Examination of witnesses (Questions 940-959)
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
940. The reason I am asking these questions
is to get a clear view of where the lines of accountability lie
for an unusual person like yourself around Whitehall. There have
not been very many of these over the last quarter of a century.
You are accountable ultimately for what you do in Whitehall to
whom? The Prime Minister? To whom do you answer? Suppose you get
something wrong, suppose you collect one of these papers from
the Cabinet Secretary and leave it in a restaurant and there is
a row, who is responsible?
(Lord Simon of Highbury) I would be responsible if
I left it in a restaurant, but I doubt very much whether it would
be the end of the accountability because the person who had given
it to me would no doubt be accountable, so if it had come to me
through the Cabinet Secretary or it had come to me through one
of the other Civil Service channels, no doubt they would be held
accountable.
941. You have brought a good deal of business
experience to bear on Whitehall and Michael has made a point about
the need for more exchanges across disciplines. Do you think that
a multiplication of Lord Simons across Whitehall is going to achieve
much?
(Lord Simon of Highbury) It would not achieve much
multiplying me because giving advice is not the same as doing
the work and delivering. I think much more important is the target
of 100 private sector experienced people coming into the management
machine, the 3,000 civil servants who are what we call generally
the management level. I think that cross-fertilisation is extremely
useful and long may it continue. Having open tender for jobs within
the system and fewer barriers to movements between departments
is all to the strength of the system. I think that is what will
improve the professional management.
942. Can I end by asking Michael Heseltine how
he thinks that cross-fertilisation should be built up. What are
the main impediments to it? Is it the lifetime career civil servant
approach? In years gone by almost everyone who joined British
Petroleum thought they might spend a whole career there. I joined
British Petroleum in 1981 and a high proportion of people thought
they were joining for a lifetime. Everybody knows now that is
not true in large sections of industry but it is still true in
a few professions, one of which is the Civil Service. People enter
it in their early 20s and spend a lifetime in it. How are we to
get this cross-fertilisation?
(Mr Heseltine) I do not have statistics but I think
it is worth probing that assumption because, if I think of some
of the most talented civil servants with whom I have worked, several
of them have moved out into the private sector and I think this
was not uncommon. I can think of some who came in from the private
sector, but again I have no statistics for that. It is not too
difficult if you are determined to do it for a Cabinet Minister
to bring people into the department. I personally am very much
committed to the view that special advisers—non-political
special advisers—are an enormously valuable asset. I brought
in people like Tom Baron from the house building world, Peter
Levene from industry, Tom Burke from the environment world, and
they worked within the departments as special advisers. What their
politics are I have no idea. Certainly they were not all Conservatives.
I brought a hundred export promoters into the DTI in order to
act as a liaison between the national markets and the Department
of Trade and Industry. There were already people there—innovation
advisers they were called—in the DTI, so it can be done.
So it should be.
Chairman
943. Can I pick up one point from that exchange,
and it is a Treasury point again? Lord Simon said that he thought
the PSA system was the most important innovation for some years,
and of course this is Treasury driven. Having abolished the Treasury
as it were on the one side—
(Lord Simon of Highbury) Sorry, Chairman; I did not
abolish it.
944. Having separated out various activities
we have got the fact that now the Treasury is performing what
you were describing, Lord Simon, as this most important innovation
in government, driving from the centre, from the Treasury, these
agreements right through the public sector in terms of performance
targets and delivery. Should the Treasury be doing that? If the
Treasury did not do it who would?
(Lord Simon of Highbury) Again, if you think of the
private sector analogy, you would probably have a team involved
at the first level setting the strategic plan for the company,
and at the second level allocating resource in the appropriate
direction. You would put together a group of people to perform
those functions and that would be, referring back to your earlier
conversation, the strong centre. It would probably have representatives
from the financial function, representatives from the strategic
planning function and representatives from the operating divisions
and you would make, as you said yourself, Chairman, a strong centre.
As it happens the way the system at the moment works it looks
more like two separate functions: a financial strategy function,
which is certainly now more effective than a revenue control function
because it gets into strategy objectives, as you said, at a much
wider level, but you also have at the centre in parallel a strategic
planning function and a policy advisory function which is more
Number Ten and the Cabinet Office running in parallel. Effectively
you have a choice. You can either run it like that as a two-headed
system or you can try and structure something which puts together
all three parts at the centre. Companies run these things in different
ways but, excuse me, I always think in a private sector model,
a company model, because that is the administrative system I am
used to.
945. Therefore you are predisposed towards thinking
about a more collegiate, more board, view?
(Lord Simon of Highbury) Yes, I am more predisposed
towards that model, particularly where you have very strong departmental
walls for public accountability reasons. The horizontal management
of the system has always seemed to me to be the greatest challenge
and when you start to allocate resource across departments of
state to achieve a strategy, how you manage that horizontally
and play the tunes on it is the most difficult part of the professional
management system.
946. So your enthusiasm for the PSAs goes alongside
the belief that they would work even better if they were somehow
collectively owned?
(Lord Simon of Highbury) Yes, that is fair to say.
Mr Turner
947. Can I first of all apologise to the three
witnesses? I have to go shortly. It is nothing personal, I assure
you, and I look forward to reading the transcript of the rest
of the meeting. I would like to take up with Michael Heseltine
the government offices that he set up. You did set up those in
the late 1990s. Can you tell us why?
(Mr Heseltine) Yes. I think they would come initially
from the urban challenges that we faced where you had a range
of government departments acting in their own interests, I do
not mean selfishly but clearly they were in pursuit of their own
objectives in these areas with their own officials and their own
officers, and it seemed to me that the problem of the urban world
actually required a much broader approach. The policies we had
been pursuing from the 1980s onwards were all about trying to
regenerate comprehensively and you cannot do that unless the education
and crime and the roads and the environment and the housing all
come together to try to raise the particular area you are preoccupied
about. We talked about it internally and came to the view that
it made sense to create integrated offices of government in the
regions. I think it was the right decision. We managed to deal
with the inevitable clash about who was going to take over whom
by dividing the regional directors amongst the departments that
were defending their sovereignty and providing they all got their
share of the top jobs it worked extremely well and I think the
regional directors have one of the most exciting jobs in government
today. I think it has been a considerable success. That is why
we did it.
948. You say it has been a considerable success.
You think that they are still working there?
(Mr Heseltine) Certainly I had a lot to do with the
regional directors; I saw them regularly. To my knowledge they
thought the job was extremely attractive and it was much more
effectively administered once it had been fused, and unless they
were telling me what I wanted to hear (which I do not believe),
undoubtedly it was a very sensible and overdue step.
949. I get the impression from my own regional
office that one of the difficulties is the one Lord Simon was
referring to in the horizontal management sense that, whilst what
is now the DETR elements worked quite well, it was very difficult
to get the education and those other departments to work quite
as closely as they should.
(Mr Heseltine) I think I am right in saying that education
was not involved.
950. Exactly. That is the point I am making,
that you are saying it should have been.
(Mr Heseltine) Of course it should be. One of the
things that is not as appreciated as it should be, and it is slightly
outside what is relevant to what you are talking about, which
we discovered in this whole initiative, was the way in which the
local authorities were divided in battalions which saw their command
structure going direct to their sponsoring department in Whitehall.
That was very serious in that of course they were very much creatures
of Whitehall. Much more serious was the fact that they were relatively
indifferent to what was going on in the other parts of their local
authority. In other words, the housing guy was looking to the
DoE and was hoping at the end of the year to get a bit of extra
money, but he was not particularly preoccupied by crime in the
locality because that was the Home Office. You can repeat that
pattern. One of the great benefits that came out of the concept
of City Challenge is that these local authorities, incredibly,
for the first time had to talk within themselves because they
could not win the City Challenge process unless they had put forward
corporate plans which were based upon the general interest of
the community that was bidding for the City Challenge money, and
of course they could not do it if they did not involve the private
sector as well or the tenants or the Chief Constable or the headmistress
or the teachers. For the first time in the process of putting
money up for grabs we brought together the individual local authorities
at a local level and the local community at the local level in
a way that previous systems prised apart.
Mr White
951. So why could you not do it at the central
level as well?
(Mr Heseltine) We are of limited ambition. We did
bring them together in a sense. There were Cabinet committees
that brought them together and actually that Cabinet committee
process accepted and drove forward City Challenge and, if we had
been elected for another term, we were on the verge—and
I believe this very strongly as an idea—of moving from the
limited concept of a corporate plan for, say, a community of up
to 30,000 people, to bid for the extra cash, to the point at which
local authorities bid for the whole of their corporate plan. That
would have been the next step and that is what needs to be done.
If I had been one of the directly elected chief executives it
would have been done immediately.
Mr Turner
952. This is interesting in the sense that we
are going to Newcastle to look at how the north east looks at
that. Maybe Lord Simon can come in on this horizontal management
aspect. Is it the politicians who are preventing this from happening
in the way that most of us would envisage any regional government
office working, and involving departments in that? Do you see
that as a political problem or do you see it as an administrative
problem?
(Lord Simon of Highbury) I do not really have the
experience to answer that because in my brief ministerial career,
particularly as it were coming straight from the business world,
I tended to focus on two projects which I knew I needed to get
done within a specific time and not worry essentially about the
organisation of government through to the local government regional
office. I worked with the regional offices because of the DTI
policy, but not in looking at it as a co-ordinated structure.
The issues of co-ordinating structure are the ones that one has
had to face as a minister at the top of the system. No doubt the
more problems you have in co-ordination and horizontal management
at the top of the system the greater will be the difficulties
at the bottom. They are usually magnified if you look at it in
the private sector, so your question is extremely important but
I do not think I know enough about the regional office and local
authority management structure to comment.
953. Do you see it as part of a devolution process?
(Mr Heseltine) Yes, very much. We are desperately
over-governed. People talk about the freedom of local government.
I once got the forms that had to be completed in local government
housing departments before they got authority for capital expenditure
on houses. By the time you had dealt with the colour of the brick
and the slope of the slate and the 80 questions that those local
authorities had to fill in, the language of freedom for the local
authority had no meaning whatsoever. I do not have the slightest
doubt that the same thing went on in the Department of Education
and all of that. If we had got to this stage I was trying to take
my colleagues towards of a corporate plan and a competitive process
for bidding between local authorities for the funds that were
available, then one of the prizes that I saw in that was that
central government could stand back and allow local authorities
to be different. I happen to think that Newcastle is one of the
more interesting examples of a coherent local government because—and
heaven knows, the north east feels a bit beleaguered for very
understandable economic reasons—they have co-operated much
more effectively than the equivalent public/private sector or
local authorities in other parts of the country. I do think that
if we got this really powerful local figure, a working community,
a devolved relationship through the government regional offices
(I do not believe in regional assemblies, by the way; it is just
another tier to get in the way) then I think Whitehall could have
a bonfire of its controls. The unitary authorities are a very
important part of this package. You have got them in the north
east but they should have them in the shire counties as well.
Then you could say, "These are big, mature people and they
must be allowed to experiment and do things differently".
That would then be a very substantial devolution of power from
the centre.
954. What about accountability in a direct sense?
You have the accountability of central government, you have the
accountability of local government, you have got these government
offices in the north west and north east and so on, working in
there, you want them to have freedom and yet you do not seem to
want them to have any direct accountability to the people they
are bringing services to. You talked about the regional directors
reporting directly to you rather than to the people whose services
they are delivering.
(Mr Heseltine) First of all, there is a very real
supra-authority relationship. The road programme is a national
road programme, for example. The police forces operate very much
on a national scale, so there are big central issues. There is
a whole allocation of funds issue, there is a whole accountability
to the use of the funds issue. The role of central government
is unavoidable in such circumstances. That is what the regional
offices are there for. One was trying to get them into a position
where they took a positive view of their role. They were going
to help as opposed to saying, "Fill in form 43 and we will
let you know". That became an interesting and exciting job.
The accountability seemed clear. The regional office is there
to represent central government and be accountable for the decisions
of central government. The local authorities are there to carry
out their responsibilities, and the difficulty for the Member
of Parliament of course is to try and recognise that he is not
a local councillor. If you are in a marginal constituency the
temptation is to be a district, county and goodness knows what
councillor. That is very corruptive of the system.
955. I must admit it did sound very Roman. It
is quite good if you are a Caesar but not very good if you are
further down the scale.
(Mr Heseltine) I did not get very far with Latin myself.
Mr Wright
956. You mentioned the fact that you were opposed
to regional government. Do you not think that there are so many
tiers of government at the moment that something needs to be done
to put the balance back?
(Mr Heseltine) I have just indicated one area where
we did. We got rid of the two tiers in Scotland and Wales with
great success but that was largely because there were not any
Conservative seats to lose so it was not a hugely controversial
thing from my party's point of view. It was much more difficult
when we tried to do the same thing in England. We set up the Local
Government Commission for England and look where it got us. That
was one way of getting rid of the tier. I am a unitary authority,
county based man myself. That gets rid of a tier. It gets rid
of the districts. Do you then recreate the regional tier? I say
not. There are certain things; I can understand that there is
a regional road programme for instance, but actually it is mainly
a national road programme, so regionalising it probably creates
a tension there between the central planning and the local one.
From my knowledge and experience of most parts of this country
there are not regional identities. People in Preston do not think
of themselves as Liverpudlian, and certainly Mancunians do not
think of themselves as Liverpudlians, and so trying to put the
whole lot together just creates another forum for a great row.
In the north east arguably it is different. I am not sure whether
Northumberland thinks of itself as Newcastle, but certainly it
is closer. I am making the right point, I see.
Mr Campbell
957. Newcastle thinks it is Northumberland.
(Mr Heseltine) That is right. So creating this regional
tier is just another row and another tier. But you have to have
the regional offices of government. That is not the same thing
at all.
Mr White
958. One of the things I found interesting as
somebody who reformed the local authority I was on and backed
your reforms in the early nineties and tried to think the unthinkable
and create new structures within local government, was that one
of the things that came out of that was that public services do
not have the involvement of the community. They did not at that
time and still for the vast majority of the public services, community
involvement is minimal. Consultation is at best patchy (real consultation,
that is) as opposed to, "We have decided what we are going
to do here". How do you go about bringing the public into
the mechanisms of government?
(Mr Heseltine) This was to me one of the most exciting
things of City Challenge. There were those to whom it was anathema
(not my party but there were parties who did not take so kindly
to the idea of City Challenge) because they said, "You are
going to penalise the unsuccessful." I said, "Yes, we
are", and we did. If we had 30 local authorities bidding
for the money that was available and it was five million pounds
a year for seven years for these deprived areas, then only ten
or 11 won, so 15 or 20, whatever it was, lost. I was prepared
to take the flak of that, believing, hoping, that the effect would
be that the 20 would not sit and sulk but would say, "Sod
that, we are going to do it right next time", and that is
what actually happened. The ten that won became the role models
and the other 20 immediately rushed off to see how they had won
and we managed to ensure the following year that a lot of the
20 won as well and so it worked out. One of the conditions of
City Challenge was the community involvement. Ministers judged
City Challenge. I personally with my ministers went round, listened
to the 30 bids we had, made a decision. We were dealing broadly
with Labour authorities. There were no party politics in it; there
was an element of philosophy in that we wanted private sector
involvement and that sort of thing, but by and large it was totally
about trying to help build communities. One of the most distinguished
authorities lost when the leader (we made the leaders do the presentation
of their bids) was asked by me, because I was doing the judging
in this case, what did the local teachers think of this. He said,
"We will explain it to them". He lost at once because
he had not consulted the teachers. We asked the same question
about the Chief Constable. "You want this money to revive
this inner city area. What does the Chief Constable think about
your plans?" If anyone said, "He of course will keep
the law", then finish. If you could not take the enthusiasm
of the head teachers and the Chief Constable you were wasting
your time trying to improve housing in these large areas. If it
is still a crime rat run you have had it. That was the whole philosophy.
The best example of it all, tear jerking as a matter of fact,
was the Hulme Estate in Manchester. This was one of the worst
slums in this country, and arguably in western Europe, deck access,
rotten as hell. Everything was wrong. The fact is that we got
the local authority with the benefit of AMEC, Sir Alan Cockshaw,
in partnership to consult the local tenants and devise a strategy
to save the Hulme Estate, and today the Hulme Estate is a highly
attractive and desirable part of Manchester. Interestingly enough,
it was that team concept that did the City Challenge with the
Hulme Estate that, when the bomb went off in central Manchester,
the Labour leader of Manchester was only too happy to take from
to rebuild the centre of Manchester. We were accused of centralism
because we insisted that they did their job of involving the community.
I called it devolution.
959. How do you get that involvement into central
government services? That is where I find difficulty.
(Lord Simon of Highbury) With great respect to City
Challenge, and I am not trying to make a political point at all
here, the problem of all intermediate organisation between central
government, Westminster, and whatever level you want to call it:
regional or county and so on, is that it falls apart in community
and democratic terms if the assets it is controlling do not offer
appropriate service to the consumers. The consumers are not interested
in intermediate government and its shape. They are interested
in the school or the hospital. It seems to me that what government
is trying to do now and rethink now—and I do not want to
presuppose the organisation because I am not a party to intermediate
organisation—is to ensure that the quality of the delivery
from the asset—from the hospital or the school—is
more controlled by the local people so that it is either your
schools council or your trust board. But there is intervention
from the community and accountability to the community much more
strongly felt at the level of the asset management. I think the
big debate in government, as it will be in the private sector,
is what layers of intermediate management are appropriate or do
you even need when you have a fully effective asset management
system where the local people are running their own asset? Of
course they are going to be accountable. Is their accountability
to the centre centre (Westminster) or to an intermediate centre?
Many of the problems, if I may say so, of the last administration
were that they may have thought a lot about the intermediate levels
of government but they did not concentrate enough on the delivery
at the asset level and the accountability to the local people.
(Mr Heseltine) Well, I do not agree with that.
(Lord Simon of Highbury) I was not trying to make
a political point. It is an organisational point.
(Mr Heseltine) Yes indeed, but the whole process of
publishing results from schools and parent/teacher governors was
precisely to do what you have just defined. Like so much of life,
there is a perversity about it because the parent/teacher governors
became very closely involved with the teachers and they were not
prepared to recognise the failure of their schools even when the
statistics glared in their face. The whole process of what you
have described as asset management is that what we thought would
be a grip by the local parents to get results actually became
a sort of redoubt defending the indefensible. I do not think asset
management hits the essence of the problem of either communities
or deprived communities because there is so much inter-relationship
between all the things that go to make the community that if you
just concentrate on the school or the hospital and the other bits
are wrong, those other bits will alienate the chances of restoring
optimism and growth to the whole community. I think you do need
intermediate systems and the ideal one to me is the directly elected
chief executive of a local authority. That should be the person.
It is preposterous that if you live in a British provincial city
today the chief executive of the local authority will be paid
more than practically any manager in the city whilst the leader
will be grubbing round trying to eke out what is a pathetic expense
allowance. It is utterly and absolutely incredible.
(Dr Clark) Michael, I have been listening to what
you have been saying and I certainly do not take much issue with
the initiative you took in the eighties and nineties in pushing
forward things like the Next Step agencies, performance targets,
financial management initiatives. I go along with those. I would
raise some questions. I do think we have ducked the issue because
I then ask the question, "How does this affect our constituents
who are wrestling with the problems of going from pillar to post
and from one government department to another government department
at a local level looking for housing benefit, unemployment benefit,
social security benefit?" There is just no cohesion at all.
They are in different buildings, they are staffed by different
people, and there is no need for them to be so. We are back to
the point that Lord Simon mentioned and we have ducked it, because
the most difficult one is, how do we tackle horizontal management?
Actually the reforms of the eighties and nineties, which certainly
increased public service productivity and empowered a great many
civil servants and managers, made the problem worse because they
created the silence and they made horizontal management even more
difficult. I believe that if we do not take a serious look at
this problem we are going to have great difficulty in retaining
the support of our citizens for government, whether it be local
government or central government. I can see that they should operate
in terms of powers but also in terms of the delivery of services.
I was, when I was in the Cabinet Office, looking at ways in which
we could possibly look at ways of delivering central government
services through local government. Often they do very much better
than central government. You might then have a bid in process
but I just do not think that we have been radical enough in our
thinking on this. Whilst I have got the floor can I just pick
up one of Andrew's points about the interchange with industry?
It is very welcome. Both parties have tried to encourage it but
probably we want something much more radical than that. It is
not good enough to have somebody going off for 18 months to work
for ICI or BP and vice versa. We really ought to be thinking of
something like the French system. God forbid, we would not want
the elitism there but people do come in and perhaps spend ten
years in the civil service there.
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