Select Committee on Public Administration Minutes of Evidence

Examination of Witnesses (Questions 140 - 159)



  140. Rather like a department of Whitehall but they somehow manage to get things done throughout the world. Why is it that a small and very well trained and well motivated workforce in Whitehall cannot do these things now?
  (Lord Haskins) There are various reasons. Bear in mind first of all the transparency of the way business works is rather more obscure than the transparency of the public sector. Those guys you are talking about are not having to explain what they are doing to the Daily Mail morning noon and night as do the people who run the Health Service from the Prime Minister down . . . The sort of situation where a woman in Birmingham at the time of the election raised her serious problem with the Prime Minister for him to deal with would not happen in a well organised private business because there would not be the tabloid pressure. Therefore it comes back to risk management. I can delegate power to people in the entrails of Northern Foods, encouraging them to take risks and if they make mistakes in the risk, supporting them, if they have done the right thing, because risks include failure. The public sector does not tolerate any failure. Every policy has to be delivered 100 per cent. If you get it 99.9 per cent right, and the Daily Mail gets the 0.1 per cent wrong, then you are in trouble. I do sympathise with everybody working in the public sector on the intolerance of risk failure.


  141. May we explore this a fraction more before we leave it? Martin Taylor, sorry to quote back at you, what you said, but here we have Chris Haskins saying basically we have to push the responsibility down the line to staff to do all, that it cannot be done from the centre, yet when I look at what you have been writing in the FT after the IPPR report came out, you say, ". . . It is impossible . . . not be struck by the extent to which the public services are in the grip . . . of their staff . . . institutionally large parts of the public services appear to be run in the interests of the staff". On the one hand we are being told, push the power down the line to the people who run these organisations. You are saying that the people who run these organisations are running them in their own interests.
  (Mr Taylor) Long term there is no inconsistency between those two points of view. I also said in that piece—unless the sub-editor removed it—that this happens in bad, large companies too. You find a cynicism about head office and people run the thing according to their own survival instincts and their own preferences. A lot of companies certainly were like that and some still are. They get into trouble pretty quickly. The most important point Chris made which I would certainly agree with is that nobody can run an organisation of one million people in the sense of administering it so that it will deliver good services at the end. You can administer something in the sense that 1,000 British civil servants administered India in the 1920s, but you are trying to do a rather different job. I am sure the NHS, which was the subject raised, must be cut up into smaller pieces. People must be made more responsible for things. We will eventually get to sizes of unit that can be properly managed. Yes, you will get more inconsistency but we have plenty of that at the moment and I do not think there is consistency of delivery across the board, although ideally there should be. People should not be frightened of that. It takes a managerial revolution. It is not the sort of thing you can do simply by announcing a restructuring. It takes a long time to change the culture of an organisation. It can take five or ten years actually. So it tends to be outside the parliamentary time horizon and I feel very sorry for Ministers who are constantly pushed to promise improbable improvements in a time frame which no sane businessman would accept. They are usually doomed to failure. Everything which goes wrong is laid at their door personally. Of course one takes responsibility. When I was the CEO of Barclays I used to get letters from customers who were angry with the way their account was managed and that is how it should be. Sometimes they would come to the annual general meeting and I would have the experience of the Prime Minister in Birmingham. It is important to know what is going on. What I would not have been able to say was that I can fix all this in the next six months. That is the big problem.

  142. I am still not sure whether you are saying that because the public sector is irredeemably self-regarding in the grip of its staff, it does not have a public service ethos, that is all baloney you are telling us, you basically just have to ditch it and turn to private sector people who know how to cut the mustard.
  (Mr Taylor) No, I am not saying that. There are lots of admirable people in the public service doing their level best with, in many cases, inadequate resources. We do have a system that is set up not to work very well and we should not keep being surprised when it does not work very well. We need to reform it and we need to rethink it. The only important thing from my point of view that the private sector brings is competition. Competition is the source of innovation, it is what makes you change if things are going wrong. People in the public services do not need to change if things are going wrong, they do not need to reform themselves, they are constantly reformed by bodies way above them. Competition is the only thing and it is very sad that we have managed on some occasions, in bringing the private sector into the public services, to give it monopolies, where the point of the private sector is lost at once. We corrupt it in bringing it in a monopoly structure.

Annette Brooke

  143. My point follows on rather well from that. I am quite concerned as we are going through this inquiry that we are highly unlikely to come to a conclusion: private sector good, public sector bad, or vice-versa. But the situations in the middle are actually varying for every single circumstance. I should really like to ask both of you how we look at this in terms of evaluating different types of private sector involvement and obviously the competition is a bit of a clue in some circumstances. We need an underlying philosophy for it all to hold together and I suspect perhaps there was the wrong underlying philosophy where you have privatisation which led to private monopolies. Can you perhaps open up on that? How do we look for the best delivery when there are actually so many permutations?
  (Lord Haskins) The two ways I know quite a bit about are public health and safety and the environmental stuff. I think there is a way—this is a regulatory point—where you can say that the public sector has to establish minimalist standards for food safety and environmental protection. They need to be minimalist, but at the same time protecting the public interest and safety. Then you say to the private sector (a) you have to accept their standards and (b) you have to comply with them, in other words it is their responsibility. The Government should say that is what we want the food chain to deliver. It should not get very much into the detail about how you deliver those outcomes. It is up to you to work that out for yourself; self regulation is one of the great debates in society as to whether for example the doctors who are in the private sector regulate themselves or the state regulates them. The Government has come to the conclusion that it would be much better if doctors regulated themselves rather than the state take over the regulation of doctors and I am sure that is the right way to go. You have to look at it issue by issue because if it is an issue of serious public concern, then the state has to take a greater interest in it than others. I was always struck at the time when all those IRA prisoners were jumping out of jails in Cambridge and there was an argument about whether it was Mr Michael Howard or Mr Lewis who was responsible. I think actually that Michael Howard was probably right that on the day-to-day basis of running the prison, if the prisons were to be in an agency then it was Mr Lewis's responsibility to make sure that they were not jumping out rather than Michael Howard's. Parliament did not see it that way. Parliament decided to say it was Michael Howard. It is not so much a public/private sector issue so much as having agencies like the Health and Safety Executive which are just one step away from Ministers. The Health and Safety Executive by and large does a very good job; because it is one step away from Ministers it is allowed to be more flexible in the way it relates to the private sector. On the other hand the Civil Service itself—and it is partly to do with the way we create regulations or create legislation at the centre—is very prescriptive, very rigid and does not allow that flexibility that you need. A start would be to strengthen the concept of agencies. The Government are looking at the present time to make the Environment Agency a more effective at arm's-length agency rather than bringing it in more under ministerial control. That is a dilemma. Those agencies in turn should have more accountability to Parliament themselves rather than through Ministers.
  (Mr Taylor) May I take a rather different line in answering your question? The main conclusion of the IPPR report was that the lines between the public and the private sector in various areas of endeavour were almost entirely arbitrary. They were where they were. We suggested that if you were trying to improve standards and challenge and bring competition in, what you had to do was experiment. A lot of civil servants are very uncomfortable with experimentation. It might go wrong. There is sometimes a preference for the status quo which always goes slightly wrong than for something else which might be a lot better but might be a lot worse. It was very striking to us how the areas where Government had been brave in bringing the private sector in were areas which were not in the full glare of the public eye, and how much more adventurous local authorities had been than central government. Many of the most interesting partnership ideas were in local authorities, but there were huge areas of endeavour, the Health Service in particular, which were such political hot potatoes that we have the most extraordinary situation—and of course if one said this to a Minister or senior civil servant they would deny it angrily and this is true of people of all parties as far as I am concerned—where there is almost more interest in preventing political troubles arising from the NHS than in improving patient care. It has become almost impossible to discuss it sensibly. That is what we need. For me, we have gone about bringing in the private sector in quite often the wrong way. Some privatisations have been very sensible. They are not all monopolistic; they have not all worked badly. What you cannot do is to privatise what I call in my report pseudo-businesses, things which rely on public subsidy like Railtrack because you are always going to have trouble in the end when that public subsidy is withdrawn. I do not speak with hindsight, I have said it in the paper. We have been obsessed with getting private sector finance into the public sector because when all this programme began, the Government in 1992-93 had no money. We have let a lot of people who give the private sector a bad name in this sense make quite a lot of money out of highly leveraged structures. That is not the way to bring the private sector into the public sector. The Government as a purchaser should not allow that. What we need is private sector management skills. Every morning when I go to work on the Underground I see a poster which drives me crazy—if I may be controversial for a second. It says at the top "Your New Tube". It is not new and it certainly is not mine. It goes on to say, "Public Management. Private Finance". I think that is absolutely the wrong way round. Public finance is cheaper and private management is more competent. We do have some funny ideas in this country and we also have an enormous amount of creativity. It is just a shame that we do not try the more daring things around the edges which are likely to work.

  144. It seems to me the finance issue, which you can actually set and you can have a clear evaluation and it worries me in a sense that we seem to be jumping—
  (Mr Taylor) Theoretically.

  145. Theoretically, but there is more and more extension of this. Whether it has actually been proven to be good or bad is one issue we can probe on. It is the mechanisms which are really teasing me. Something I know a little bit about, education, you have a failing local education authority. I find the permutations and the different ways it is being tackled across the country, the sorts of experiments, not necessarily innovative, totally foolhardy without actually having a model and thinking it through and the likely outcomes. This is what I am really trying to get from you. Just trying everything on the scene is one way I suppose you can have a go, but that seems very damaging and it does not actually necessarily take us to a clear outcome at the end of the day. I just wondered whether you would comment on that, whether we should actually be looking across the board, having something which holds all this together. It is all so piecemeal to me and that is why I have a problem with it.
  (Mr Taylor) The most striking thing in the educational use of the private sector, to which you referred, is that it is restricted to failing schools, which seems to me so strange. We have a system which says, here is this public service ethos which will ensure, as Raymond Plant said, that we get contracts more than delivered. The private sector gouges for profit and is unreliable and driven. Let us wait until we have a school which is in real, real trouble and then let us pass it over to these rogues and profiteers. What sort of a way of thinking is that? Either the private sector can run schools or it cannot and it is not going to learn to run schools intelligently and you are not going to get good people going in to run schools if they are only given failing schools which may in any case shut down in a couple of years. If you want to bring a process of management into education, I have to say to you that it seems to me much less important than health. If I were one of these powerful unnamed people in the Prime Minister's Office I would not be worrying about bringing the private sector into secondary education, I would be desperately worried about the university sector, that is where I would be experimenting., because we are in huge danger in this country. If you are going to do it, why just give the private sector problems. It is a little bit like what was going on with the water companies and the railways in a sense. Where things have been run down for long enough and you cannot make sense of them, flog them off to these guys and good luck to them. That seems to me bad government and bad business.

Brian White

  146. One of the things which seems to be coming across is that willing change is not the same as being able to deliver it. I just happened to be talking to IBM yesterday who have gone through a major restructuring and they have brought somebody new in at the top to achieve that because they recognise that the then existing chief executive could not achieve the cultural change that was needed. When Sir Richard Wilson retires next year, should it be somebody from outside the Civil Service who comes in to lead that change or do you think that the only way to achieve reform within the Civil Service is from within?
  (Lord Haskins) My guess is that Sir Richard's replacement should come from within the Civil Service if only for the fact that an outsider coming in to that den of lions would be devoured; they would be out for him and they would get him. You need to find the senior civil servant who buys the reform programme. To be fair, Sir Richard has bought the reform programme and he has started it. I think that bringing an outsider into that job in the present climate would be even too risky for me, but no doubt Martin is much more entrepreneurial.
  (Mr Taylor) No, I do agree. If you want to experiment by bringing private sector trained people into the Civil Service at senior levels, that job would be a step too far, it really would. It would be like being made president of Afghanistan or something like that.

  147. How do you go about getting that transformation and leadership which is lacking at the moment?
  (Lord Haskins) My line is the agency concept of separating a lot of the delivery side from the day-to-day control of Ministers and separating policy from delivery. Policy and delivery are all interchanged in the structure at the moment. People are expected to develop policy and to deliver on that policy and that does not work. To reduce the numbers of civil servants quite significantly, to make them purely policy specialists and to develop a completely different type of civil servant who is trained for delivery. At that level you can of course have much more exchange because you can use private sector inputs to deliver within the Health Service. I have no difficulty with that at all; as long as the Government's strategy is achieved, who cares whether it is done on a private or a public sector basis as long as it produces the best result. Those agencies should be given much more discretion to choose how they are going to operate at a local level. You will always need at the centre some Richard-Wilson-type, hugely intelligent, trained policy makers, but you do not need however many there are of them. Is it 5,000? I think we could do with about 2,500, say.

  148. You ask "Who cares?", but I would argue that the Treasury cares who does it and part of the problem would be that the whole of this exercise, whether it be the Tory privatisation or the PPP at the moment, is to get round Treasury rules. That is the one part of reform that nobody talks about: the subject of Treasury rules which define the Public Sector Borrowing Requirement is taboo and we go round all these experiments just to get round Treasury rules. Should we not just reform the Treasury rules?
  (Mr Taylor) Let me first say that the only explanation I can come up with for what the Government are doing on the Underground railway is that instead of paying £5 billion a year for four years, they are to pay £600 million a year for 70 years. There may be another reason, but if so I wonder why they are keeping it so secret. I have very high respect for the Treasury as an organisation and the people who work in it, and as you know they do believe very sincerely that only they stand between Britain and ruin and that if some of the rules are not always as intellectually respectable as they might be, they will do to keep the children in check. I really think they feel that changing them is very dangerous. I find it hard to comment on the public morality which flows from that. The rules are clearly artificial. If we are to go down the route Chris talks about and I would certainly favour of having much more delegation of public services, we are going to have to find a way of financing these things that we can be grown up about. I think that is a problem.
  (Lord Haskins) The very simple issue which never ceases to amaze me is the way the Treasury does its books. It cannot separate revenue from capital. Every time you raise it they say the stock market would be very anxious if there were a massive change in the way the Treasury states its Public Sector Borrowing Requirement. Until we do that we are always going to have this difficulty. Seventy years of £600 million of revenue spend per annum is easier to present than £30 billion of capital.
  (Mr Taylor) There are all sorts of very clever people in the financial markets who are trying to work out what is really going on and they find it hard.

  149. May I just ask a regulation question? One of the things I find is that we produce 3,000 statutory instruments a year, most of which are incomprehensible because they are not written in English, they are written in legalise. Would not the whole argument about whether we are being over-stifled with a burden of regulations be removed if those regulations were actually written in English? Would not a purpose clause in each regulation, stating what the outcome of that regulation was, be a better way of achieving a better public service?
  (Lord Haskins) On the general point about regulation, I agree with you. One of the things which surprised me about the Civil Service generally was not quite the lack of literacy, but the tendency to talk a language which only another civil servant understands. It is almost an exclusive process where the rest of us do not know what is going on. That is true. In defence of statutory instruments, I have to say that 90 per cent of the statutory instruments are absolutely run-of-the-mill stuff which has to be done just to keep the trains running. When we get into a discussion about excessive regulation or bad regulation we have to be very precise what we mean.

Mr Prentice

  150. We read in the Financial Times today that the British Chamber of Commerce tells us that there is a tide of regulations sweeping business. Would you agree with that?
  (Lord Haskins) Yes, and it is sweeping European business and North American business and it has been sweeping through for the last 50 years. One of the most amazing things, and it is not a political point, is that the tide of regulation is now being driven by the readers of the Daily Mail.

  151. You said earlier that what you would like to see are flexible regulations. Can I ask you what you mean by flexible regulations in the context of foot-and-mouth? There have been lots and lots of regulations promulgated to control foot-and-mouth.
  (Lord Haskins) Foot-and-mouth is a special issue.

  152. It is an issue you know a lot about and that is why I am asking you that question.
  (Lord Haskins) It is. Foot-and-mouth is not quite the economic catastrophe a lot of models say but it was a serious, serious problem, a national problem which had to be dealt with as a national issue, just as the war in Afghanistan; the war on foot-and-mouth was not dissimilar. In the normal course of events the Government should make it clear what it is trying to regulate, what the objective is, so that people understand their purpose. My experience is that most people, say on food safety, hotels and restaurants, understand and recognise the need for having regulations to protect people from danger from the food they are eating. The complaint comes about the way the regulations are enforced. What I am saying is that what we should do is regulate those restaurants relatively lightly, assuming they know what their obligations are but when they do break the law, the penalty should be quite tough.

  153. I understand all that but foot-and-mouth cost the country £2 billion, so it is a lot of money.
  (Lord Haskins) Yes.

  154. I just want to stick with foot-and-mouth regulations if I may because you are an expert on foot-and-mouth and I should like you to tell the Committee which of the regulations, because you will know them inside out, that were made to deal with the foot-and-mouth outbreak were unnecessary.
  (Lord Haskins) The new ones or the existing ones, the ones which were there before?

  155. You pick the regulations.
  (Lord Haskins) Which were unnecessary. I am not an expert on foot-and-mouth at all but everybody seems to think I am.

  156. That is a revelation.
  (Lord Haskins) You have to remember that this is the biggest outbreak of foot-and-mouth disease the world has ever known and the exponential speed with which that started in those first three or four days was breathtaking. Therefore the rather crude regulation about slaughtering animals had to be introduced rather quickly; some would say not quickly enough but as quickly as possible. A lot of basic, simple, environmental rules had to be broken in order to get that disease under control. In a crisis of that sort there is always going to be a trade-off. The great success of bringing the army in was that wherever the army shows itself the great British public feel okay. If the DEFRA officials had been carting carcases around and burning them on the hilltops, I suspect the public would have complained. If they saw the Royal Engineers doing it, it was acceptable. There was a period in that crisis where those sorts of things had to be done. The complaints about the regulatory process thereafter have been that on the one hand the regulations had been too rigid in opening up the footpaths but, on the other hand that they had been too flexible in that the disease went on for too long. The Government in the last four or five months has been getting that about right. The only point I would make is that all the evidence points to the fact that not one roamer, not one hitchhiker was responsible for foot-and-mouth spreading around the country. Foot-and-mouth was spread animal to animal, by farmer to farmer and farm machine to farm machine. We learned those lessons. We will learn all the lessons about how to use vaccination in the future. Hindsight is easy but in the circumstances of what happened in that week in February, created a disaster of unprecedented scale.

  157. I understand. I want to come onto vaccination in a minute, if I may, but I was interested that you told the Committee you are not an expert in foot-and-mouth. However, you were appointed as the rural recovery co-ordinator and you mentioned accountability earlier. I am totally unclear in my mind how you came to be appointed to this job. What was the mechanism? Did you get a phone call from the Prime Minister?
  (Lord Haskins) I got a phone call from Downing Street and I was asked if I would do this job and I said yes. I did not have to be expert in vaccination to do that or in foot-and-mouth disease, because that was not what I was engaged in. What I was engaged in was looking at the rural economy, looking at the tourists, looking at the farmers and being somebody whom farmers and tourist people could speak to, which was an important issue and suggesting ways that the Government speed up getting the countryside back to normal.

  158. I am not being impertinent when I say this.
  (Lord Haskins) No, no.

  159. You understand me. But why Lord Haskins? When you got this phone call from Downing Street, did the person who spoke to you say you brought special qualities to this job of rural recovery and you were the man they needed?
  (Lord Haskins) I am, for my sins, a farmer, I am, for my sins, a food producer, I am a business person. I did work of this sort for William Waldegrave, John Gummer and the Irish Government. I do have an interest in the link between the public and the private sector. Other people have to decide whether I am any good at it. You have to read the report and see whether the report was a waste of time. The Government has not responded to it, but the proof of the pudding is always in the outcome. There is a report, which came in six weeks which is quicker than most of the others did.[1]

1   Witness correction: The report was produced in eight weeks. Back

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