Examination of Witnesses (Questions 160
TUESDAY 15 JANUARY 2002
MP AND MR
160. I notice in your Public Expenditure Assessment
Guidance that you say in paragraph 2.4 that a rigid model is not
imposed but departments must observe the general principle that
they have to read the report objectively. I presume that is clear.
(Mr Smith) Yes.
161. Because the Strategic Rail Authority document
was published yesterday I happened just to look back at, as it
then was, the DETR Annual Report for the year 2001. I do have
to say it would have been very difficult to anticipate what has
taken place from the report. The PSA target established new targets
for rail performance in 1999, progress targets published in transport
2010, the ten year plan and so on. Is there going to be any element
of review of these things to anticipate risks and challenges?
(Mr Smith) I do not think you can expect a departmental
report to anticipate every contingency that is going to arise,
even some serious ones. They do set out departments' plans but
in the best world plans do not always correspond to exactly what
takes place. When it comes to evaluating risk I would expect if
particular projects or particular programmes had a particular
element of risk that would be an appropriate thing for attention
to be drawn to, not simply in main departmental reports but within
the overall body of information that we are talking about, part
of which, of course, are the departmental investment strategies.
162. One has to say looking back at thisI
confess not to have read it in any degree of thoroughness at the
timean element of self-congratulation, which has proved
not to be warranted, although in fact some of the indications
are in fact there, for example punctuality. "A Second National
Rail Summit was held in May 2000 to assess progress with the industry's
commitments to include rail service. Since the Summit there has
been a disappointing decline in punctuality across the rail network".
There is no indication, of course, of a Third National Rail Summit,
heaven forfend what might have followed that. Some of the indications
are in fact there but they are not easily teased out. It is slightly
infuriating from that point of view because it is almost as if
some of these issues are in fact being referred to but not in
an especially clear way.
(Mr Smith) I think there is a balance to be struck
between the accurate reporting of plans and programmes and what
could be taken to veer into the area of speculation. I do not
think committees or Parliament would thank departments for reporting
things which were speculative.
163. Can we just talk about the relationship
of the Spring Report and the Autumn Report and again going back
to the PSAs that James Plaskitt was talking about. Is it that
the Spring Report is going to deal with the PSA targets in a non
financial way? What I do not understand is the relationship, in
publicising the progress towards PSA targets, the relationship
between the Spring Report and the Autumn Report?
(Mr Smith) Okay. They will both be providing information
showing the latest progress against PSA targets and in that sense
there is a real addition in the information which is being provided
to Parliament. One particular frustration which there has been
in the Spring Reportsand this was evident last yearis
when departments are reporting, and their report has been prepared
before the end of the year on which the performance is being reported,
you do not have the fourth quarter information usually, for example.
Therefore if you want to take the performance reporting as covering
the year that is being reported on, there is an element of estimating
whereas what should be available in the autumn will enable you
to compare what was set out in the report in the spring with what
actually happened. I think that is a gain. The other stimulus,
if you recall, from the RAB reforms to performance information
being reported in the autumn is that one of the principles of
RAB reporting is the allocation of expenditure by objectives and
being able to see an outturn. Now it will be good when we are
able to have the resource accounts alongside the supplementary
autumn information, that is certainly the objective we want to
work towards. When I said earlier that had we left the original
RAB recommendations in place Parliament could have gone an unacceptably
long time without performance information, what I was referring
to was the fact that under the original RAB proposals, the Spring
Report was just going to be forward looking and it was the Autumn
Report which was going to report performance. Well, of course,
if you delay that autumn performance information until the resource
accounts themselves are available, which might not be until early
in the following year, you could go a very long time without performance
information being reported to Parliament. Just to be clear, what
I am suggesting is this autumn performance information, whilst
we want to have it alongside the resource accounts, I think we
should do that by trying to bring the resource accounts forward
rather than delaying the performance information. Where there
is a gap we will give the performance information.
164. Are you saying then that the Spring Report
will be a comprehensive report that will enable one to judge to
what extent the PSA targets are being met
(Mr Smith) On the latest information.
165. both on performance measures and,
say, in comparison of spending against budget?
(Mr Smith) Certainly the latest information on the
performance measures, and obviously setting out the current year
estimates as well as the plan for the future year.
166. Will we be able to judge for instance in
the Spring Report whether the department is underspending or not?
(Mr Smith) Provisionally I think is the right answer
to that and you will know definitely with the Public Expenditure
Outturn White Paper but I will ask Adam if that is broadly correct?
(Mr Sharples) That is right. We publish in July the
Public Expenditure Outturn White Paper which gives the best estimate
of what the outturn is for the previous financial year. The departmental
report will be published in April which will give the best estimate
at that point. There may be some further information coming through
between April and July.
167. Just for clarity, we are saying really
that the Autumn Report is clarifying and making sure that the
second decimal place is right of the figure that the Spring Report
(Mr Smith) Not quite, no, it is adding later performance
168. And adding for the last month.
(Mr Smith) Yes.
169. But only in the Autumn Report will we have
the resource account budgeting?
(Mr Smith) We will have the resource accounts. We
want to have them in the autumn. I have to say it has proved harder
to get them as early as we would have liked and we are still working
170. If we do not have the resource accounts
or some estimate of the resource accounts in the spring, how do
we judge how well the department is doing on its capital spending?
(Mr Smith) You have got an estimate of the current
year and as Adam Sharples said earlier then in the July Public
Expenditure Outturn White Paper you have got more final figures.
Those figures themselves, of course, can be subject to later revision.
It is a definitive record.
171. There will be some estimates in the Spring
Report that indicate how the resource accounts are going?
(Mr Sharples) The Spring Reports will include the
budget figures for the previous financial year, so the best estimate
available at the time of the outturn against those budgets for
that financial year. The point about the performance reporting
that I would emphasise is that the focus of performance reporting
is the Public Service Agreement targets. The broad principle that
we try and follow is that whenever we report on progress against
PSA targets we give the latest available information. Now in the
case of exam results, it might be the results from the previous
summer; in the case of crime surveys they might be done every
two years. Some information is available more frequently, but
at the point the report is published we would give the latest
available information. The other significant point is that most
PSA targets do not depend on financial year information for their
reporting. So, it is perhaps a bit of a misunderstanding to imagine
that there will be a strong link between the outcome on the finance
side for a financial year and the performance for that financial
year because the PSA target will be often working on a different
cycle to the financial year cycle.
172. Will there not be a link in terms of capital
spending for that particular year? The extent to which you have
spent capital in that year will indicate how well you are progressing
with your investment programme even in the Spring Report.
(Mr Smith) Yes, that will broadly be the case.
173. That will be in?
(Mr Smith) Yes, but of course if you are linking it
with performance, the performance even on the delivery of a capital
programme obviously is not an end in itself. The end in itself
is the health service or the education or transport services which
174. There is no proxy for it in many cases?
(Mr Smith) Yes.
175. One final thing, the resource accounts
for this last year, only 25 per cent of them were available on
(Mr Smith) Yes.
176. Is this view that we will have resource
accounts available for the Autumn Report wishful thinking?
(Mr Smith) That is why I said earlier that where we
can publish the performance information alongside the resource
accounts, clearly it is desirable to do so but the view I have
come to is it would be a mistake to delay the performance information
to await the resource accounts. Meanwhile we and all the other
parties involved need to work to get more of the resource accounts
available by November.
177. Just a small supplementary on this point.
I remember when resource accounting was debated in Parliament,
we all grappled with it with a certain amount of difficulty. I
wonder whether your view of the delays in the introduction of
resource account reporting is that this is due to departments
having certain technical difficulty in adjusting to opportunity
costs and so on or is it more a question of priority?
(Mr Smith) Do you mean what we have just been discussing,
the resource accounts not coming forward as early in the year
as we would like?
(Mr Smith) I do not think this timeliness of accounts
problem has been unique to resource accounting, I think we have
not had the cash accounts as early as we might have liked either.
Obviously changing to a new system does involve a process of education
and training. No, I think it just is that we have got to do more
to examine best practice of those departments that are able to
get it in a timely fashion and work with the National Audit Office
and others to make sure that we do better.
179. Chief Secretary, Mr Cousins' intervention
highlighted the danger with these types of reports that they can
tend to highlight the good news and play down the bad. Could you
just let us know what the role of Treasury and non departmental
staff is in preparing the annual reports and the departmental
reports and scrutinising the information that is in them?
(Mr Smith) First of all, of course, the example which
Mr Cousins gave did include one where punctuality was disappointing,
I think was the phrase he used. So it is not like a positive spin
was being put on everything even in that report.