Examination of Witnesses (Questions 60-62)
14 JULY 2004
MR ROBERT
CHOTE, PROFESSOR
COLIN TALBOT
AND MR
DAVID WALTON
Q60 Chairman: Put it this way: we do
not have the whole picture but is there sufficient of a picture
there?
Professor Talbot: I do not think
there is. The existing output information for the public sector
is extremely weak. It is based on fairly shaky foundations but
I think everybody recognises this is an international problem;
it is not just a UK problem. Statisticians in a number of countries
are trying to address this. I think it is going to be a considerable
time before we get a system in place which has the level of detail
or measurement of public sector outputs, of very specific outputs
across a range of different services, which would give us the
sort of robust information we would need to get the real picture
of public service and real output levels and then start to establish
some trends on that. I really do not think that sort of information
is going to be available in a robust enough form within the lifespan
probably of this Spending Review.
Mr Walton: Just in a macro-economic
sense, there is complementary information. For instance, we know
what is happening in the labour market. We know that unemployment
is falling. Whatever the actual published GDP numbers say, and
those are always revised through time, we have another indicator
from the economy which suggests that slack is being taken up.
Obviously, if you observe wage inflation and price inflation,
we have another indication of where output is relative to some
notional potential. We never know precisely what actual output
is or indeed what potential output is. There is evidence from
other bits of the economy, from surveys, which help to give you
handle on some of these things from a macro perspective.
Q61 Chairman: Lastly to Colin Talbot,
going back to what is said in Gershon about £21 billion savings,
the CBI have identified £5 billion. Could you recap on the
rest for us?
Professor Talbot: Most of the
rest, the £5 billion that the CBI suggests, is going to come
from the staff savings; most of the rest is going to come from
improvements essentially to processes and back-office services.
One key element is improving the productivity of those staff that
are actually doing the job. The figures that are being suggested
there seem in some areas to be wildly over-optimistic. The second
is in delivering better procurement and other back-office services,
and again the history of this has been that we keep pointing to
the fact that both the procurement systems and the numbers of
people within the public sector with the requisite procurement
skills are at a very low base. To get those in place and get them
working in the timescales involved I think is going to be extremely
difficult. Again, if I can come back to the departments, the Department
for Education is suggesting that it its going to put in place
a new procurement centre of excellence to be established by April
2005 to strengthen the procurement practice across the education
and children's services sectors.
This will deliver around 35% of the entire efficiency
gains for the Department of Education which is £4.3 billion.
That is only going to start operating from April next year. In
reality, to improve procurement across the whole of the education
system will take three or four years. Anybody involved in management
change initiatives knows these things take a long time to put
in place and a long time to embed, particularly where cultural
changes are involved as well. To think that is going to deliver
35% of that £4.3 billion in the timescale seems to me to
be wildly optimistic. It will deliver savings—I am not suggesting
it will not—but I just think it is extraordinarily optimistic.
Q62 Norman Lamb: Spending is front-loaded,
is it not? The bulk of spending comes next year and then dropping
off after that.
Mr Chote: Under the three years
of the spending review, that is right. The year which overlaps
with Spending Review 2002 is a higher growth rate than the two
subsequent ones.
Professor Talbot: But that is
just an increase in the overall spending. Procurement savings
are going to come from the whole of the spending pattern and it
will take a lot longer to deliver.
Chairman: Thank you very much for your
time.
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