Examination of Witnesses (Questions 80
TUESDAY 7 MARCH 2000
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
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.
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
(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.
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.
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
(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
(Mr Sharples) Certainly.
(Mr Rayner) We have set out in one of our earlier
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
(Mr Sharples) I am sure it will be possible to provide
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.
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
(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.
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