Examination of Witnesses (Questions 40-59)
MR MARK
HUTCHINSON, DR
DAVE GRIGGS
AND MR
STEVE NOYES
11 MAY 2006
Q40 Chairman: Are there any other
losses which might come into future accounts? If so, how much
will that amount to?
Mr Hutchinson: In relation to
weatherXchange?
Q41 Chairman: Yes.
Mr Hutchinson: I am not aware
of any future write-offs of the costs. Clearly there are ongoing
liabilities associated with our involvement in the joint venture.
I do not believe they are significant and I do not believe they
will lead to future write-offs, but I think at this stage the
answer to are there circumstances where we are likely to generate
future write-offs in relation to our joint venture is I fully
expect the £1.5 million write-off in the 2005-06 accounts
to be, in accounting terms, the end of the story.
Q42 Chairman: Do you have any other
joint ventures with private companies?
Mr Hutchinson: We have a shell
joint venture, just a paper arrangement structure in relation
to a New Zealand concern. The joint venture was called Eco Connect.
Our involvement with Eco Connect is not being progressed, so in
practical terms we have no active joint ventures. Clearly we have
learned lessons from the weatherXchange joint venture, and whilst
I think joint ventures do have a place in progressing our objectives
for entering commercial business, I think undoubtedly we could
manage those better. Certainly I think at this stage there are
no additional active joint ventures which the Met Office is engaged
with.
Q43 Mr Havard: We have also written
to the Ministry of Defence about some of these issues and we have
a viewpoint, not so much about the detail on the weatherXchange,
I do not want to pursue that, as the Chairman said, but what I
do want to ask, however, is in the replies they have given us
there are references to the MoD having taken steps to ensure that
appropriate controls and best practice are now in place to prevent
similar circumstances in the future. I would like to hear what
you have to say about what those new procedures and controls are,
in order to deal with avoiding a similar sort of circumstance?
Mr Hutchinson: The main lesson
we have all learned from our long engagement with the joint venture
was the need to ensure that the structures that were in place
to ensure proper governance of our investment in this joint venture
were compliant with that. Certainly one of the experiences from
the weatherXchange joint venture was that sometimes decision-making
in relation to investments or if a service was supplied to this
company, did not go through the appropriate governance bodies
with that sort of deep scrutiny and audit which should be conducted.
Certainly what we have put in place as a result of some of our
experience of the joint venture is a much more formalised and
structured set of controls and governance bodies and stem from
the Met Office board, which was put in place towards the back
end of 2004, I believe, through to a greatly enhanced audit control
and scrutiny process. We have also separated out the delegated
powers within the Met Office so that no one person can make a
financial commitment, they have to set the requirement, state
the price but then get financial concurrence from a second person,
so there is a degree of separation of powers, delegations and
controls, which I think reflects an awful lot of what goes on
elsewhere within the MoD. Until recently, it did not really exist
in quite the same structured way within the Met Office. Basically,
there have been improvements around the control and governance
of our investments and the engagement with such concerns. I think
also the second issue which came out after our experience was
the need to ensure that management information flowed better to
those bodies set up with oversight responsibilities for the Met
Office, ensuring financial reporting, management reporting, was
holistic rather than piecemeal, so that people could have a true
view of the totality of what we were talking about and we are
able to better exercise due diligence to the Government.
Q44 Mr Havard: When the Annual Report
and Accounts 2004-05 refers to changes to the Government's framework,
you have just explained what that means but obviously I need to
find out what the difference between some of those things are.
Sometimes the language gets interchangeable and loses its meaning
for people. That was what you referred to in relation to the governance
framework. Can I ask you, first of all, are all of these things
therefore fully operational 2005-06 because this is the Annual
Report for 2004-05? This is now in place and has been in place
for some time, has it not?
Mr Hutchinson: Indeed. The new
Met Office board—which was new then in 2004—was put
in place with a clear mandate to bring in experienced non executive
directors with commercial experience to apply the sort of scrutiny
and due diligence checks on our commercial activities which we
suffered from a lack of before then. Perhaps that was one of the
reasons why we got ourselves into the pickle we did over weatherXchange.
That was in place before the final decisions were made about weatherXchange
and was also one of the reasons why some of the experience and
some of the findings came out. Yes, all the other things in terms
of delegation, control and audit arrangements are now in place.
Q45 Mr Havard: The NEDs, the due
diligence and those processes, cover all the other things about
best practice of governance, does it, that is what all that means?
Can I ask a question, however, which is that you have these non-executive
directors and so on, have you looked at the appropriateness of
all this with anyone else? Has anyone else independently reviewed
these things? For example, have you been to the National Audit
Office? Where have you taken advice?
Mr Hutchinson: We involved the
National Audit Office from the first in terms of exposing what
we thought had gone wrong and what the most effective remedial
measures would be. I am pleased to say that the National Audit
Office confirmed our view in that we had identified the right
lessons from our experiences. They said also that the steps we
have taken are the right steps to ensure that those lessons are
not repeated in future cases.
Q46 Mr Havard: That leads me to the
next question which is where does it go beyond there because quite
clearly past experience is going to colour people's attitudes
to some degree or another, so it is really a question about whether
all this makes other private sector companies cautious about coming
forward to enter into any other types of partnerships you might
want to do in the future? Can you say something about that? I
know you cannot speak for the rest of the world.
Mr Hutchinson: I cannot, but I
can certainly speak for the Met Office. We have been taken aback
by the failure of the weatherXchange joint venture to succeed
in quite the way we wished it to. I think, looking with perfect
hindsight, the concept was the right one. It was an attractive
proposition and it was not just us who thought so, some major
investors, Billiton and Zions Bank, also thought it was a thing
that was worth putting money into. The failure lay not so much
in the concept of the joint venture, or the objective of seeking
to get into new markets to secure commercial return, it was the
failure within the Met Office to properly manage that investment
and apply the appropriate governance checks. I do not rule out
future use of joint ventures because they have their place in
the conduct of a trading environment. Afterall, we are supposed
to be looking for innovative, successful ways of offsetting the
cost of our operation to the public purse by this sort of commercial
behaviour. As I have said in the past, I think we need to improve
the way we assess risks, manage investment and take a total view
of the package with sufficient commercial experience available
to us so we do not let our own naivety and lack of familiarity
cloud our judgment.
Q47 Mr Havard: I asked the question
for the obvious reasons relating to what I have just said. It
is interesting because the number of trading terms and processes
are reducing which the MoD are engaged with, and the pathway and
partnerships are becoming a much more common currency to us. It
is interesting for us to know what your future position might
likely be, whether it is the original question asked by the Chairman
as to why you are still part of the Ministry of Defence, but also
how one is then set in order to be able to maintain a trading
position if you do not believe any of this has disturbed you in
anyway in relation to that.
Mr Hutchinson: As I said in an
earlier answer, I am aware that the MoD is keeping its mind open
and reviewing its options in relation to how a trading body such
as the Met Office should be managed and directed in the future.
As I said, I am not aware of any clear evidence that point the
route to privatisation or to return on vote. The trading position,
it seems to me, is about where we are at the moment. If that stays
the case, and clearly this is something which is not wholly within
the Met Office's gift, I do believe that a trading fund has the
right, and indeed in some cases the obligation, to look at ways
of securing commercial return, and joint ventures potentially
can play a part in that. Our experience with weatherXchange has
not made us more reluctant to go into joint ventures as a principle,
they simply have made us very careful about how we go into joint
ventures in the future, if we ever do, and to be much more scrupulous
about how we manage those ventures in the future.
Q48 Chairman: Does that not amount
to the same thing? Does it not run the risk of retreat because
you have been bitten once, as you might say, and therefore there
will be a nervousness about ever getting into this dangerous area
again?
Mr Hutchinson: A certain amount
of nervousness has to be expected. As you say, "Once bitten,
twice shy", but I think in this case we have learnt the appropriate
lessons which, as I said before, was not so much about, "This
was a daft idea or a daft vehicle to access a new market",
it was much more internal to that in terms of, "We did not
manage it very well and we need to learn our lessons from it".
I still think the concept of a venture into a new market with
a set of new products is potentially very attractive. As I said
before, it was not just our judgment. I do believe we need to
keep our eyes open and maintain that innovative risk-taking approach
to trading. We are a risk-taking business simply by virtue of
our trading status, so I think we need to make sure those risks
are properly identified and properly managed. Undoubtedly, that
was what we felt most strongly about after our experience with
the joint venture.
Q49 Linda Gilroy: The relocation
from Bracknell to Exeter was a cost of some £106 million,
I wonder if you can run in front of us what the expected benefits
were of the relocation and the extent to which they are being
delivered?
Mr Hutchinson: If I may pass on
to Steve Noyes to talk about some of this because he had the leading
role in the relocation project at the time, so he can go into
that in much more detail than me. As far as I understand it, the
main benefits of the relocation at the time the project was being
planned and executed were very much along the lines that we expected
to deliver a significant reduction in the operating costs, the
payroll costs and, indeed, as a consequence of the relocation.
We had become a smaller organisation with a 500 post difference
between the size of the Met Office in Bracknell and the size of
the Met Office which is currently in Exeter. Not all of those
benefits related directly to relocation but it was certainly one
of the factors which allowed us to downsize and reduce the cost
of our operations. Also, one of the big areas we thought we would
get major benefit from would be simply co-locating a lot of our
activities in one building because in Bracknell we were operating
out of many different buildings. Although they were in the same
geographical area, you would probably realise how difficult it
is for people to talk to each other if they have to walk down
a corridor, let alone across a road. The benefits of teamwork
interaction across the office and the synergies that will drive
in terms of our performance will play a key part to benefit from
the relocation. Finally, we hope the specific operation part of
the business will be much more resilient given the investment
we have made in each of these computer halls. Those are the main
areas where we expect to get benefits. Mr Noyes can probably say
whether or not we are on track in terms of delivering those.
Mr Noyes: I will start in terms
of where Mark finished, which was on deliverance. Certainly where
we stand now is we are doing significantly better in terms of
our ability to keep the operation running than we were when we
were in Bracknell. We were getting repetitive problems, particularly
in regards to power, which caused significant interruptions to
services during the end of the last decade. Having moved down
here, our performance in order of magnitude, if not more, is a
step forward. That is not to say we have not got any problems,
we had some small concerns last year but we are learning from
those. As with any new building, as you move into it you learn
how to use it. With regard to the performance of the organisation
and the way in which the staff are using the building, there is
definitely a lot more cross-fertilisation of ideas which breaks
down the barriers between the different divisions and parts of
the organisation. That is reflected in the staff attitude survey
which we carried out after we moved. We looked at perceptions
beforehand and then afterwards and there was a definite improvement
in terms of the staff's view in terms of whether or not the new
building was helping them to work more effectively and work better
in the context of a team. In particular, our teams draw together
skills from across the organisation as a whole. With regard to
our operational performance in terms of financial, we have moved
to a new building with the commensurate running costs and those
are running exactly as we would expect them to be, so we are delivering
those. The actual services that are also part of arrangements
are working effectively as well.
Q50 Linda Gilroy: Are there any specific
examples? You mentioned the staff survey as a verification of
how cross-fertilization benefits from the co-location, but are
there any specific examples which come to mind, things that you
think may have come about more easily and more quickly in a more
innovative sort of way?
Mr Noyes: There are a number of
statistics, but they will be more likely to be on the cusp, so
to speak. In particular, if you look at the awareness within the
organisation on capability in terms of climate change, when we
were based in Bracknell, the climate research scientists were
located in a separate building and they are now part of a single
office here in Exeter. I think largely as a result of that the
expertise and capability which they offer to the organisation
is now beginning to be much more integrated into our more corporate
thinking. In terms of the sorts of services we may start to offer
to customers, we are now able to exploit that much better than
we were in the past.
Mr Hutchinson: One very significant
example of the sorts of benefits which come out of that closer
alignment of our research staff and our operational forecasting
staff was seen in the recent forecast we made in the autumn of
last year, making a long-range forecast for the winter season.
It is certainly possible to improve but I do not believe we would
have got that sort of connection between what was essentially
a research finding being brought into the operational forecasting
capability in quite the same way had we been in Bracknell. I think
that offers a hard example of where the joining-up of our capabilities
can lead to an outstanding result.
Q51 Linda Gilroy: Following the relocation,
has the Met Office been operating at a full manning level? If
not, what is the shortfall and what impact is it having?
Mr Noyes: We are, and we are actually
bringing more staff than we originally expected to. Our target
was to bring about 70% of our staff as a minimum to ensure business
continuity, expecting that we would probably have to recruit some
more, but in the end we brought 82% from Bracknell down. In terms
of our forecast headcount that we budgeted year on year, we have
always been there or about right, so there has been no noticeable
shortfall in terms of staff nor of skill. Indeed, as a result
of moving—and I think we were questioned about whether or
not relocating to Exeter would enable to us bring perhaps some
of the best and most eminent scientists to the region—we
are able to attract very good skills, not just in the science
area but across the business as a whole. That is partly because
of the environment they work in and in terms of a place to live,
but also our salaries are more competitive in the South-West than
they were in the South-East.
Q52 Linda Gilroy: You have got a
full complement of staff, and I think you are saying to me there
are no difficulties in having brought skilled staff down, in maintaining
the levels of skilled staff. Are there any pinch points or skill
shortages?
Mr Noyes: No. We were aware of
where there might be skill shortages so we already recognised
them and we managed those risks as part of the relocation itself.
Q53 Linda Gilroy: The other issue
affecting staff and staffing levels was the decision to move the
production of the majority of weather forecasts to Exeter from
other Met Office centres around the UK and the sort of impact
this is having on other centres, such as Birmingham and Manchester.
Can you tell us a bit about how the decision is being taken forward
and what sort of level of savings are perhaps expected from that
move?
Mr Noyes: I am sure you are aware
the Minister announced plans to do what was described at the end
of January, so the decision has now been taken. In terms of a
project for delivery, the intention is to move almost all of the
work we do by the beginning of winter this year. The focus of
the activity at the moment is primarily on making sure that we
have the right people in the jobs who can then be moved to Exeter
from these various locations. Just recently we completed a recruitment
exercise internally, and we are now in the process of moving towards
interviewing staff for those jobs. Clearly there are fewer jobs
than there were before, so it is a major issue for the staff,
and we are treating that very, very carefully and working with
the representatives of the trade union and staff directly. The
other key activity at the moment is the actual transfer of the
activities of staff in terms of the products we give to customers
and the technology required for that, so there are two key aspects.
One is the management of people and the impact on the staff, and
the other is in terms of the services our customers receive.
Q54 Linda Gilroy: We understand that
Direct Space Research was undertaken by Sounding Rockets and Satellites
Experiments at Bracknell. What was the outcome of this research?
How has it been affected by the relocation to Exeter?
Dr Griggs: I am not aware of the
exact research you are talking about. We have an experimental
site in Bracknell where various research was done on radar and
other operational instrumentation. That work is currently being
carried out at different locations, but I am not quite sure about
the exact research you are referring to.
Q55 Linda Gilroy: The work involved
in Direct Space Research, I thought the name of the entity part
of the organisation was the Sounding Rockets and Satellites Experiments
units. That work is being carried out but not here?
Dr Griggs: I would need to check.
Q56 Linda Gilroy: If you can let
us have a note?[9]
Mr Hutchinson: It is certainly
not an area that would have been affected by the rationalisation
of our production centres, they were not conducting research in
quite that way, it would be another aspect of Met Office business,
but we will find out.[10]
Q57 Mr Crausby: Some questions on the
future military Met requirements. The Met Office has run a trial
at two RAF bases delivering automated meteorological services
to the Army and the RAF delivered electronically from a remote
location. Can you tell us something about this trial? When do
you expect the results to be available?
Mr Hutchinson: Certainly. I will
update you on the memorandum which MoD sent to you some weeks
ago now.[11]
Apparently the trial has slightly changed, it is now going to
be held at RAF Wittering. I believe the first stage of the trial
will commence in June, and it will take several months to take
stock of the automated products and what the customer in this
case thinks of it. Beyond that, I cannot really say. It is a trial
which will have a lot of education on both sides. We are trying
to move it forward in the light of that education and results,
but we are waiting for the trial to commence.
Q58 Mr Crausby: Have you any idea of
the scale of savings that you would expect if the trial was successful?
Mr Hutchinson: Not at this stage.
Perhaps it is a question which would be more properly addressed
to the MoD because, of course, this is a requirement which they
are the customers for rather than the Met Office which is supplying
forecast services to meet their current requirements. Certainly,
if the automation succeeds in meeting the customer's requirements,
then the direct consequence of that is we will not require quite
so many forecasters themselves to be positioned at defence airfields
across the country. That undoubtedly would generate a degree of
resource saving in the Met Office in terms of supplying the customer
requirements, but the scale of that at this stage is not something
I am proposed to speculate on.
Q59 Mr Crausby: The MoD memorandum
also tells us that these trials are part of a broader programme
aimed at improving meteorological support to all military users.
What are the main elements of the broader programme? How exactly
will that meteorological support to the military users be improved?
Mr Hutchinson: I think I have
to refer you to the MoD to talk about their broader programme,
it is not mine. Certainly the Met Office is engaged fully with
the Ministry of Defence to look at how we can play our part in
integrating meteorological information into a broader environmental
picture which the MoD wish to have. We are playing a bit role
in the overall debate because, of course, from a defence perspective,
it is not just meteorological information, it is a range of environmental
issues which they have to integrate together to generate the recognised
environmental picture. That is not something which I have a particular
oversight on, so I am afraid I am probably not going to be able
to answer your question about how the overall defence programme
is structured and proceedings.
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