Examination of Witnesses (Questions 20-39)
RT HON
PAUL BOATENG
MP, MR GUS
O'DONNELL CB, MS
MARY KEEGAN
AND MS
SARAH MULLEN
9 FEBRUARY 2005
Q20 Mr Plaskitt: I am sure I am not the
only Member of Parliament who has been lobbied quite hard by teachers
in my constituency who are concerned about the reform of the teachers'
pension scheme. Minister, why is the teachers' pension scheme
being reformed?
Mr O'Donnell: We are looking across
the whole of the broader public sector on pensions. Pensions were
set at a time when life expectancy was very different so we are
looking now at affordability across the public sector. You will
have seen announcements about the Civil Service and moving from
60 to 65, and specific recommendations of changing, moving away
from final salary schemes, which benefit people who do very well
in their last two or three years, towards averaging, which actually
will help most people and will be overall a net benefit. There
are some changes out there. We have to think about, and it is
being negotiated area by area. We need to take account of, for
example, what would be appropriate with the military, given the
finances are different. For each of these pension schemes there
is a discussion going on about what is the right way to do this,
bearing in mind the question of ageing, which we should regard
as a positive, and the question of how we get fairness between
current taxpayers and future taxpayers, which is essentially what
this is all about.
Q21 Mr Plaskitt: That is interesting
because, you see, being lobbied by teachers, obviously I spoke
to the Department for Education and asked them for a full briefing
on why the teachers' pension scheme is being reformed and it says
what you have just said, happily for you. The one word which did
not appear in the explanatory note from the Department for Education
was that it was something to do with efficiency, it was instead
to do with demographics, longevity, affordability of the scheme,
all of which I understand. When we asked the Treasury to give
us some examples of what counted as efficiency savings, for the
purpose of this exercise, why did they offer up "reform the
teachers' pension scheme"? What has it got to do with efficiency?
Mr O'Donnell: The reasons I gave
are fundamentally the reasons for it. It will result, quite possibly,
in increases in efficiency as well.
Q22 Mr Plaskitt: How?
Mr O'Donnell: Having trained teachers
for some time and they having got their experience, you are being
able to retain them for longer.
Mr Boateng: If you can arrive
at a scheme which produces a high level of benefit, which forms
part of a competitive reward package for teachers, and the scheme
still provides the benefits which are sought in teacher recruitment
and retention and maintains those benefits but at a lesser cost
then I do not think it is unreasonable to argue that is an efficiency.
That certainly is the approach which the Treasury has taken.
Q23 Mr Plaskitt: Is it not a change in
the nature of the pension scheme? What your note said was that
it was reduced input for the same or better output, but for many
teachers, looking at it, it looks like a change in their pension
prospects?
Mr O'Donnell: It is both, is it
not, but it is giving them the opportunity to work longer, and
not all of them will want to retire at 60.
Q24 Mr Plaskitt: Do you suggest that
I write back to the teachers in my constituency who are lobbying
me about this and say the pension scheme is being reformed because
it is in pursuit of efficiency?
Mr O'Donnell: I think you should
give them the answer I gave you first of all and add to that it
is completely consistent with improving efficiency in public services.
Q25 Chairman: It is consistent with it
but not part of it, is that right?
Mr O'Donnell: It is entirely consistent;
that is all I can say.
Q26 Mr Plaskitt: Was putting the teachers'
pension scheme forward as an example of an efficiency entirely
consistent with the guidance you have given departments on their
Efficiency Technical Notes?
Mr O'Donnell: It is certainly
an example. What we are looking for is increases in output and
using the same or lesser inputs. Certainly, if it results in that
outcome, as we hope, then it is a perfectly valid example and
in line with the guidance, I would say.
Q27 Mr Plaskitt: Who wrote the Efficiency
Technical Notes; were they written entirely within the Treasury?
Mr O'Donnell: No. They are written
by us in discussion with departments and then we talk to the NAO
and the Audit Commission about measurability issues and at the
end of the day we come out with Technical Notes.
Q28 Mr Plaskitt: Who approved the guidance
ultimately which has been given to departments on the Efficiency
Technical Notes? Who signed it off and said "That's it; that's
the Note"? Did you, Minister?
Mr Boateng: The process is one
in which the National Audit Office and the Audit Commission examine
draft ETNs against every criterion. Gus has mentioned one of them.
Q29 Mr Plaskitt: That is the process
by which you got to the point where you had the Note, but then
who signed it off and said "That's the draft; that's it,
I approve it. It can go."? Somebody must have done that.
Ms Mullen: Are you talking about
the Efficiency Technical Notes or the guidance?
Q30 Mr Plaskitt: The Efficiency Technical
Notes.
Mr Boateng: They belong to each
department.
Q31 Mr Plaskitt: Who approved the text?
Mr Boateng: This was what I was
trying to explain, Mr Plaskitt. There is a process, and this is
where the scrutiny panel works, and the scrutiny panel consists
of the NAO, the Audit Commission and ourselves. They examine the
draft ETN against agreed criteria, the measurement methods, the
clarity of savings, the data quality, the service continuity,
readability. They provide advice to departments. That occurred
in and around September 2004. Subsequently, the departments publish
their ETNs. The reason why we involve the NAO and the Audit Commission
alongside ourselves in these discussions with departments is in
order to arrive at a place in which we have a balanced view, the
views of the NAO and the Audit Commission are understood and communicated
to departments and then subsequently there is ownership of them
by the departments. It is for the departments, having been through
that process, to publish the ETNs because ownership is absolutely
central to the process.
Q32 Mr Plaskitt: When we took evidence
on the Pre-Budget Report in December, the Chancellor told us that
it was the Treasury who issued guidance to departments on their
Efficiency Technical Notes. It has been put to us that the Treasury
has issued some guidance notes to all the departments.
Mr Boateng: Yes.
Q33 Mr Plaskitt: Who has the ministerial
responsibility for that guidance which went to the departments?
Mr Boateng: I did.
Q34 Mr Plaskitt: Do you intend to publish
that guidance at any point?
Mr Boateng: I do not see any reason
why we should not publish that guidance and I am only too happy
to make it available to you.[1]
Mr Plaskitt: Thank you.
Q35 Mr Beard: When we took evidence on
the Pre-Budget Report last year, the Chancellor told us that it
was departments who were accountable for efficiency gains and
for showing how these would be made and that individual efficiency
proposals were not a matter for the Treasury to take a view on.
We were told also that advice was provided by the National Audit
Office and the Audit Commission on draft Efficiency Technical
Notes via a scrutiny panel, which has just been mentioned, comprising
the Office of Government Commerce and Treasury officials. What
exactly was the role of the scrutiny panel?
Mr Boateng: The role is to assist
the various parties, but essentially the department, to arrive
at a common understanding, a balanced view of what the NAO's and
the Audit Commission's comments on these drafts were, so that
can be taken into account by the departments in producing their
final Efficiency Technical Note. It is an iterative process, it
is one where there is discussion, with the need to ensure that
those issues around clarity of savings, measurement methodology,
data quality, service continuity and readability have all been
thrashed out and we have arrived at a Note which is fit for purpose.
They are not uniform documents, they will vary according to the
role and responsibilities of the various departments.
Q36 Mr Beard: We were told also that
it was left to departments whether or not to take the scrutiny
panel's advice into account in the published version of the notes.
On how many occasions did departments not take any notice of the
scrutiny panel's advice?
Mr Boateng: I would hope that
on every occasion they took some notice of it. At the end of the
day, and this is the balance that we have to arrive at, and my
colleagues will give you their take on this, what we must not
allow to happen is that the departments take the view, "Well,
these belong to somebody else, these have been imposed on us by
A, B or C." They have to own them and they have to take responsibility
for them, because they will be held to account for their failure
or otherwise to deliver on these Efficiency Notes and the targets
which they have.
Q37 Mr Beard: My question really is,
given that very sensible principle, how many exercised it and
how many said, "Well, we think the advice that's given by
the National Audit Office and the Audit Commission is well worth
taking into account and we'll modify what we were going to do
otherwise"?
Ms Mullen: The process was such
that a number of departments had a discussion with the National
Audit Office and the Audit Commission about the advice they had
and followed those through. I do not know the exact number but,
as the Chief Secretary has said, the way we set up the framework
is built very much on the PSA model where departments are responsible
for publishing their Technical Notes. We took a decision to ensure
that departments published those Notes by the end of October,
which was only a number of months after they had been set their
targets in the Spending Review. The reason we did that was because
we knew from our PSA experience that getting a handle on measurement
issues was important to do early in the process, but we did say
that we expected those Efficiency Technical Notes to be developed
over time, as departments' delivery programmes were developed.
We have recognised also that there are some very difficult and
complex issues that we are trying to tackle here, in terms of
measurements, particularly of output and outcomes, and we will
need to go back to that and we want to involve the NAO and the
Audit Commission in that process.
Mr Boateng: Indeed, some of the
Efficiency Technical Notes make specific reference to the difficulties
in relation to measurement, and it is right that they should because,
in one sense, this is an area where we want to test what works
better for some rather than others. That is why we are engaged
in a process of discussion with the NAO and the Audit Commission
about their future role in scrutinising ETNs. Indeed we would
very much welcome the Committee's view, based on all the evidence
that you have taken, as to what their role should be and how we
might do this better. I think that is one of the contributions
the Committee can make and we would welcome that.
Q38 Mr Beard: Can I clarify what Ms Mullen
has just said. Ms Mullen, I understood you to say that the National
Audit Office and the Audit Commission had discussions directly
with departments and they had mutual agreements?
Ms Mullen: When we passed back
the advice from the scrutiny panel to the departments, we invited
departments, if they wanted to, to follow up with the NAO and
the Audit Commission, and I believe a number of departments did
that.
Q39 Norman Lamb: So they all see the
advice from NAO and the Audit Commission?
Ms Mullen: Yes. The departments
see all the advice.
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