Examination of witnesses (Questions 920-939)
WEDNESDAY 24 JANUARY 2001
THE LORD
SIMON OF
HIGHBURY, CBE, THE
RT HON
DR DAVID
CLARK MP AND
THE RT
HON MICHAEL
HESELTINE, CH, MP
920. That is one kind of blockage which you
identify. My impression of government now is that it is immensely
frustrated by the gap between the setting of policy delivery targets
and the delivery of those things on the ground and it feels somehow
in its bones that there are blockages in there that are stopping
this happening. Lord Simon, you were, as I understand it, brought
in to "think the unthinkable" about all this. What is
the unthinkable?
(Lord Simon of Highbury) I do not actually believe
that this is a problem where you have got to continually think
"outside the box" if that is what you mean by the unthinkable.
Managing a system—and this is a very big system, 600,000
people, executive agencies and administrators, so it is a very,
very big company to manage—you do have to think very clearly
about leadership, the planning structure and the performance structure
and you can separate those three things out relatively clearly.
I think whilst it is interesting to listen to Michael Heseltine
talking about the system he experienced, if you look at the system
which I experienced, the public sector agreements (PSAs) are a
very good planning basis for most departments. They separate out
strategic objectives, medium-term objectives and short-term objectives
and the dialogue between the ministerial team and Civil Service
management can be very effective if it is handled professionally.
The issue is the consistency of quality and the consistency of
synergy between the ministerial team and the administrative team
and the understanding of the system through those objectives and
who is responsible for what. It is no different than most businesses.
There are not miracles in businesses. There is just a lot of hard
work, a lot of planning and a lot of consistency about performance
management. I do not think you have to think the unthinkable.
You just have to be very clear and very consistent about professional
management in my experience, which we are not. For all the reasons
that have been explained, in a dynamic system of politics there
is very little consistency. So how you manage the system becomes
much more professionally important in this structure than in other
ones. There is a very good theoretical structure in place. The
issue is to make it work better. I think that is professionalism
not something outside the box or unthinkable.
921. So the idea you have some kind of radical
plan in your back pocket is simply not true?
(Lord Simon of Highbury) No.
922. Could I ask you finally on this same area,
you were involved in the Treasury's Public Service Productivity
Panel which reported last August. I have not read the report but
I read press reports of the report, and my reading of it is that
your conclusion and that of your colleagues' was that it was a
political failure to provide what you call "visible, committed
leadership". There was a problem here, the problem of conflicting
priorities and so on. Is it the case that you concluded that it
was really a failure at political level rather than a failure
at administrative level that you were identifying as a key factor
here?
(Lord Simon of Highbury) I think it is a relative
failure of both. As I say, if you look at the private sector you
will see relative failure in many companies, either the failure
of the board to have its strategy consistent and clear or the
failure of the executive team to deliver appropriately. There
is no perfect company in that sense. So what I think this report
Meeting the Challenge of Productivity tries to point out
is means by which both parties, the political leadership and the
administrative leadership, can improve by professionalism of management.
So, no, I do not think there is a total failure on the political
side and I do not think there is a total achievement on the administrative
side. What I do think is important is that if you have vertical
structures (which government is) with departments of state whose
accountability to the public at large through Parliament is always
vertical, then the management of the horizontal issues, of which
there are many in government, becomes professionally very difficult.
If you did that in a company you would find it much more difficult
to manage a company. So there are particular challenges in political
management which are horizontal issues. Take an issue like Europe,
how do you manage that across many departments when there is vertical
accountability through the management structure? Quite difficult.
923. You have put your finger on precisely the
dilemma but have you found the answer to this dilemma, the vertical
and horizontal? Is it in a more muscular centre that can enforce
its will throughout the entire system? Is that the direction that—
(Lord Simon of Highbury) I do not think there are
any absolute answers to that question, Chairman. It depends on
the issue and the dynamic of the market-place. That is not to
make things difficult. The issues are dynamic and to say that
for every issue we need to solve in government all we need to
do is strengthen the centre is like a company saying they have
not got enough people from head office who can walk around saying,
"I am from head office. I am here to help you." We know
that problem. It is not to load the centre all the time that is
critical. It may well be that if you empower and allow people
within the system to do more work themselves and to go up and
down the organisation chain less, you will get more out of the
system, particularly if it is a non-critical issue. If it is a
critical issue, and that is about priorities and focus at the
political level, you may want more centralisation. I do not think
there is an absolute management answer to that. Each problem needs
to be analysed and you have got to decide where you have got to
apply the pressure to get improvement in delivery.
Chairman: Thank you very much. Mr Tyrie?
Mr Tyrie
924. Before I ask any questions I saw Michael
Heseltine writing furiously at one point and I just wondered if
he had anything he wanted to add.
(Mr Heseltine) I was toying with the question you
put to Lord Simon about thinking the unthinkable. I have had seven
small thoughts.
Chairman
925. Seven unthinkable thoughts?
(Mr Heseltine) The first is that you should recommend
separating the Treasury, from its present overarching and dominating
and, in my view, stultifying influence over the management of
our economy, into two parts. One is essentially an accounting
part, the second is what you might loosely call an office of the
budget which takes strategic views and is "for" things
as opposed to just being "against" things. The second
is that you should give the Audit Commission the responsibility
to audit national government as well as local government. The
Audit Commission has saved massive sums of money in local government
by production of comparative statistics in many different services
proving you can measure the public sector perfectly effectively,
but it is not applied to central government and it should be.
The third thing is that one should ask oneself why do we need
civil servants? We need civil servants to give the best policy
advice to Ministers and appropriate bodies. The classic civil
servant is very sophisticated, very clever, and very difficult
to find. We have got 600,000 who do not conform to this rather
refined definition because huge numbers of them are in delivery
of services as opposed to giving advice to Ministers. I believe
strongly that the evidence is overwhelming that service delivery
should be the result of competitive tendering with private sector
organisations delivering because they will inevitably deliver
more effectively in terms of quality of service and price than
a bureaucracy which lacks the discipline of the private sector.
So that would mean that you could concentrate on recruiting the
quality of civil servants that we associate with the concept and
leave the delivery of objectives to people whose job depended
upon delivery and who would lose contracts if they did not deliver.
The next thing I would want to see is that there is proper management
information of the sort of quality that you would get in any worthwhile
private company about the detail and costs of departments set
out in language and of a statistical form and numeracy that people
can understand. Sixthly, I think that the targets set for agencies
in the public sector should not be set by civil servant because
they are too close to the agencies and often part and parcel of
the same process of decision making. I think there should be an
external discipline on the setting of targets. Time and again
we found when targets were being set they were worse targets than
the ones that had been achieved the preceding year and Ministers
were too busy to be bothered with attention to all this stuff.
So there should be a public/private sector scrutinising process
on the targets that are set for agencies. And, seventhly, there
should be much more cross-discipline recruitment between the public
and private sectors. If I have got a few more minutes I will come
up with some other ideas.
Chairman: I am glad Andrew Tyrie asked what
you were writing.
Mr Tyrie
926. I do not seem to need to do very much here.
Perhaps I should just ask Lord Simon to explain the changes in
his physiognomy as he listened to that list which varied a good
deal as Michael spoke.
(Mr Heseltine) In what way did it vary? I could not
see.
(Lord Simon of Highbury) The occasional smile of support!
I think the area where I would feel most uncomfortable is on the
issue of definitely deciding that services are always delivered
better in the private sector. I am not convinced by that argument
necessarily for either the health or school system for instance.
I think a hybrid system works quite interestingly and whether
it were government policy or not (and it appears to be) having
both systems available and choice to the people seems to me to
be a very good principle. I was smiling slightly at the thought
that we had to have public tender for every service and progressively
privatise all the system. I am not sure about that. I smiled with
interest on the reorganisation of the Treasury, Michael. One might
think about re-organising the Treasury but I would probably think
about it in a different way and have it concentrating on macro
economic management and the issue of money and its relationship
with the Bank and to try perhaps to think of micro economic management
and the role of the DTI relative to the Treasury in a slightly
different light. Those would be issues. I think the days of the
Treasury as a one-year cash accounting system saying no to everything
have disappeared with the PSA structure and I think the PSA structure
has been one of the great advances in the general management and
professional management of the political system in the last four
years, as I have observed it. So I certainly believe that the
Treasury could be encouraged to take more risk and involve itself
with greater flexibility in strategy and policy development, but
I think it is moving in that direction and that would be my inclination.
927. Between the two of you, you have abolished
the Treasury, have you not? Monetary policy has basically been
given to the Bank of England anyway so when you say give them
responsibility for looking after monetary affairs the lion's share
of that has already gone. Michael wants to create an Office of
Budget like the OMB in the United States, I presume, probably
supervised by an equivalent organisation here to the Congressional
Budget Office. There is not a great deal left if you also hand
the micro supply-side responsibilities across to the DTI. Is this
a fair description of your combined views, that it amounts to
a dismemberment of the central department which is, if I may say
so, a very radical proposal, the dismemberment of the first and
most powerful department in Whitehall.
(Lord Simon of Highbury) It still has to handle such
small issues as tax revenue and collection and balancing the budget
for the nation.
928. Tax!
(Lord Simon of Highbury) My view of it, Andrew, is
that—and I know you are tempting me to say more—the
answer is it is a very small department already and the chances
are that it will become smaller because of the focus of change
in monetary management and budgetary management within the system.
But abolish the Treasury? Good heavens above.
929. "Dismemberment" was the word
I used. Michael?
(Mr Heseltine) I think, as Lord Simon said, there
are essential jobs that come with the collection of revenues and
the setting of the budgets and the monitoring of expenditure and
I do not quarrel with any of that, but anyone who has seen the
pervasion of influence of the Treasury understands that it is
a very negative force. Everything is rejected as a matter of principle
and then you have a huge battle. They are always trying to find
ways of cutting the budgets of departments. There is never any
strategic appraisal as to where the problems are in society over
which they have such an influence. I understand their problems
because of course the whole question is expenditure, but a classic
example of this, which I suspect has certainly been the case in
all governments up until the present one (and we cannot pass judgment
on that one because it is in its early days) is the way in which
capital expenditure has been slaughtered because people would
not take the difficult revenue consequences on the revenue programmes,
so in the end you always cut the capital and, without any doubt,
over a long period of time this country has suffered in its infrastructure
in the widest sense of the word precisely because of that failure
to invest in the education system and the transport systems, for
example. Water was slaughtered as a programme in the 1970s, I
happen to remember. So you have to have a Treasury, a finance
director, an accounts department, whatever it may be, but I think
you need to have, as you rightly said, an Office of the Budget
to try and take a strategic view as to what the requirements of
the economy are.
930. Could I probe a little bit further what
the task of the Implementation Unit is, which I think you head
up—
(Lord Simon of Highbury) Nothing to do with me guv!
931. So this stuff we have had in the press
about the Implementation Unit linked to your name is—
(Lord Simon of Highbury) No.
932. Could you tell us what you do?
(Lord Simon of Highbury) I offer advice if asked.
933. And how many days a week do you find yourself
devoted to offering advice to the Government?
(Lord Simon of Highbury) Some weeks none, some weeks
two or three. I have only been doing this job for 15 to 18 months
so it is hard to see a pattern.
934. How many man days have you devoted to giving
advice over the last 18 months?
(Lord Simon of Highbury) I have no idea because I
do not charge for my services so I do not have to keep a record.
935. You do not know whether it is ten days
or 50 days?
(Lord Simon of Highbury) It may be over the last 500
days 300 days of thinking time and 60 days of activity.
936. Do you have any position as an adviser?
Do you have any formal position in any respect whatsoever?
(Lord Simon of Highbury) None. As an unpaid adviser
I give advice if people ask for it.
937. Do you do that on the basis of government
papers? Do you see government papers from time to time?
(Lord Simon of Highbury) I have seen government papers
from time to time like the draft of the Public Services' Productivity
paper which the Chairman was talking about from the Treasury.
Since I was one of the panel I drafted some of it and you will
see my name put to some of it. The same with Modernising Government
and the reports on Civil Service reform. Those, as they have been
drafted, I have seen in part as they have come through.
938. Do they come via the Cabinet Secretary?
(Lord Simon of Highbury) Via the Cabinet Secretary
or one of the Departments. I am a member of the board of the Centre
for Management and Policy Studies (CMPS).
939. Do you hold or have or attend meetings
with the Cabinet Secretary at which Civil Service reform is discussed?
(Lord Simon of Highbury) Yes I have done. The board
discusses that matter. It is mainly about the training and learning
side, the development of programmes.
| 
