Examination of Witnesses (Questions 40-59)
SIR HAYDEN
PHILLIPS GCB
13 JULY 2004
Q40 Ross Cranston: One of the puzzles
we had was the move to absolute numbers as opposed to percentages.
Again in your note to us at page 9 you explain that. I think you
say, quite rightly, that the proportions can vary in terms of
the amount of recorded crime. One can see why you could have an
argument for absolute numbers. I guess our puzzle was: why do
you not have the two because you need both the absolute numbers
and a proportion in terms of a target?
Sir Hayden Phillips: The reason
is probably—it is speculation and I cannot remember now
how we came to this decision—that, as it says in this note,
the point about the absolute number is that you would get less
variation and therefore, if you were also to have a proportion
target, the task of explaining generally—and I think this
is meant really for public consumption—how well the process
was doing would become much more complicated. One of the problems,
and this is much more Home Office business than mine, from my
experience in the Home Office, was that having to explain movements
in criminal statistics is always very difficult. It is a fact
that crime has come down overall by 25% since 1997, but, within
that, the pattern of different sorts of crime has changed. What
people respond to, as it were, is the more immediate experiences
rather than the general trends. If you are setting an absolute
number, it just feels like common sense and not over-sophistication.
Ross Cranston: As you say, this is primarily
Home Office, but I guess we reasoned that, say crime went up enormously,
the fact that you are now bringing 1.2 million to justice does
not really assuage the community feeling that you do not have
a grip on the problem. I guess in our simpleminded way we thought,
"Why not both measures?" Could I take you on to the
fact that the department has been put on special measures.
Q41 Mr Clappison: Could I just ask
one question on the crime report. We have heard from you and from
ministers about the apparent dramatic reduction in crime over
the last few years and we know that one of the Chancellor's targets
or agreed targets is to reduce crime by 15%. How is that reconcilable
with the ambition set for your department to get 1.2 million cases
a year brought to court? Does that mean that lower offences are
going to be brought to court than are at the moment or is there
some disconnection that I have not spotted between the number
of crimes and the number of criminal cases brought to court.
Sir Hayden Phillips: First of
all, I am happy to say that the 1.2 million/1.25 million longer-term
target is indeed a shared one and not placed on us. There are
critical contributions from the police in terms of the detection
rate and from the CPS in terms of the charging policy. That is
a process point. I agree with you, there must come a stage logically,
and we are not there yet—and I do not think we necessarily
will be there over this period, as announced yesterday, of four
or five years of looking for this reduction, and at improvements
in crime prevention measures, as much as anything else—in
which, if crime were dramatically falling, as it were, the numbers
you would be bringing to justice, depending on the nature of the
crime you investigated, might themselves be expected to fall.
That would be "a good thing," logically. But I do not
think on those trends we are there yet, nor would I necessarily
expect us to be there in the foreseeable three or four years.
Q42 Peter Bottomley: To be explicit,
central government has not told you to expect a smaller number
of crimes to be taken through the courts during the next four
years.
Sir Hayden Phillips: No.
Q43 Ross Cranston: Could I take you
to this point about special measures. In your helpful note, again
at page 16, you tell us something about that. Why was the department
put on special notice?
Sir Hayden Phillips: Perhaps I
could try to explain how I feel about this personally. There is
a bit of history here. I observed during my first few years in
the Lord Chancellor's Department that year-on-year at around Christmas
time I was told we were going to overspend on our budget, particularly
in relation to legal aid, and each year we put in a reserve claim
at the end of the year to cover it. Quite often, that reserve
claim turned out not to be necessary. In 2002—and I am trying
to do this by anecdote because it brings out the problem—I
was told we needed a reserve claim of £40-odd million and
I used up some considerable personal capital in the chief secretary
of the day to persuade him that that was all right. He agreed.
Then, as a result of a bureaucratic disaster, the supplementary
estimate was not laid and therefore we did not get the money,
so I spent the next two months sweating quite considerably. But
I should have relied on our historic inability to forecast accurately:
we came out and we did not need the reserve claim.
Q44 Chairman: Because you under-spent
in other areas?
Sir Hayden Phillips: We under-spent,
I forget the amount, and I was told rather cheerfully that it
was all right. I thought that this was not a cause for celebration;
this was a cause for real concern. That was the point, Mr Cranston,
at which I decided that we had to fundamentally reform our finance
function and I went into the market place and hired a professional
from the private sector who had a proven track record as a finance
director in major companies. That we began to put right, but that
activity did not take place until the beginning of 2003 on the
creation of the Committee. In that year we had a very large reserve
claim again, at the point at which I wanted to make some serious
changes in the way the department did business and the Treasury
wanted to see some serious changes in the way the department did
business, so the so-called special measures came together with
what I recognised was a real need for the department to change.
They amounted to our working extremely closely with the Treasury—on
a quarterly basis; regular meetings. We have had for the first
time over the last 18 months a set of management accounts that
you can absolutely trust and there is one financial story told
to everybody, including the Treasury, rather than a series of
different figures—which has always been the argument before.
I think that has been extremely helpful and the result is that
we have been told by the Treasury and by the Chief Secretary that
we have genuinely made a major transformation in financial management.
Although "special measure" sounds like a terrible imposition
on the recalcitrant, it is a part of a fundamental change in the
way the department does its professional business in the finance
area, and I claim—I would, wouldn't I?—that we now
live within our means and we have a good story to tell. I hope
that relationship with the Treasury will continue. If you ask
me if I want to stay in special measures and whether I like this
sort of treatment, I think it is very healthy and very good, and
that we should be very open with our banker and we should share
the books. That is good for the department and good for the Government.
Q45 Chairman: You have answered a
number of questions there: you have the Finance Director, Simon
Ball; a whole new approach; and one set of figures. Is there anything
else in terms of the way the department is run?
Sir Hayden Phillips: Yes. We have
a process in which the rest of the department and its senior management
are locked into making sure that the finance figures are real,
that they reflect reality. In government departments in the past,
the senior responsibility for money was combined with that of
personnel. There was not a professional focus on finance and everybody
said, "We leave that to the finance division." The result?
Things go wrong. That is no longer the case. Every month my Executive
Committee colleagues and I look through the whole of the management
accounts to see how things are moving and make adjustments in-year.
That is how we were able to manage down our expenditure by £97
million last year, to come in under budget, and for the first
time in a decade not to make a reserve claim to the Treasury.
Q46 Chairman: You are celebrating
not coming off special measures. You like them.
Sir Hayden Phillips: I love them,
yes. I like this form of bondage!
Q47 Ross Cranston: When are you going
to come off?
Sir Hayden Phillips: I do not
have a problem about this. I think quarterly meetings between
the Secretary of State and the Chief Secretary, and regular meetings
between my Finance Director and Treasury officials in which we
go through the figures and see how we are doing, is good for us
and it is good for the Treasury's knowledge of us. To take an
example, if the legal aid forecasts are genuinely looking as though
we will overspend, we are sharing that with the Treasury at an
early enough stage for them to ask questions about the underlying
reality of the projection, and, therefore, if we did need help
from them in the future, for them to be more ready to help because
they have been engaged on the ground floor.
Q48 Chairman: Is this process only
important to the two departments currently on it or is it to be
the general practice?
Sir Hayden Phillips: I do not
know what happens in relation to other departments.
Q49 Chairman: Most of them are not
on special measures.
Sir Hayden Phillips: I find the
phrase "special measures" extremely bizarre in a way.
I think there must well be other departments where, in terms of
looking at the way expenditure is going, the relationship is as
close, even if it is not described in this way. Our history of
putting in reserve claims when they were not necessary, was one,
when I was in the Treasury, I would have thought it was not satisfied
with.
Ross Cranston: Constructive engagement,
the term you used, might be the more appropriate description.
Q50 Peter Bottomley: It is much better
than that, is it not?
Sir Hayden Phillips: It is much
better than constructive engagement. It is triumphant success.
Q51 Peter Bottomley: Could I pick
up on a point on judicial pensions, which appears on page 22 of
the supplementary document. There is an explanation that the resource
budget plan was expected to have a reduction of £10 million,
but, in fact, on reflection, it turned out not to be a reduction
of £10 million but an increase of £1 million. That is
an £11 million difference, which may not be very significant.
Were the £10 million of judicial salaries being paid out
of an account that no-one had spotted? Would there at some stage
be the possibility of a little note explaining how either the
number of judges or what they were paid or where they were paid
from was not always known?
Sir Hayden Phillips: I have to
confess I cannot answer that off the top of my head.
Q52 Chairman: You admitted to us
that you over-estimated contributions to the judicial pension
fund by £10 million but you have not told us how on earth
that could happen.
Sir Hayden Phillips: I will tell
you. I cannot tell you now but I will give you a note that sets
that out clearly.[6]
Q53 Ross Cranston: If I may move on to
efficiency and other savings, page 11, point 6, of your written
document. You tell us about an action plan there. The Corporate
Board undertook a rigorous examination of its cost and income
base and agreed an action plan. What does that action plan consist
of? Is that what you were talking about earlier: trying to get
down the number of ineffective criminal trials; dealing with asylum
legal aid?
Sir Hayden Phillips: Yes. I see
the information we have given you on page 11 in point 6 relates
to specific actions we have taken over this last year and this
coming year to come on stream by 2005.
Q54 Ross Cranston: This is what is
down at the bottom here, " ... action in hand to meet the
overall deficit."
Sir Hayden Phillips: Yes, up to
the end of 2005-06. In response to Dr Whitehead's questions earlier
I was talking about our plans to make further efficiency savings
over the period from 2005-06 to the end of the SR/04 spending
round. At this stage, they are probably not as specific in terms
of plans as the ones we describe here which are in action at the
moment. But we would certainly go on looking to achieve savings
in the areas of where it is relevant and it is sensible additional
civil fee income, although I cannot give you figures for what
they might be for the future. We would go on, as it is described
here, purging unnecessary projects, as it were, that did not fit
our priorities. We would certainly go on with trying to make better
use of the combined estate of the magistrates' courts, the crown
court and the county courts in order to produce savings without
reducing services to the public. This mentions innovative facilities
management, and one of the things I mentioned earlier in relation
to Dr Whitehead's question was that we must look to achieve a
smarter procurement of all our goods and services. They are the
sorts of areas we would look at, but I am afraid I am not in a
position today to give you precise figures for each of those categories
for the longer term.
Q55 Ross Cranston: You touched on
the implications of the Gershon review earlier and I see the figure
at Table 42 mentions a reduction of 1,100 and also relocation
by 2010 of 200. I do not know whether you want to say any more
about the implications of Gershon. I would like to ask you specifically
about the implications of the Lyons review in terms of relocation
as well.
Sir Hayden Phillips: The label
"Gershon" means the £292 million efficiency savings—
Q56 Ross Cranston: I suspect you
have covered most of it.
Sir Hayden Phillips: I think we
have covered most of it. I think I have mostly mentioned the areas
we will be looking at, including the fundamental review of legal
aid—which will make a contribution to that but is not focused
on it. On relocation, the numbers we have agreed we will aim to
relocate are relatively small: out of the total staff of 26,000—and
I am looking forward to next year—only 200 posts. I think
the best thing is to repeat a point I made earlier, that the staff
who serve the public directly in individual localities are out
of scope, and that is about 90% of our 26,000. Half of the DCA
staff, about 7,500, are in London and the South-East but 80% of
those are in front-line roles. You are left with a pool of about
1,600 posts in the centre of the department. When we looked at
what could sensibly be done, it seemed to us that in our case
the realistic thing was to look to the creation of the future
organisations and JAC and the tribunals' system as the likely
candidates, which brings us to a relatively low figure. You also
have to look at the business case for this. The full cost is relocations
by £50,000 a head, and it takes quite a long time for that
to pay back. For understandable reasons, I think, in terms of
the way in which we deliver our services, we are at the low end
of the numbers—-
Ross Cranston: I just noticed that Lyons
estimated that some 1,200 to 1,600 might be relocated—and
you will always remember Dudley in your relocation plans!
Q57 Chairman: And Berwick-upon-Tweed
as well!
Sir Hayden Phillips: If I could
have a list of the constituencies. The trouble is, Chairman, my
influence may no longer be quite as powerful as it has been!
Q58 Keith Vaz: Are you disappointed
that over six years you have failed to implement a diversity agenda
in your department? The department is still, in a sense, exactly
the same as it was six years ago.
Sir Hayden Phillips: I think that
is a little unfair. A diversity agenda we do have. Quite a bit
of action has been taken in terms of the way we work to enable
that to happen. We have some very powerful networks in the department,
both in relation to ethnic minorities and to other groups. We
have managed to win an award for work/life balance; we have a
record on dealing with general issues and the encouragement of
women returning to work which is really very good. I am not trying
to be complacent. This is an area in which, as you know, I have
been engaged ever since the 1970s.
Q59 Keith Vaz: You have been, and
that is what disappoints me.
Sir Hayden Phillips: In terms
of practical advance, of all the areas of administration it is
one of the most intractable I have found over many years.
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