Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 580 - 599)



  580. How can we improve it?
  (Sir Andrew Turnbull) There are issues of resourcing, the resourcing of support you get. Where do you get your advisers from, are they picked up here and picked up there?

  581. So you would welcome a large increase in resources for Parliament to be able to scrutinise the Treasury?
  (Sir Andrew Turnbull) That is not for me to decide.

  582. It is a logical implication of what you have just said.
  (Sir Andrew Turnbull) You look at other legislatures and you see that this whole process of scrutiny is organised differently and resourced at a different level. Also, ours is a very complicated constitution in the sense that people have party loyalties as well as being Members of the legislature scrutinising the Executive. There is an ambiguity in the role of Select Committees which is always difficult to cope with.

  583. Professor Likierman, I know you were on the other side of the fence many years ago, you were advising this Committee or its predecessor. If you could take yourself back to those days, what would you like to have had as someone advising MPs to scrutinise the Treasury? What extra resource or procedures would you like to have seen?
  (Professor Likierman) If I can turn the point round. At the time my concern was whether MPs themselves gave the time which the subject sometimes warranted. MPs are busy people and even with additional support, sometimes they are not able to give the amount of time and attention to the subjects which are covered by Select Committees. I cannot comment on the question of whether absolutely resources would be better but I know they have to go together with close attention by MPs themselves. You asked me to speak as a former adviser to this Committee and I am speaking in that role.

  584. You favour some system of incentives and obligations on MPs to try to get involved in scrutinising the Budget and the Treasury?
  (Professor Likierman) The question of incentives is an important one. Why people should give time and attention to Select Committee matters is obviously a question of relative priorities for those MPs. Again, it is very much for parliament to decide what the incentives should be for MPs to spend time on Select Committee business.

  585. I will finish on a slightly easier question for John Gieve, if that is all right. You are developing the PSA framework and certainly it has been a moving target, a new area of policy. When do you think it will be more or less settled so that the Treasury will feel self-confident enough to allow the performance on PSA targets it sets to be externally monitored?
  (Mr Gieve) I think we made a huge stride with this spending review. I think in most areas of government, we have got the right targets, we have set the right priorities, they do match the government's key priorities and they do capture what the electorate expect from government and they are focused on outcomes. There is still room for improvement but I think we made a quantum leap forward this time round. In terms of monitoring the results and so on, the PSA process is an open process, that is the point of it. It is getting government to say explicitly what it is aiming to do which enables people outside government to judge whether they are achieving it or not. We are intending to establish an open website in which there will be quarterly reports on how we are doing against these targets. In that sense, the more parliamentary scrutiny and public scrutiny the better. That is the point of having the framework.

  586. Your budget and your departmental accounts are audited independently externally by a creature of parliament named the NAO. Why should the PSA be so monitored and audited if they are a fundamental part of the budget as the Treasury claims?
  (Mr Gieve) Can I answer that in two halves. First of all, what we have done, we published last week and this week technical notes to the PSAs which set out all the definitions and measures which we will use. They have been published on departmental websites over the last few days. They were a product of a process of examination by a group which we led but involving the National Audit Office, the Audit Commission, the Office of National Statistics, the Cabinet Office. There was a joint review committee which went through those technical notes to try to ensure they were of good quality. In many cases, and this includes many of the Treasury's own objectives, for example, the actual measures are themselves independently verified. They are either national statistics or they are produced by some of the auditing bodies.

  587. What proportion?
  (Mr Gieve) I think there is a lot of external validation involved already. The question of whether you set up a separate process of formal audit is one that we are open minded on. As you know, the Sharman Review is looking at this amongst other things and we have suggested a similar group, that is involving not just the National Audit Office but the Audit Commission, the Office of National Statistics, the Treasury, Cabinet Office, should get together and review what sort of external validation would make sense and where it is necessary and so on. Our mind is not closed on going further but actually there is an awful lot of published, independently validated measurement information already.

  Mr Davey: Thank you. Can I apologise I have to leave.


  588. Can I just try and probe this one step further than Mr Davey has done on this question of parliamentary accountability. Sir Andrew, from the Treasury point of view, are there any gaps in parliamentary procedure, Budget procedure which would improve matters from the Treasury point of view? Do you think it would be useful from the Treasury point of view to have better and closer analysis of the Budget?
  (Sir Andrew Turnbull) We have gone back to a two stage process which a lot of people argued for. It is not a green Budget, but the PBR is a major change. You can even find people saying "Well even before PBR is published should there be consultation before that?" There is a tremendous amount of material which is put into the public debate in the autumn and that is an opportunity which parliament, the media and other analysts can take up. In a sense we have made an important change here. There are a host of measures, 20 odd measures in this PBR which we have indicated an interest in pursuing in the next Budget. We are still adhering to the view basically that we want to take this decision once a year where you can bring the arithmetic of public finance together and not take them piecemeal through the year. We have put out this material and it creates an important opportunity. Also, we are moving to a world of resource accounting and budgeting. Will that present more information and present different information? We have tried, also, to move Treasury to a more strategic view vis a vis the spending of departments. We have tried, also, and I have to say unsuccessfully, to get that reflected in the extent of the detail which was presented to parliament. We were stopped in this by the PAC who said "No, we want you to carry on with quite low thresholds, reporting on gifts and write-offs and so on". I think there is some move which parliament can make which reflects the fact that the Treasury is trying to look at policies at the strategic level and leave departments greater freedom over the details of their delivery.

  589. I realise that talking to Parliament is never going to be like phoning a friend, but nevertheless would it not help the Treasury if Parliament had a greater understanding of the Treasury's perspective on expenditure and the view that it was just a penny pinching or negative department might be modified if Parliament was brought more into the Treasury's confidence?
  (Sir Andrew Turnbull) The other change is that we have moved away from an annual process of public expenditure rounds. There are very good reasons for this. It puts an end to the kind of annual game playing, people saying "I will settle for the figures for one year hence but I make no commitments to the next year because I know within a few months I can be back arguing again". I think that has been a big improvement. Again, that is an opportunity for Parliament to also change the time horizon of its focus and look at these settlements over the same kind of three year horizon and in the same way now there are two-sided settlements. We are explicit not only about the money but we are now explicit about the outputs that are to be achieved and this Committee and all the other departmental committees ought to be able to use that material and follow it up in a fairly systematic way.

Mr Beard

  590. Could I go back to the PSAs. You had the system that was initiated in 1998 and is now being renewed or amended. What lessons have you learned from that initial experience of the 1998 targets and system?
  (Sir Andrew Turnbull) The first thing is that we do not in any way regret 1998. Some people have said the fact that we have changed it means there was something wrong.

  591. That was not the implication I was making.
  (Sir Andrew Turnbull) It is like saying when Microsoft produced Windows 1998 that Windows 1995 was a mistake. It is a development. We do not see what we have done in 2000 as being the end of this process either. The whole issue of validation is clearly to be developed further. 1998 was itself a development of things that had gone before. The whole idea of setting money and outputs was something we had applied at the agency level for a number of years and the innovation was to apply that at the departmental level. We will go on producing this. I think we recognised that having an undifferentiated, non-hierarchical set of objectives meant that what you were trying to achieve in terms of the real outcomes you wanted to deliver was mixed up with the how, the processes, the delivery mechanisms, the management changes. Separating those two out has produced a great deal of clarity as to what is the status of each of these divisions.
  (Mr Gieve) If I could add something to that. We had too many measures in the first set and too many targets and, as Andrew said, they covered everything from how quickly we answered Parliamentary Questions to whether we reduced congestion on the roads. The purpose of the new set has been to separate out the real political priorities. The second set of PSAs are more focused on outcomes, the things on which politicians and the Government will actually be judged. They are more outcome based and a better attempt to specify real top level business and political priorities. That was one of the things we learned. I think the process was the other thing we learned. The first time round the final negotiation on PSAs happened after the end of the Spending Review, this time we reversed that order and the first half of the Spending Review was all about discussions about what were the key priorities, how should we define success for each of the departments. That was a co-operative process although there is a necessary tension, if you like, at all times between the Treasury and departments over spending. It was a-co-operative process with departments and with the other central departments, like the Cabinet Office and the Policy Unit, at the beginning of the process to say what would count as success in this area. We have got the order right this time.

  592. Have you done any performance analysis of the different departments on the basis of that original PSA, 1998?
  (Mr Gieve) Which ones are hitting their targets or who did this process better?

  593. Yes.
  (Mr Gieve) We do collect quarterly information on whether people are hitting them. These are the original targets, the ones set in 1998. We publish the results at the time of the departmental reports in March, so we published them last March and we will publish them again this March.

  594. Against the original set of targets?
  (Mr Gieve) Against the original set. As I say, for the new PSA targets we are hoping to go one stage further and have a sort of central score card available publicly for those.

  595. How long are you going to keep the original ones running?
  (Mr Gieve) There is always a problem here about when you change trains. We will continue to monitor the original ones, at least up until the end of the three years for which they were set, so to the end of next year.

  596. Those are the main lessons that have come out of the original exercise. Are there any others on the way things are monitored and the relationships between you and the departments?
  (Mr Gieve) I would say one lesson is that it has been a helpful development in relations between us and the department to get an explicit agreement between both politicians and officials in departments but also between the centre of Government and the individual services on what are the priorities. I think departments would have said in the past that one of the problems in managing their service was having their elbow jogged by the centre of Government which would say "we think that the focus should switch to X or to Y". Having an explicit agreement between the centre of Government and the individual departments on what is important and what they should be aiming at has clarified and been a helpful step in relations.

  597. Could you explain why you feel that now you have got to a better combination of SDAs and the technical aspects of this? What is the difference about the way you are doing it now which gives you more confidence?
  (Mr Gieve) As I say, I think there are a number of things. Firstly, the process of agreement came at the right stage of the Spending Review. Secondly, we learned from the first set that there were too many targets and we have now got a better set of priorities. Thirdly, we have concentrated on outcomes and we have separated out, if you like, the main business objectives and PSAs and how to do it in the SDAs and I think that is a step forward in clarity. Finally, I suppose looking through the departments one by one we feel that the current set, so far as they have changed, and there is quite a lot of overlap, is actually an improvement, they are smarter and clearer and they capture better the true purpose of Government. I suppose another thing is we have done more this time to try to pick up the cross-departmental objectives and priorities of Government. We did a little bit of that in the original Spending Review in 1998 but we had 15 cross-departmental reviews in the last Spending Review and we did much more to ensure that, for example, the Department for Education and the Department of Health had targets which reflected the contributions they were making, not just to health but to crime reduction or the reduction of deprivation in certain neighbourhoods. So 30 of our 160 targets this time are cross-departmental targets, or joint targets, and I think we have made a big improvement on that front.

  598. Could you explain the concept of the SDA, its content and where it fits in now it has been separated out from the PSA?
  (Mr Gieve) The concept is that at a high level this explains how departments are going about achieving their main business objectives, and in particular it picks up what I call the personnel Cabinet Office agenda on such aspects as diversity, equality of opportunity and so on, a number of things that are very important across the whole of Government and are to do with how Government organises itself but are not themselves, if you like, top level service objectives. So that is the split.

  599. Which will you be monitoring, PSA or SDA?
  (Mr Gieve) Both.

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