Examination of Witnesses (Questions 140
THURSDAY 15 NOVEMBER 2001
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 pieceunless
the sub-editor removed itthat 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
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.
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 waythis is a regulatory pointwhere 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 itselfand it is partly to do with the way
we create regulations or create legislation at the centreis
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 situationand
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 concernedwhere 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 crazyif 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.
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,
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
(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.
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
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
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 Witness correction: The report was produced
in eight weeks. Back