Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 180 - 196)



  180. I was reading Mr Prescott's introduction.
  (Mr Smith) We have supplied already to the Committee the guidance which we put out. We have not only set out there the financial information which is required in the tabular form it is to take, the PSA information and progress which is required to be reported objectively and, of course, as the reports come in officials and ultimately I have the responsibility of clearing that presentation jointly with the department concerned.

  181. Given how important the PSAs are in particular to the whole of Government and given the danger both in Government and business that when people produce an annual report part of it is for information and part of it is to persuade their bosses and others that they are doing a good job and to protect the high salaries or whatever awards connected with their work happen to be, is there not a serious argument for taking some of the work involved in producing the reports and in commenting on performance against, for example, PSAs and placing that outside the department, either in the Treasury or in some other auditing body so that the analysis of the performance, at least in part of the reports, can be considered to be as objective as possible?
  (Mr Smith) Let us remember that a substantial proportion of the information which is in the reports in fact already meets the criteria which you have set out because the information is National Statistics information or because it is audited by the Comptroller and Auditor General and certainly, as I have said, Treasury officials are involved in putting this together. On the broader question of external validation of performance, that is something, of course, which the Sharman Review examined and I hope to be in a position to report the Government's response to the Sharman Review quite soon.

  182. The last question on that. I accept that most of the statistics used will have had some independent validation and also that some targets which appear in the annual reports are easily quantifiable and hopefully easily measurable. As you know, quite a lot of the elements of judging departmental performance, even though they have statistical information built into them, require quite some element of judgment. If you look through the PSAs' resource departments you will find all sorts of ties which are set in a very broad way, preserving macro economic stability and things like that, which really require some measure of independent judgment about whether they are actually being achieved. It is very easy for departments to tick those off in particular years if they are monitoring themselves but perhaps somebody else should be having a look at these things and perhaps it should be their judgment which appears in the report.
  (Mr Smith) Something like macro economic stability is very objectively measured actually, it is not something you can fudge very well, as previous governments have discovered.
  (Mr Sharples) I would add to that, the Government does publish for each of its targets a technical note which sets out in some detail precisely how that target will be measured. It is possible to track back to that.

  183. Can I just ask, I am sorry to have to come back to that, what is the principal argument against having an element of external validation of the performance against PSA?
  (Mr Smith) I think there are powerful arguments for an element of external validation. As I say, these are matters we will be responding to in our response to the Sharman Report. There are other considerations as well though. Going back to when I was at the DFEE, I was always struck when I was carrying forward the New Deal programme at the discontinuity between the management information that you needed to have to drive a programme forward, the information that a Job Centre manager needs to have on their desk to know what they need to do on a Monday morning for that week to make sure the programme was on track, and the information that you actually needed to satisfy National Statistics and that was properly validated which inevitably came in some time later. If you try to deliver and guide the programme on the basis of the externally validated pukka statistics, it is a bit like driving a car on the basis of a film of where you were ten minutes ago. Let us remember that there are other requirements for information in departments if programmes are to be successfully delivered. As far as possible, of course, it is good if you can get a correspondence between the management information that you need to make a success of programmes and the information which it is useful to report to Parliament and to the public on progress. In some cases that is the case but in others, for reasons of timeliness and the means by which information has to be gathered, it is not so readily achievable. I think there is a balance to be struck there but I do appreciate the importance of the objectivity and public confidence in the performance measures they are using.

Mr Cousins

  184. Chief Secretary, do you think there is a case for departments also reporting on some of the issues raised in the Performance and Innovation Unit issues which are inherently-cross-departmental? For example, the PIU Report on difficulties with public sector computing systems which everyone would recognise is a big issue across Government, do you think there is a case for expecting that departmental reports would, perhaps not routinely and mechanically but about significant issues like that, pick up on PIU Reports and marked progress?
  (Mr Smith) Not simply the PIU Reports, of course. One of the things which departments are specifically asked to include in their reports are points taking up observations and recommendations which the National Audit Office has made. Certainly there would be a case for them covering issues which have been raised by the PIU or other units and I will reflect further how that might be done. You actually allude to another important area that it can be a bit tricky to get right and that is how cross-departmental initiatives are properly reflected in departmental reports. As you will have seen from the notes of guidance that we circulated to the Committee, there is provision for how this should be done in the accounts. We do need to make sure that there are clear accounts of progress on departmental initiatives in the departmental reports as well.

Mr Fallon

  185. I am still not quite clear, coming back to the decision to reduce the core financial tables in each report, who actually decides? Would it be, for example, that the department decide they would like to conveniently cut out one of the tables this year and then the Treasury would be the guardian of the public interest and say "No, no, we published that last year, we must go on publishing it"?
  (Mr Smith) No.

  186. Or could it be that the Treasury might say "This is all rather embarrassing politically" and the Department's Permanent Secretary would say "We published it last year so we must go on publishing it"? Who decides?
  (Mr Smith) This is one of the issues over which departments do not have discretion. In the information we have supplied to the Committee you can see there the tables which would be required of the main departmental report, which tables will go into the Estimates and which tables will go into the supplementary budgetary information. Those tables follow a common prescribed format and will be available, therefore, on a consistent basis.

  187. It is the Treasury's decision in the end which of the core financial tables must be retained?
  (Mr Smith) In this proposal, yes, and in the guidance we have given. One thing I would say is that mindful, as I said earlier, of the incompleteness of consultation with Parliament on this, obviously if this Select Committee or others have got particular views about this, either in advance of the presentation of this year's reports or in the light of the experience of this year's reports, then I am very concerned that we take this on board, I am very mindful that these reports are not simply the property of Government or the Treasury, they are the property of Parliament and the public as well.

  188. One guardian of public interest here is the Office of National Statistics. Did you take advice from the Office or the National Statistician when you decided which financial tables are now going to be left out?
  (Mr Smith) Was the Office consulted or represented on the review group?
  (Mr Sharples) No, the Office of National Statistics was not consulted as part of that process. These tables are essentially concerned with budgeting information which is not part of National Statistics.

  189. So they are not National Statistics?
  (Mr Sharples) The National Audit Office was part of the group and, in fact, we had a representative from the Chartered Institute of Public Finance and Accountancy. We did seek to gather views. The point I would emphasise about the core tables is that this is simply an issue of where the information is published, it is not a question of what information is published; though some tables we think we can make clearer than they have been in the past, and some tables have become redundant now that we have moved through the transitional phase. As the Chief Secretary says, the core tables we feel will give a much clearer statement than has been possible in the past of how each department is spending its money. Now the content of those tables is being discussed extensively with departments to make sure that we have a shared view of what is the clearest way of presenting the information but the sum total of the tables in the departmental reports in the Estimates and the supplementary budgetary information will cover all the information which was available previously.
  (Mr Smith) To be clear, Mr Fallon, in answer to your question, the tables which are being included in the core report, they are set out here: the summary, the resource budgets, the capital budgets, the capital assets, the administration costs, the staff, these are surely the core tables which, alongside the progress on the Public Service Agreements, are what you would expect. As I say, if you have got observations as to what might be added to that or could be subtracted, I will pleased to hear them.

  190. You have just said, Chief Secretary, these surely are the core tables. I would expect the National Statistician to be consulted as to which tables should be in or left out of the departmental reports. I am surprised at Mr Sharples' suggestion that budget estimates are not within the scope of National Statistics.
  (Mr Sharples) What National Statistics are primarily concerned about is the public expenditure totals on a national accounts basis which is something slightly different from the budgetary totals which are used for administrative purposes within Government. There are some transitional mechanisms needed to move from one system to the other system and those appear in the accounting adjustments that we publish.

  191. You have made it clear that the ONS was not consulted.
  (Mr Sharples) Not about the tables in the departmental reports, no. As I say, that is not something that the Office of National Statistics has a direct interest in.

Mr Beard

  192. This question is really to Mr Sharples. The position, as the Chief Secretary has outlined it earlier, is quite clear, that the Spring Report is one which subject to certain reservations about accuracy would enable you to see how you are doing against the PSA targets. In the guidelines that were suggested by your working party, Mr Sharples, you referred to this being as a forward looking report, the Spring Report, implying that it is setting out departmental plans. Then you referred to the Autumn Report as the backward looking departmental report as though that is one that is checking up on how well you have done. There must have been some change between these proposed guidelines of your working party and those which have gone out to departments now, would you like to comment on that?
  (Mr Sharples) You are quite right, there has been a change. What you are quoting there is the old proposal that we should move to split reporting with a forward looking report in the spring and a backward looking report in the autumn. That was the old proposal. What is being proposed now is that we have a comprehensive report in the spring which looks forward and sets out forward budgets and forward targets but also sets that in the context of performance so far. So it is both forward looking and backward looking. The argument put forward is that having a comprehensive report will give readers a much better view of the departments' activities as a whole. What is proposed under the new proposals is that there should also be in the autumn a supplementary performance report. So we are not moving away completely from the idea of spring and autumn reporting; we are simply changing the emphasis a bit so that in the spring there is still a comprehensive report.
  (Mr Smith) That is what I was referring to, Chairman, when I said earlier that had we stuck rigidly to the original RAB proposals there would have been what I think Parliament and the public would have found an unacceptable gap in reporting information because under the original RAB proposals there would have been no backward looking information in this coming Spring Report and if the autumn performance information was delayed to wait for the accounts, we might in the case of some departments have had a gap as long as from March 2001 through to February 2003, which I do not think people would put up with.


  193. Could I just ask a couple of final housekeeping questions. The Core Requirements make clear that departments are not obliged to use The Stationery Office for printing, but failure to do so will prejudice the production by The Stationery Office of the reduced-cost full sets of reports (of which over 150 were sold last year). Have any departments changed publishers for 2002 and, if so, will the Treasury seek to make other arrangements to secure the continued availability of boxed sets at a discounted price? I am thinking here of university libraries, schools and community libraries and the not inconsiderable cost of these reports. I believe to buy the reports individually costs about £492 and the boxed reports will be much cheaper.
  (Mr Smith) I will ask Adam to answer on whether the Treasury is aware that any department is not using the TSO but I will give a commitment that we will examine, in the event of any department doing so, what could be done to retain the boxed sets at a discounted price. I take your point.
  (Mr Sharples) As far as I know, all departments have used The Stationery Office as their publishers for the 2001 reports and intend to do so for the 2002 reports. Some departments do use other printers but then pass it on to The Stationery Office to publish. We also attach great importance to the availability of a full set of reports at a discounted price so this is something that would concern us as well if some departments were moving away from that.

  194. Finally, Chief Secretary, last year there were 22 departmental reports but the review recommended that the smaller departments should go ahead and publish their own reports. Can I ask how many reports there will be in 2002 and how many departments will be publishing their own reports?
  (Mr Smith) The smaller departments will be doing their own reports under the guidance of the parent department, if you like, which will include such information as is necessary and relevant to the fulfilment of their PSAs but not clutter up the report with superfluous information, if that information will be better in the agency's or small department's own report. I do not know the answer on the exact number but, obviously, I can let you have that.

  195. If you could give us a note on that for the record it would help very much.
  (Mr Sharples) I do not think that we will be able to give an exact figure at this stage because discussions are still continuing between departments and the smaller departments in some cases.

  196. Could I thank you and Mr Sharples for your attendance today and as you indicated at some stage during your evidence that you are willing to work along with the Select Committee, we would be very grateful for that because already I have written to other select committees asking for their comments on their view of departmental reports and it is an issue which could be live.
  (Mr Smith) Thank you very much for that, Chairman and I thank the Committee for its questions and deliberations. There is a further point I might ask you to reflect upon. I do appreciate that you are doing a wide-ranging inquiry and it will take time to conclude that. It is obviously a matter for you but you may want to look at the final shape that the reports take this forthcoming spring. I wonder if I might ask if on the basis of your deliberations so far there are any pressing observations you would like to make in relation to immediately forthcoming reports—and obviously they are going down the slipway and some changes can be made but some it will be harder to make—if we had some interim observations, obviously without prejudice to the final conclusions the Committee is going to come to, if you wanted to do that, we would be pleased to receive them, but it would need to be as soon as possible.

  Chairman: We are conscious of time here and, indeed, we have discussed this issue and we plan an interim report in February. We will get that information to you and we are mindful of the comments you have made. Thank you very much for your evidence this afternoon.

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