Examination of witnesses (Questions 60
WEDNESDAY 28 FEBRUARY 2001
CLIFFORD and MR
60. Another matter that Laura Moffatt would
have asked about has been asked before, but I shall ask the question.
I am sure that the directors will be paid the market rate for
the job because we must have people who will make the new company
very successful. The only thing that I am concerned about, as
are others, is that in previous privatisations the people who
have steered a publicly-owned company into the private sector
are rarely out of pocket as a result of the experience. We want
to have assurancesfrom which Sir John's bank manager will
dissent stronglythat there will be a legitimate salary
and legitimate remuneration and that we will not see the kind
of a abominations that we have seen in many other privatisations
over the past 10 years, where the senior directors are able to
sell off their shares and disappear into a life of luxury. If
the Government are divesting themselves of something of which
they should not be divesting themselves, at least we shall be
partly satisfied if we feel that those standards are adhered to
and not the standards that we have already seen, much to our dissatisfaction.
I am sorry to ask this embarrassing question, but it needs to
(Baroness Symons of Vernham Dean) Of course, it is
a reasonable question. Given some of the matters that we have
seen in the past, it is a question that would occur to every reasonable
person dealing with this. I have no problem with you asking the
question at all. The legitimate salary must reflect the market.
That is very different from public sector salaries. As all of
us who work in the public sector know, there is a different market
in the private sector. I absolutely agree with you that it should
take that as its benchmark right across the private sector. Of
course, we shall take advice on this from outside the Department
as well as having views of our own. You say that you do not expect
anyone to be out of pocketof course notbut we expect
those appointed to earn reasonable salaries for what they do,
which will be different from what they are doing now. We shall
also expect there to be MoD approval of all the New DERA board
appointments. That relates to another part of the compliance regime.
61. What are the current constraints on people
inside the Ministry of Defence or its agencies on accepting directorships?
How long is it before it is open-house?
(Baroness Symons of Vernham Dean) It is the same as
it is for all civil servants. As a Minister in a previous incarnation
in the FCO I have seen the applications made by senior civil servants
to go into the private sector. Most of them are unexceptional;
on occasions some are referred and there is a period known as
"purdah" with which I am sure you are familiar, which
may be only a matter of weeks in some cases and maybe months in
other cases, but that is to ensure the proper separation of the
public and the private sectors over highly sensitive matters.
62. Purdah followed by Shangri-La. So there
will be constraints but they might be a matter of months?
(Baroness Symons of Vernham Dean) Mr Chairman, they
would be the same constraints as they are for the rest of the
63. I thought that was two years.
(Baroness Symons of Vernham Dean) It is up to two
64. That is the way they sell you things.
(Baroness Symons of Vernham Dean) Who sells you what?
65. Hang on! One fight at a time. You are satisfied
with these constraints?
(Baroness Symons of Vernham Dean) Mr Chairman, they
are constraints which have been adopted across the Civil Service
for a number of a years. In a former incarnation I was General
Secretary of the First Division Association of Civil Servants
and was part of looking at the way in which purdah operated from,
if you like, the point of view of the Civil Service. I was satisfied
with it then and I am satisfied with it now as a Minister. The
question must arise with people looking at individual cases and
about the sensitivity of the individual going from one job to
another and whether or not that is appropriate. As you know, Mr
Chairman, there are those who think those constraints ought to
extend to politicians as well as to civil servants.
Chairman: So we will have no revolving
door between one part of the building and the next with people
moving out swiftly?
66. Within a week or so.
(Baroness Symons of Vernham Dean) You have to look
at each case and each case is scrutinised. There is a committee
to which these cases go outside the DepartmentI have momentarily
forgotten who chairs the committee but I am sure we can get the
name to you, but a person of unimpeachable integrity outside the
Departmentwhich looks at these cases. Very often they pass
without comment and without constraint or restraint, as they probably
should. Individuals have a right to earn their living outside
the Civil Service. Why not? But there are occasions when, of course,
there are difficulties raised in relation to individuals and companies
to whom they are going and the information they take with them,
and they are then instructed to go through this period which is
known as "purdah"rather inappropriately but nonetheless
that is what it is known asand those periods usually start
at about three months and can run up to two years.
67. You know what I am getting at. I do not
want to see people leaving the Ministry of Defence who have been
part of the negotiation for New DERA and within 6 months, 12 months
or two years ending up on a tripled salary at the expense of the
public purse, be it politicians or civil servants or whoever.
I really feel this is a very sensitive subject, we have gone through
this before in other privatisations, and I would be reluctant
to acquiesce to any system which would allow people who were part
of the negotiations to profit significantly from their work. Politicians
have done it, civil servants have done it.
(Baroness Symons of Vernham Dean) Chairman, I will
send you papers about the system we have in place for civil servants.
I do genuinely believe it is robust. I am absolutely certain we
do not need an extra layer of bureaucracy to deal with this specific
privatisation that we are talking about. There will, of course,
be vacancies which ariseI am not talking about director
levelin New DERA, vacancies which arise in DSTL, and those
will be for open competition in the usual way, or however New
DERA decides it is going to do its appointments as time goes on.
The important point to remember is that there is already a very
robust monitoring of how civil servants move from the public to
the private sector and I am very happy to send you the details
of that. Mr Chairman, Sir John wants to say something.
68. Sir John, you have every right to defend
(Sir John Chisholm) Do you mind, Chairman, if I just
say a word about our remuneration policy, just to address that?
(Sir John Chisholm) It is clearly an issue that we
face, that when we recruit people from the private sector who
join us having been successful managers, successful scientists,
et cetera, in the private sector, we recruit them on a higher
salary than our public sector colleagues have. Clearly that creates
a demand within the organisation; what about us? To which I say,
we are being challenged as an organisation to prove ourselves
successful in the private sector, when we have proven ourselves
successful in the private sector, we can expect to enjoy the kind
of rewards that people who have proven themselves successful in
the private sector get, but we cannot get that until we get to
that stage. In regard to bringing in executives from the outside,
if they have a proven private sector record, then we are prepared
to pay those sort of salaries. In regard to people who are already
in the organisation, certainly when they have proven themselves
successful they can expect to earn the reward, but they cannot
expect to earn it just because we have been privatised.
70. Will there be any similarity of salaries
between those in Retained DERA and New DERA at least in the next
(Sir John Chisholm) In the next 12 months for certain
there will be.
71. I have a question on this point, directed
to you, Minister, on the advice you get as a minister, because
in your previous incarnation you very much signed up to the idea
of impartiality of advice to ministers.
(Baroness Symons of Vernham Dean) I still do.
72. Absolutely. Are you satisfied with this
process at work here, that you and other Ministers in the Defence
Ministry have had absolutely impartial advice when, to put it
bluntly, the person giving the principal advice, Sir John in this
case, does stand to gain personally if his advice is taken?
(Baroness Symons of Vernham Dean) To be honest, I
do not think he has been the person giving me the principal advice.
He has certainly been one of the sources of advice but he has
not been the principal source of advice. If I may say so, that
has come rather more from Mr Jagger's side of the house, and Mr
Colin Balmer, who is not here today, who is the Principal Finance
Officer in the Ministry of Defence. The impartial advice, of course,
has a particular party political context in the sense we have
discussed it in the past, but, you are quite right, it is important
for individuals to be impartial right the way across the spectrum
of activity. I am sure Sir John will not mind my saying, Sir John
was very much a proponent of the original model we discussed and
which we then decided was not something we wanted to go ahead
with. I am sure Sir John gave me entirely impartial advice, and
in the end we sought to do something rather different with this
Core Competence. The advice I have received from civil servants
varies enormously, it is between civil servants who have a whole
variety of different views. Sir John had a different view and
others have had different views, and in the end one has to take
responsibility as a Minister for taking a decision about how to
go ahead, and one hopes it has been done on the basis of sensible
advice which has been properly looked into by the Minister before
taking what are, as you rightly acknowledge, very important decisions.
73. You are happy that vested interest has not
come into the advice process?
(Baroness Symons of Vernham Dean) I am absolutely
happy that vested interest has not come into the advice process.
74. Can you reassure us please that anybody
involved in DERA now will not be getting share options when it
(Baroness Symons of Vernham Dean) No, I cannot give
you that assurance. What I have said is that we want to spread
the share ownership. I think it would be very unfortunate if you
were to say, for example, that individuals who are working at
what might be fairly junior levels in DERA could not have shares
in the company in which they operate.
75. I did not say "shares", I said
(Baroness Symons of Vernham Dean) I cannot give you
that assurance. I think that is something we would want to look
at in terms of the remuneration packages and I hope we will be
able to talk rather more about that towards the end of this year.
I do not think it would be fair all round to give you that assurance
at the moment.
76. What you are saying to me basically is that
you will not reassure me that what happened at the privatisation
of British Rail, for example, where train leasing companies were
set up and people were made millionaires overnight, will not happen
under the proposals you are making?
(Baroness Symons of Vernham Dean) I can give you an
assurance that I do not want to see anybody become millionaires,
as you put it, overnight simply by virtue of DERA being privatised.
I thought that the point Sir John made in relation to remuneration
goes as well for the point over share ownership. I would not wish
people to become, as you put it, millionaires overnight. Should
people prosper because the organisation prospers, that is a different
matter, but I think we are all aware of the very considerable,
frankly, affront that was caused to very many people through some
privatisations in the past, and we will be alive to trying to
ensure that similar affront is not caused this time.
77. May I ask Sir John then? Sir John, would
you, if offered, not take share options?
(Baroness Symons of Vernham Dean) I think that is
a very unfair question.
Mr Cann: It is a perfectly fair question.
78. Absolutely, totally fair.
(Sir John Chisholm) If I may say, Chairman, this whole
conversation raises the issue of my motivation in this, am I allowed
to make a personal statement?
79. Of course, and protected by privilege as
well. No one is questioning your motivation at all, Sir John,
not at all.
(Sir John Chisholm) Can I say something about myself?