Examination of Witnesses (Questions 80-99)
MR BILL
JEFFREY CB AND
MR TREVOR
WOOLLEY
24 JANUARY 2006
Q80 Mr Jenkins: Just keep us of informed
of the way you are thinking now and what we can have expectations
for in the future, and if we have it in black and white I would
be very grateful. If I move on to the value for money, we are
going to reduce the costs for military training for recruits by
6% and I have seen now that we have scrapped the target entirely.
What target is now in place?
Mr Jeffrey: It is not that we
have scrapped it; it is that there have been some changes which
mean that it can no longer be satisfactorily measured, and we
assessed that it would not have been achieved. Do we have another
target?
Mr Woolley: No, no replacement
target.
Q81 Mr Jenkins: So we had a target
and you could not meet that target and so you have not adjusted
the target, you have scrapped it.
Mr Woolley: As Mr Jeffrey says,
the fact is that it is no longer really possible to measure performance
against that target in the way that that was originally envisaged,
because the target was very much related to measuring training
on a single service basis and because of the creation of more
joint service establishments it is not really possible to make
the measure on a single service basis any more.
Q82 Mr Jenkins: So you are telling
me that no one now can work out that if I have three streams of
individual recruits and I put them into a mixed facility and then
I bring them back out at the end of the mixed facility, I cannot
cost that process? Are you telling me you cannot do it, or it
cannot be done?
Mr Woolley: What we are saying
is that it is no longer possible to attribute the costs of joint
establishments to single service throughput, and as the measure
was on a single service basis you cannot effectively measure the
cost on a single service basis.
Q83 Mr Jenkins: So where do you attribute
the cost of this multi-service unit to, then?
Mr Woolley: Where do we attribute?
Q84 Mr Jenkins: If you have a multi-service
unit where do you attribute the costs? To training?
Mr Woolley: Indeed.
Q85 Mr Jenkins: So part of this also
is training and if you divide the amount of the cost of training
by the number going through you get a cost per head, do you not?
Mr Woolley: You could get a cost
per head of all Armed Service personnel. What we cannot do is
have a cost per head for a soldier or a sailor or an airman, which
is the way the target was originally expressed.
Q86 Mr Jenkins: It says here, "Reduce
the per capita cost of successfully training a military recruit
by an average of 6%" and that was your target. It does not
say an RAF or an Army or a Royal Marine recruit, does it?
Mr Woolley: But the measure is
on a single service basis; the individual measures underline this
target.
Q87 Mr Jenkins: But the point is
now you have no target at all rather than a military recruit target,
do you?
Mr Woolley: Correct.
Q88 Mr Jenkins: Do you find that
alarming or are you quite happy to have no target to work to?
Mr Woolley: There are clearly
potentially almost an infinite range of targets that we could
work towards, and as far as what goes into the PSA we have agreed
with the Treasury that this particular target should no longer
feature as a PSA target because of the nature and the change of
the policy.
Q89 Mr Jenkins: I am going to get
no further on that one, obviously I will have to talk to a Minister
about why they are quite happy to have no targets for public expenditure
on this sort of activity. If I move on to the next one, we are
going to reduce our expenditure and the cost of the DLO by April
2006 by 14%, but I do not have a breakdown here. Are we reducing
the stockholding, reducing the service times or are we reducing
or increasing the efficiency saving in the running of the establishment?
What is the main ingredient in the reduction in costs in this
area?
Mr Jeffrey: It is principally
the performance and efficiency that we were discussing earlier
in this hearing, which enable costs to be reduced.
Q90 Mr Jenkins: So we are increasing
the efficiency in the running of it? It is just not stock?
Mr Jeffrey: I do not believe so.
Mr Woolley: In some cases reducing
stock might be part of the efficiency saving.
Q91 Mr Jenkins: Yes, I know, and
last time we asked you, you had a very good trick, when you wrote
down the amount of stock I think some stuff went down from about
£20 when we bought it in to a value of pennies, and you said,
"Look we have reduced our stock." That is why I am always
a bit wary about looking at savings in value of stock. Or should
we classify stock separately to the actual manning costs and the
look at the increased efficiency of the manning costs?
Mr Woolley: What we would score,
as it were, to the saving is not the value of the stock as such
but the cost of capital on the value of the stock, and that is
what would contribute towards a saving in budgetary terms.
Q92 Mr Jenkins: The next item is
MoD main buildings. When we modernised it we got a 12% reduction
in Head Office and other management costs. Are all these staff
functions that were originally in the Head Office still carried
out in the main building? The reason I ask you is because we did
a PFI on one office and because it was too small we had to move
some of the staff out to peripheral offices and then we said that
the cost of running the main office had fallen.
Mr Jeffrey: Broadly speaking,
my understanding is that we have much the same staff in the main
building as we had before. Certainly my experience in other fields
is that when you modernise buildings like this there are significant
savings to be had simply because you use the space more effectively
than you might have done in an older building.
Q93 Mr Jenkins: So all the functions
are still carried out in there? Yes? Thank you. If we turn to
page 95 in the report, a simple question: at the bottom of that
page on logistics we see that we have £21.6 million cash
receipts achieved from the sale of surplus equipment. Did we buy
any surplus equipment back this year?
Mr Woolley: Did we buy any surplus
equipment back this year?
Q94 Mr Jenkins: Yes.
Mr Woolley: Not that I am aware
of.
Q95 Mr Jenkins: Can you check please[15]?
We certainly did not in the previous years. On page 97, paragraph
210, as we look down to the "Lean" engineering and support
facilities for the Tornado we see that in partnership with Rolls-Royce
we have produced cost savings of £88 million over four years.
This is the year 2004-05 accounts, so the previous four years.
When did they start at Marham "Lean" engineering, please,
what year?
Mr Jeffrey: I think this is the
Tornado future support improvement and efficiency that I mentioned
earlier.
Q96 Mr Jenkins: It says, "Produced
cost savings of £88 million over four years". So this
is an expected result and not an actually achieved result?
Mr Jeffrey: This is a programme
on which work began some years ago, in May 2000, to simplify the
way in which Tornado support arrangements work. It is partly already
producing savings of this sort and partly still to do so.
Q97 Mr Jenkins: I do not understand.
The figure here says it has produced cost savings of £88
million and I take that to be a fact. I do not understand it £88
million actually saved but a projection of £88 million. Which
is to be, is it £88 million saved or is it £88 million
projected savings?
Mr Jeffrey: These are four years
in the past since this was produced.
Q98 Mr Jenkins: So I take it has
saved £88 million. Could you check on that and let us know?
Mr Jeffrey: Yes, we will.
Q99 Mr Jenkins: I will go to a much
more complicated part, unfortunately. Page 139, cost of operations.
The figures on your schedule, once again—it always confuses
me when figures do not add up—do not add up, and they are
qualified in the next page over. Is it my understanding here that
we have a baseline of expenditure and we have an operational cost?
And whilst we are on operational costs the Treasury pick up all
the extra funding that comes in over and above our baseline. On
operations, if we crash a vehicle it is replaced, but if we wear
it out it is not and that has to come out of the baseline cost.
An example would be, if I had a gun the ammunition was paid for
out of the contingency fund to fight the war, but if I wore the
gun out and I brought it back they would not replace it; the replacement
and refurbishment would have to come out of my base budget, is
that right?
Mr Woolley: To the extent that
we are able to capture the net additional costs incurred by going
on operations then we can and do claim that back from the Treasury.
So in the example you quote, if we could demonstrate that a gun
that had been used on operations had needed to be replaced sooner
or it wore out faster as a result of that operation than it would
otherwise have done, then indeed we score that to the cost of
the operation.
Mr Jenkins: Page 194, please. The third
item down there is a loss of £65 million being incurred following
the impairment of an operational building.
15 Note: See Ev 94 Back
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