?
  (Mr Likierman) I do not think it would fair for us to anticipate the nature of the audit opinion that might be given. It would be surprising if there were not issues arising from asset holdings in the Ministry of Defence which were still not the subject of NAO comment. In one sense the question then arises as to how far that might provide a more general problem for the Government rather than simply being one for the Ministry of Defence. If they improve their record-keeping and their ability to count and value their assets, that clearly would provide an improvement over where we are now.

  81. I accept all of those points but how many years do you think Parliament can accept qualified accounts from the Ministry of Defence?
  (Mr Likierman) If I take appropriation accounts, a number of appropriation accounts have been qualified for many years. It is the nature of the audit process that there can be qualifications and the accounting can be done on a qualified basis. It depends on what the nature of the qualification is as to how far it jeopardises any of the processes, either Parliamentary or governmental.

  82. It seems to me, from what you are saying, that you anticipate that these accounts from the Ministry of Defence will not be telling us what is going on in the Ministry of Defence about their asset holdings. If we are having a year-on-year qualification of those surely that is an issue of concern?
  (Mr Likierman) It is an issue of concern. The process of improvement has been taking place and will continue to take place. All I can say is that without being able to anticipate what happens in two years' time I am sure there will be issues surrounding assets in two years' time.

Mr Ruffley

  83. I have a question for Adam Sharples: can you tell us what progress is being made in aligning the subheads in the resource estimates with the objectives in the Public Service Agreements?
  (Mr Sharples) Perhaps I can explain a bit about the structure, just to be clear that this fits. The intention is that each department should have a set of objectives, and they were published at the time of the Comprehensive Spending Review. Each department then has a set of Public Service Agreement targets which flow from those objectives and the intention is that in the course of this Spending Review we will be reviewing those targets and updating them where appropriate. The question of the structure of Estimates and the subheads in Estimates is a matter which is under discussion between departments and the select committees and the structures have been put forward for discussion. There will not be complete alignment because Public Service Agreement targets are often not related to a specific function but rather flow from a general objective of the department. So there will always be some difference between the objective structure of the PSAs and the Estimate structure.

  84. When might those discussions, as you say, between any department and its select committee be completed?
  (Mr Sharples) The discussions are under way at the moment. When we put forward the Estimates at the Trigger Point 4 stage, which will be the "shadow" Resource Estimates for 2000-01, then that will be a further opportunity to comment on the structure of the Estimates and to check they are properly aligned with the structure of objectives.

  85. Is the answer to the question that it should be completed by Trigger Point 4?
  (Mr Sharples) Trigger Point 4 will be an opportunity to have a further review. Obviously the process will not be finally completed until the estimates are put forward for real for the 2001-2002 financial year.

  Mr Ruffley: Is the Treasury monitoring how far each select committee is doing its work in discussing, debating and advising each department?

  Chairman: With respect, it is not really Treasury's business to monitor us, we are meant to monitor them.

Mr Ruffley

  86. No, Chairman, you misunderstand, to what extent is the Treasury monitoring the progress that individual departments are making in their discussion with individual select committees? I was just wondering, to what extent is the Treasury making sure that by trigger point four we have some sensible agreement on this point?
  (Mr Rayner) The Treasury initiated a process last year of discussions between departments and their select committees about the structure of their Resource Estimates. That process went on for quite a considerable part of last year. We were aware that agreement was reached in almost all cases; though there were one or two areas where discussions were continuing. As my colleague mentioned, agreement should be reached by the time of Trigger Point 4. At that stage there should be a full set of Estimates which reflect the discussions that have taken place and, of course, discussions may continue as circumstances evolve. May I just make one further point on the earlier discussion. It is important to remember that the coverage of the Estimates does not necessarily match the coverage of the department's total business. An example mentioned in the earlier discussion was the Department of Social Security, where a lot of expenditure is non-voted. In that sort of case, by definition, there will not be a complete match between the coverage of the Estimates and the coverage of the total department's business and therefore its overall objectives.

  87. Picking up on that point, will there be good explanatory text for humble Parliamentarians who may not be accountants? On that very point you made a very interesting point that there will not be a straight read across. I think it is worth noting that certainly Parliamentarians would be pleased to see some clear explanatory notes when estimates come before Parliament to make that very point.
  (Mr Rayner) That certainly will be explained as part of the explanatory information. One of the advantages of the resource-based Estimates system is that, whereas at the moment cash Estimates focus purely on the voted expenditure of the department, part of the explanatory information alongside Resource Estimates will relate the voted expenditure to the totality of the department's expenditure. I think the relationship between the two elements will be considerably clearer.

Mr Cousins

  88. This Committee's concerns are different from those of the PAC because we are more concerned with objectives and how those objectives are distilled and how they are realised more than with, as it were, the strict accountancy and value-for-money side of it. The illustrative accounts that the Committee has been sent, in Mr Rayner's memorandum to us, about the DSS and the Ministry of Agriculture are extraordinarily unilluminating in terms of the achievement of objectives. In fact I think I probably put the point rather mildly, it worries me that Schedule 5, which is the reporting on objectives bid for the resource accounts, is going to be meaningless. Indeed the commentary we had about the DETR from our previous group of witnesses only confirms my feelings, the Schedule 5 accounts, the reporting of objectives is really going to be an empty process. Can you reassure us about that?
  (Mr Likierman) Can I just go back to something that Ken Wild said about the nature of the information that is being provided? In essence, what is happening is that Parliament will be provided with a huge amount of extra information which it has never had before, of which Schedule 5 is a very good example. We would very much hope that Parliament itself would take the lead and individual select committees will take the lead in terms of what they want from these accounts to make sure that they themselves could make the best use of them. In the case of Schedule 5 I think this is going to be incredibly valuable information which has not been available before. I am sure your fears will not be realised in that respect. The question of what select committees do with these is very much up to them. If they have to follow through what Professor Heald was suggesting and look carefully at these year after year, I am very sure they will provide an extremely important element for accountability to Parliament that has not been available before. The complexity, in a sense, refers to a quarry of material. The question of how it is then presented is the next stage along.

  89. Of course quarries are places where there are random explosions for which some announcement has to given, followed by a huge amount of dust. In order to make sense of this business about objectives you have to consider not merely the resource accounts but also the departmental plan and then the departmental report for the previous year. It is not at all clear to me that we are actually going to have the mechanisms coming on stream together. Will we have departmental plans with the Service Delivery Agreement process and the departmental objective clearly set out? When are we going to have those?
  (Mr Sharples) The intention is that this year's departmental reports, to be published in April, will include a clear statement of the department's objectives, its targets against each of those objectives and the outcome against each of those targets. The information in Schedule 5 on the resources devoted to each objective, which will come through in time, has to be set in the wider context of performance reporting through the departmental reports. The intention is that as we move into resource accounting and budgeting the material that is now in the departmental report will be split into two reports as a forward-looking report to be published in the spring and a backward looking report, including performance reporting, information and the accounting information to be published in the autumn. These new arrangements will start to come into play for the first time in the autumn of 2001, when we envisage the first backward-looking set of reports will be published. Once we get into 2002 we will move into the structure of the forward-looking and backward-looking reports. The precise contents of these reports is something that is still under development and we would very much welcome responses from Parliamentary committees on the preferred presentation and content of this material. The purpose of the material is to try and keep Parliament and the public informed and in touch with what departments are doing and using their money for. We very much want to ensure that that information is presented clearly and meets your needs.

  90. In the same way as Mr Rayner sent us the two shadow or resource account reports for the Department of Social Security and the Ministry of Agriculture, is it possible that the Committee could have available to it a shadow forward-looking report?
  (Mr Sharples) Certainly.
  (Mr Rayner) We have set out in one of our earlier memoranda[12] a list of possible core requirements for the forward-looking documents and backward-looking documents. The idea was to give an overall view of the sort of material that would be included in these documents.

  91. Yes, thank you for that, however, what I actually asked for is, is it possible to take that on a very important stage forward and provide the Committee with a shadow forward-looking report for a department, so we can see what that exercise means in practice?
  (Mr Sharples) I am sure it will be possible to provide that.

Chairman

  92. Perhaps you can think about that?
  (Mr Sharples) Whether it makes sense to have a full draft of a forward-looking report, perhaps we can consider that. We can certainly provide you with further information about the intended contents of these reports.

Mr Cousins

  93. That is helpful. We will not get the first forward-looking report until the spring of 2002 and, of course, one or two things will probably happen between now and 2002, well, in fact, probably more than one or two things. Can I just come back to the output and performance analysis targets or objectives which have been specified so far, will they change between now and 2002?
  (Mr Sharples) As I mentioned earlier, the intention is that Public Service Agreement targets that were published at the end of 1998 will be reviewed in the course of the Spending Review that is now under way. We plan to publish a new set of targets, building on the existing targets, in July at the conclusion of the Spending Review, and then departments will be reporting on progress against those new targets.

  94. Right. Let us be clear about this, what worried me was a sentence in this report which was produced in December, where it says, "From next year the output and performance analysis will no longer need to exist formally. All of the key elements will instead be incorporated from 2000 in PSAs and SDAs." In fact, if we do not get the PSAs and the SDAs until the spring of 2002 there could be all sorts of adjustments to objectives that could go on in the interim period?
  (Mr Sharples) I hope that will not be the case. The intention is that new Public Service Agreement targets will be published in July and shortly after that, in the autumn, each department will be publishing a Service Delivery Agreement. I have to apologise for a new term, this is simply taking the detailed efficiency and performance information that was previously included as a section of the Public Service Agreement and putting that into a separate document. We felt that would be helpful in leaving us with a more streamlined Public Service Agreement which focused on the high level policy targets of the department and leaving the issues to do with administration for the Service Delivery Agreement. By the autumn, with the publication of the Service Delivery Agreements, we should be clear about the targets that the department is working to. If I can just clarify one further point, although the formal split of forward-looking and backward-looking reports will not be fully in place until 2002, the intention is that in the spring 2001 departmental reports will include the sort of forward-looking information, including the Estimates, that would normally be included from 2002 in the spring report.

  95. How does the Government intend Parliamentary scrutiny of the objectives, the output and performance analysis objectives will take place?
  (Mr Sharples) Through the departmental reports, that will be the vehicle for publication of the objectives and PSA targets. They will be available next month and again in the spring of 2001. From 2002 they will be available in the autumn in the backward-looking report on the performance of the department.

  96. Yes. That is passive scrutiny, that is getting a pile of paper and thinking, "Dear God, do I really have to go through all of this?" There is no provision made for debates on departmental reports, is there?
  (Mr Sharples) Departmental reports are presented to select committees and are subject to scrutiny by select committees. Debates on Estimates also take account of the departmental reports and other opportunities.

Mr Davey

  97. Following up some of the points Jim Cousins made about Schedule 5 and the detail, I think Jim Cousins was being incredibly kind. Schedule 5 for the Social Security Department has four objectives, when you divide it out into the net amounts spent on each of those four objectives you have 16 billion, 7.5 billion, 24.4 billion, 43.6 billion. What we are supposed to understand is by desegregating to those rather large quantities we can understand how policy objectives relate to expenditure. Do you think we can really make any serious analysis of that from the draft Schedule 5 you have given to us?
  (Mr Likierman) Coming back to the point about quarries rather than answers, it seems to me that these are figures which presumably departmental select committees will then want to ask departments about and to go, perhaps, beneath those figures. Those are very large sums because you have taken the department with the largest expenditure total. If you were to disaggregate into 20, 30, 100 targets, very often there would still be very large sums involved. The analysis has to follow whatever these figures provide. For the first time we are providing figures in this way, and that, hopefully, will provide a way for select committees to ask the questions they have not been able to ask before.

  98. When the New Zealand Government provided this information for the first time the way they broke down their estimates into different classes was to go into significant detail. This is a initiative not by the New Zealand Parliament but by the New Zealand Executive. If you look at the Foreign Affairs Department they broke it down into policy advice and specific territorial areas. They broke it down into that detail providing New Zealand Parliament with that level of detail so they could link the objectives, the outcomes and the money spent. Why has the British Government not gone down that route?
  (Mrs Dunn) Can I remind the Committee of the first comment that was made about these examples? It was that there were 20 pages about social security and they were very unilluminating. There is always a difficulty in getting the balance between putting in so much detail that, in fact, 20 pages become 50 pages and become less illuminating and, on the other hand, giving enough information so that people can understand what is going on. Our feelings have been it should be a matter for individual select committees to take a view; for example, what the Social Security Committee thinks is the most helpful way and the greatest degree of detail they need in order for them to do the job of understanding what social security expenditure is for. I think it is always going to be difficult if you ask for more detail. The New Zealand Estimates ended up with 800 different votes. Is that what Parliament would want, or would it be easier to adopt an approach which allows us to give quite high level objectives here but to be able, as a supplementary, to provide as much information as committees want about what is contained in that?

  99. You are saying to us that we need to, across all of the departmental select committees, be prepared to ask different departments to break down their first objective into a whole series of targets beneath, presumably from the Public Service Agreements, and to try to understand how much money is being put in to meeting that particular target. It is our job to come to you to ask for that information, you are not going to provide that to us until we ask for it.
  (Mrs Dunn) I do not think we would see it as something that you must always come to us about and we will be completely silent. Equally, it is not a case of us trying to present information in the greatest degree of detail possible and then finding that Parliament's view is that there is just too much to make it manageable. One would hope there is a dialogue.


12   See pages 128-9. Back


 
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