Examination of Witnesses (Questions 20-39)
14 JULY 2004
MR ROBERT
CHOTE, PROFESSOR
COLIN TALBOT
AND MR
DAVID WALTON
Q20 Mr Fallon: In England is it possible
that back-office employment could continue to grow in the Health
Service and local authorities outside the Civil Service?
Professor Talbot: It is possible
in the Health Service if the NHS trusts decided not to adopt some
of the reforms that are being suggested. In local government,
it is certainly possible because it is more difficult for the
central government to impose things on them anyway.
Q21 Mr Fallon: The Spending Review does
not include efficiency savings targets. There is going to be a
new system of Efficiency Technical Notes, but those are not going
to be published until the end of October. Would you not have expected
them to have been agreed by departments before they signed up
to the efficiency-saving targets?
Professor Talbot: Yes. The point
about all this is that again if you go to Section C of the Gershon
Report and work your way through the promises that individual
departments have made about how they are going to make these efficiency
savings, I have to say they are quite extraordinary in the lack
of depth and information that is given about exactly how these
things are going to be achieved. If I can just give you an example,
again from the Department of Education and Skills, at bullet point
2, which is supposed to save 30% of the $4.3 billion, is by enabling
the front-line professionals in schools, colleges and higher education
institutions to use their time more productively to generate around
30% of total efficiency gains. I am sure my colleagues in higher
education institutions and other educational institutions will
look forward to finding out how we are going to improve our productivity
by that amount in the time that is suggested.
Q22 Mr Fallon: You are saying that is
pretty difficult to measure?
Professor Talbot: It is difficult
to measure. It is difficult to see how it could be done at that
sort of level.
Q23 Norman Lamb: Following up on Michael
Fallon's questions, I note in the IFS analysis of the review that
you state that civil service numbers have exceeded Treasury plans
in every set of annual public spending projections since 1999.
You also mention that there will be some reclassifications going
on and that, prior to the reclassification, the Treasury had promised
every year since 1998 to reduce administration spending only to
see it rise consistently. Is there any substance to suggest that
this time it will be different?
Mr Chote: I guess one argument
would be that clearly the stakes are somewhat higher on this occasion
and so therefore there may be a greater impetus.
Q24 Norman Lamb: Why do you say that?
Mr Chote: I say that because it
has been made the centrepiece of the Spending Review and because
of the way in which essentially the big picture of the Spending
Review is to argue that after a period of relatively rapid spending
growth since 1999, we now have the rate of growth slowing down,
and the justification for having renewed emphasis on efficiency
savings is essentially that the voters will not notice the fact
that overall spending growth is slowing because, by reallocating
resources into the front line, you can keep that growth as strong
as it is. Arguably the incentive, now that overall spending growth
is slowing, to actually deliver on this finally is that much greater.
It is clearly not impossible to achieve this, and we have had
periods in which administration spending has declined as a share
of the total in Civil Service numbers has declined. As I say,
we simply point to the past record that this is often promised
and rather rarely delivered.
Q25 Norman Lamb: On job numbers, most
of the reductions that we are promised, the 70,000 net, are actually
jobs that have come in in the last two to three years, is that
not right? There has been that sort of scale of increase in jobs
over the last two to three years?
Mr Chote: Roughly speaking in
the Civil Service numbers have risen from about 500,000 to 550,000
over the period 1999 to 2003. It depends on which set of figures
you look at. If you are aiming for a 70,000 net reduction, then
that basically would burst that increase plus a little more.
Q26 Norman Lamb: If we are looking, say,
at the Department of Work and Pensions, there has been nothing
that I am particularly aware of which simplifies the system of
benefits, so are we simply going to have fewer people administering
a very complex benefits system and does that not cause some concern
about delivery?
Mr Chote: It is certainly true
that the reduction in DWP numbers is not being justified on the
grounds that we are going to a system, as you say, of tax credits
and benefits that is more simple. Colin Talbot may know exactly
where the DWP back-office savings are coming from.
Professor Talbot: Again, the implementation
of the plan for this in Gershon is extremely thin; there are just
five bullet points that try to explain how these savings are going
to be made. On the actual staffing numbers, all it says is: the
reduction of 40,000 civil service posts with redeployment of 10,000
of these to front-line roles and ensure relocation of 4,000 in
all. There is no explanation as how exactly this is going to be
achieved or why it is the case that there are reductions or changes
in the way in which services are provided, which would allow for
these sorts savings.
Q27 Norman Lamb: The DWP is well advanced
to support them because they have brought a lot of extra people
in?
Professor Talbot: Yes.
Q28 Norman Lamb: To move on to PSA targets
and departmental programmes, what evidence is there to show how
departments' performance against PSA targets set in the earlier
Spending Reviews has affected their spending allocations in this
one? In other words, is there any sanction at all, or is it purely
aspirational?
Professor Talbot: I think you
will recall from the evidence that you took from the Chancellor
after the last Spending Review when this question was asked several
times by the Committee that the answer was—how can I put
this politely—that there was no clear evidence. The Chancellor
kept reiterating the Treasury mantra, which is: yes, of course,
this is money being given in exchange for reform and departments
will be held to account if they do not deliver reform. I am not
aware of, and they certainly will not give any examples of, cases
where either departments have been rewarded or sanctioned for
failing to perform.
Q29 Norman Lamb: So no stick and no carrot?
Professor Talbot: There does not
seem to be. It may well be happening behind closed doors, but
none of us know about it.
Q30 Norman Lamb: Should the Treasury
include in the Spending Review a document outlining which targets
have been met, partially met and failed, preferably audited by
an independent body such as the NAO?
Professor Talbot: On the first
point, yes, and a large number of other administrations already
do something like this. In the United States, the Federal Government,
for example under GPRA, federal agencies and departments, have
to publish their results and their plans alongside one another,
so that it is fairly clear what they set out to do in the past,
what they have achieved, what they are intending to do now, and
how they are going to get to that.
Q31 Norman Lamb: Are those actually measurable
targets, though, because often the problem is that it is also
vague that it is not possible to measure whether you have achieved
it?
Professor Talbot: There is more
detail in the American federal system than there is in ours. PSA
targets have been slimmed down in number and they have become
less and less useful in terms of knowing whether or not departments
are actually achieving.
Q32 Norman Lamb: So we are moving away
from accountability in terms of the PSA targets?
Professor Talbot: In terms of
PSA targets, I think we are. They are becoming so vague and so
long-term and so outcome based in most cases, that that really
does not tell us a great deal about how departments are performing.
Getting rid of service delivery agreements, although a lot of
the information about that will have been published anyway—and
the Treasury may well still be collecting a lot of that information,
I do not know—tends to suggest a lot of the detailed information
that you would need, so knowing whether or not a complex department
like DWP or the Home Office or Education is actually delivering,
is simply not being collected. May I just add, the point was raised
earlier about the Atkinson Review, which is looking at how we
measure the output in the public sector. Certainly up until now
the figures on which ONS have been basing their measurement of
output have been extremely crude for most areas of public sector
activities and only based on a small handful of measures. Unless
you start to measure an awful lot more than they are doing at
the moment, then we simply do not know what the output levels
are for most government activities.
Q33 Norman Lamb: You have said in the
past that the system of PSA targets is fundamentally flawed. I
was going to ask whether the changes in the last two years have
changed your view but, from what you have said, if anything, it
has made it worse; it has made the targets less measurable and
therefore there is less accountability. Is that your view overall?
Professor Talbot: I think overall
that would be correct. There has been some small improvement in
consultation over what goes into the PSA targets within some departments,
but it has been pretty marginal. Certainly, the Government has
not done what I would regard as being a way of making this a much
more open and democratic system, which would be, for example,
to publish PSA targets as Green Papers and open for consultation
and involve parliamentary committees in that and involve key stakeholders
before the final targets are actually published, which is what
happens, for example, in the public sector.
Q34 Angela Eagle: Why this easy cynicism
about spending? The public sector has always been told it ought
to be more efficient and as soon as there is something like the
Gershon Report, which I think is a serious attempt to look at
how you can get economies of scale that the Government ought to
be getting especially with its procurement suppliers, how it should
re-engineer its systems to take account of the vast investment
in IT, there is all this easy cynicism about how it is all a load
of rubbish and nothing is going to happen anyway. Does the public
sector get beaten when it does and beaten when it does not?
Professor Talbot: I would not
say it is easy cynicism. It is more of a weary cynicism in that
governments frequently promise more than can actually be delivered.
It is possible to reform public services; it is possible to improve
efficiency; it does not help when governments make promises which
are not going to be delivered.
Q35 Angela Eagle: Why are you so certain
of that?
Professor Talbot: The reason I
am so certain is because the history is so clear.
Q36 Angela Eagle: You have a little crystal
ball in front of you?
Professor Talbot: No. The Rayner
Scrutinies, which were very high profile and backed by a very
dynamic Prime Minister, promised £600 million worth of savings;
they delivered about £300 million worth. The market testing
initiative similarly promised about £600 million and delivered
about 50% of that. The FMI promised huge savings and delivered
nobody knows exactly how much but probably around 40% to 50%.
The Executive Agency has promised £60 million worth of savings;
no figures have ever been published. My calculations suggest that
it is considerably less than that, if anything at all.
Q37 Angela Eagle: Do you think that some
of the things that Gershon concentrates on, such as back -office
functions and procurement functions, transactional services and
the use of civil servants' time in a more effective way are not
likely to come up with savings? There are some examples in the
Gershon Report of where this has already happened.
Professor Talbot: I think I have
just said that they will come up with savings. I am saying that
the levels of savings that have been projected do not seem to
be supported, to me, by the evidence in the report.
Q38 Angela Eagle: Box 2.2 on page 14
of the Gershon Report gives an example of the amount of money
that has already been saved by creating the Office of Government
and Commerce, which was something I certainly supported when I
was a Minister, looking at the mess that was going on with all
sorts of people trying to procure without talking to each other
and the suppliers knowing more about what contracts the Government
had than government departments. This has already nearly doubled
the amount of savings it was meant to produce so far and has a
fairly modest target to continue to do so. Why are you cynical
about that?
Professor Talbot: I am not cynical
about that. What I am saying to you is that I think there is scope
for making efficiency savings in all of these areas. I think there
are two problems about Gershon essentially. One is that it is
promising very large-scale savings and we have to be clear about
the scope of this. Most of the big efficiency initiatives that
have been taken in the past have aimed for certainly less than
£1 billion worth of savings.
Q39 Angela Eagle: Let us look at Gershon
because there are some potentials here that are quite new that
are actually being delivered. Again, if you look at box 2.2, the
NHS is procuring extra surplus operations from the private sector
and there is clear evidence that they have managed to drive the
price down for operations significantly because of some of the
changes that have been made. You do not deny that, do you?
Professor Talbot: No.
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