Select Committee on Defence Tenth Report

4  Objectives, performance and key targets

34. Executive agencies agree Key Performance Targets with their owning department. Those targets provide a measure of activity against which the agency's performance can be judged. The Met Office's most recent Annual Report and Accounts, for 2004-05, includes details of performance against its six Key Performance Targets. Three of the six targets, relating to growth, efficiency and forecast accuracy, were not met.[63] In Exeter, Mr Hutchinson explained that 2004-05 had been a challenging year because of "significant commercial challenge", and delivering a major, complicated programme to improve forecasting accuracy.[64]

35. Mr Hutchinson described the Key Performance Targets for 2005-06 as an "extension" of the previous year's targets.[65] According to the MoD's Annual Report and Accounts 2004-05, four of those targets are not directly comparable with the previous year's targets.[66] Of the Key Performance Targets set for the Met Office for 2005-06 three appear to be directly comparable with those for the previous year, although from the available information it is unclear the extent to which these targets are directly comparable (see Table 2).

36. The Government's response to our report on Annual Report and Accounts 2004-05 states that "we are introducing a number of changes to the way the data is presented in the 2005-06 Annual Report and Accounts. This should help when comparing performance from one year to the next".[67]

37. Mr Hutchinson told us that, subject to confirmation by the National Audit Office, all of the key targets for 2005-06 had been met. The MoD provided us with the draft key targets for 2006-07 in time for our oral evidence session.[68] The Minister explained that he had inherited those draft targets and that he would be considering their merits before signing them off.[69] The key targets were confirmed, without alteration, in a written statement on 14 June 2006.[70]

Table 2: Met Office Key Performance Targets
Key Performance Targets
Direct services revenue growth

(Not met)

Efficiency: Develop a new efficiency measure

(Not met)

Efficiency: supporting wider Government goals Support to wider Government goals: 3 measures including a baseline for future output efficiency targets
Profit before strategic investments


Profit, services provided on a commercial basis Profit, services provided on a commercial basis
Ready for full introduction of Freedom of Information


Return on Capital Employed (ROCE)


Return on Capital Employed (ROCE) Return on Capital Employed (ROCE)
Forecast Accuracy: An increase in NWP Index by 31 March 2005

(Not met)

Forecast Accuracy: achieve 3 forecast accuracy measures Forecast Accuracy: achieve 3 out of 4 forecast accuracy measures
Staff Satisfaction

Source: Met Office Annual Report and Accounts, 2004-05[71]

38. The targets for 2004-05 appear to us to be too skewed towards financial performance rather than the Met Office's main function, of delivering accurate meteorological information to the Armed Forces, Government and public. The details of the key targets for 2005-06 and the targets announced for 2006-07 appear to be more appropriate than those for 2004-05. Mr Hutchinson confirmed that "In terms of the WMO meteorological standards we currently come out as number one in terms of operational forecasting accuracy."[72] The Key Performance Targets for forecast accuracy in 2005-06 and 2006-07, have expanded the measures for forecast accuracy. We consider it desirable, whenever possible, to provide consistency in Key Performance Target measures so that year-on-year comparisons of performance are more easily made.

39. One of the targets which the Met Office failed to achieve in 2004-05 was to develop a new efficiency measure.[73] Mr Hutchinson explained that the Office was improving efficiency in terms of delivering the same services at a lower cost, however, he cautioned that although he was able to put a value on input efficiency:

    …we would like to be able to measure efficiency in terms of unit cost of production […] At the moment, all I can point to is the fact that we have reduced our costs and are delivering the same level of services as previously. [74]

He told us that he would like to create:

    …a measure of output efficiency, in other words, measuring the volume, the type of services we deliver, the cost of those services and hopefully breaking it down by unit cost of the services we deliver, so we have a true measure of our output efficiency, not just a measure of how much money we have saved.[75]

He explained that, therefore, among the targets for 2006-07, there would be a target of creating an output efficiency target for 2007-08.[76]

40. Mr Ewins told us that:

    …the danger with some of the targets is that you become very skilled at meeting targets without doing what your owner really wants you to do or what you think you should be doing yourself. […] be very careful when you set targets that you are not causing the organisation to do the wrong thing, even though it meets those targets.[77]

Nevertheless, he considered the targets set by the MoD during his time as Chief Executive had generally enabled the Met Office to do "the right thing".[78]

41. Mr Ewins told us that, in relation to efficiency, "customers are even more powerful than targets".[79] He considered that the normal customer-supplier process of reaching the best price for a given service was a better way of improving efficiency then an efficiency target.[80] He concluded, therefore, that as the Met Office's main customer, the MoD could provide sufficient incentive for the Met Office to improve its performance.[81] He added that it was an iterative process, which led to cost reductions for the customer and "from the Met Office point of view as a trading fund includes trying to ensure that it does not make a loss on any of the work that it does".[82] He admitted that it was a "a slightly false market", although he did not think that "because there is a monopoly supplier and a monopoly customer that of itself causes there to be a sloppy relationship".[83]

42. Mr Hutchinson explained that in addition to the Key Performance Targets agreed with the MoD, the Office had "a range of internal key performance targets which we wish to develop and deliver ourselves".[84] We were provided with the internal Met Office performance targets for 2005-06, which were divided into five categories containing a total of 22 targets, of which only one is described as "not achieved".[85]

43. There is therefore a range of factors influencing the behaviour of the Met Office—the Key Performance Targets agreed with the MoD; the Met Office's internal indicators of performance and efficiency; and the Met Office's relationship and supply agreements with its customers.[86] We acknowledge that Key Performance Targets are not necessarily the best guide to performance of an agency and accept the view expressed by several witnesses that the customer-supplier relationship was at least as, if not more, important in driving the direction and performance of the organisation. Nevertheless, the Key Performance Target process should provide value in assisting the Met Office to identify its management priorities.

44. We consider the Key Performance Targets from previous years to have been insufficiently focussed on the real purpose of the Met Office. We welcome the greater focus on the Met Office's purpose in the Key Performance Targets for 2006-07.

45. We welcome the Chief Executive's view that the customer-supplier relationship is an important driver of the Met Office's performance.

Support for military operations

46. The Met Office provides a range of support for the Armed Forces and the MoD is its largest customer. Nevertheless, the Met Office presently does not have a defence-related Key Performance Target. Mr Ewins described how the quality of the Met Office's work provided to the Armed Forces contributes to operational effectiveness. He said "…if you want the edge over your aggressors, you have got to be better than they are at what you do, and being better at forecasting than your adversary is a really important lever".[87] He added that:

    …when we go to conflicts or wars with our allies, like in Iraq at the moment, the weather forecaster of choice of all the nations in that area, including the Americans, is to come to the Met Office for weather forecasts. They are required to make their own forecast, but, if they want the best forecast, they come to the UK Met Office, and that is a measure of the standing that the Met Office has internationally, and particularly with other military organisations.[88]

47. Mr Ewins said that he considered there to be some tension between the MoD and the Met Office about how the United Kingdom as a country would fund meteorological research and development. He said that "The MoD took its responsibility to do that quite seriously, but the money to do that was competing with the rest of the defence budget".[89]

48. The MoD's memorandum states that Met Office's scientific research supports the objectives of MoD in a number of ways.[90] It emphasises that general improvements in forecast accuracy contribute to "greater precision in the control of operations".[91] The Met Office is developing improved capabilities for forecasting dust and sand, which "present unique challenges for the Armed Forces".[92] The Met Office is also studying ways to provide better information to the Armed Forces on the meteorological factors influencing electro-optical equipment and radar propagation.[93]


49. The Mobile Met Unit (MMU) is "the most visible aspect of a wide range of services provided in support of out of area operations by the Met Office".[94] The MMU comprises Met Office employees who form a Sponsored Reserve Unit of the RAF, which is deployed on operations to provide meteorological data and analysis.[95] The MMU is operationally controlled by the Armed Forces, and has suffered from overstretch.[96] The MMU has met all of its commitments and the RAF and the Met Office are considering methods of relieving the potential for overstretch.[97]

50. The importance of the Mobile Met Unit to the United Kingdom's Armed Forces should not be understated. We recommend that its role and work be more fully reported in the Met Office's Annual Report and Accounts.


51. The Met Office and the MoD are currently working on a project to improve weather forecasting at RAF stations in the UK and abroad. The MoD memorandum emphasises the connection between the Future Military Meteorology Requirement (FMMR) programme and the aims of the Future Defence Environment Capability:

52. The MoD is currently conducting a trial at RAF Wittering to evaluate, as part of the FMMR, a range of methods for providing forecast information to air crews, which is currently provided by the MMU based at RAF air stations. The two configurations currently under consideration would:

a)  provide all forecast information from a central location and delivered electronically to aircrew, with direct access to forecasters by telephone or video conference; or

b)  produce forecast information remotely, with a reduced number of forecasters still available to interact directly with aircrew.[99]

53. The MoD memorandum explains that the trial at RAF Wittering could be extended to operations. It notes that if option (a) is successful "…future trials could extend the concept to operations, leading to an eventual reduction in Mobile Met Unit numbers", but states that there are differences in operational circumstances which might retain the need for MMU personnel to be deployed.[100] We support the MoD's continuing development of the Future Military Meteorology Requirement. We suspect that MMU personnel will continue to need to deploy in order to maintain military meteorological capability on operations.

54. Key Performance Targets enable the MoD as the Met Office's owner to monitor the organisation's control of processes. However, the targets do not capture the essential role of the Met Office. The customer-supplier relationship between the Met Office and its principal customer, the MoD, provides a defence-related input to the organisation and ensures that defence issues remain a key concern of the Met Office. We do not consider it necessary for the MoD to set the Met Office a specific defence-related Key Performance Target. The MoD's status as the Met Office's principal customer should ensure defence issues remain a priority for the Met Office.

Commercial activity

55. As a trading fund, the Met Office is required to create income by selling services to the public sector and private sector. In 2004-05, the Met Office failed to meet its "Direct Services Revenue Growth Target", which relates to commercial capability.[101] The Met Office Annual Report and Accounts 2004-05 states that:

    The target required growth of 4.1% (compared to the 03/04 baseline) in revenue from both Government and non-Government sources, while maintaining overall profitability (a percentage of cost). Difficult trading conditions, especially in our commercial services, caused us to miss the non-Government element of the target, although we achieved 4.0% growth overall and maintained profitability.[102]

A table in the Annual Report and Accounts provides more detail on the commercial growth performance against key targets (see Table 3).

Table 3: Direct Services Revenue Growth Key Performance Target
Target Achieved
Direct Services Revenue Growth: Government at 4.1% 5.7%
Direct Services Revenue Growth: Non-Government at 4.1% 0.0%
Maintain Profitability at 7.9% 10.6%

Source: Met Office Annual Report and Accounts, 2004-05[103]

56. Mr Hutchinson admitted that in the past the Met Office "did not put as much effort into the commercial side of our business as we could have done".[104] He said that there could be "quite long leadtimes" for developing commercial products; and that the Met Office intended to do more to "get our commercial business up and running to the maximum extent".[105] He said that for the most recent financial year, subject to NAO confirmation, the Office had exceeded its commercial activity target.[106] Mr Hutchinson told us that:

    Over the next four years, we look to grow in absolute revenue terms from a position today of about £20 million a year commercial revenue to a position at the end of 2009/2010 of £29 million, so about a third increase in our overall, commercial revenue.[107]

57. We discussed with our witnesses the need for commercial experience to drive forward the Met Office's exploitation of commercial opportunities. Mr Andrews said that "We do need people who have a very highly developed competence in that area [commercial] and they are not typically to be found within the Civil Service".[108] Mr Hutchinson explained that the Met Office's non-executive directors brought commercial experience to the organisation.[109] We recommend that future annual reports and accounts for the MoD's agencies and trading funds provide details of non-executive directors and the skills which they have been appointed to provide.


58. The statement on the system of internal control [signed by the former Chief Executive] in the Met Office's Annual Report and Accounts 2004-05 refers to changes to the governance framework of the Met Office following "certain financial decisions [that] were taken in circumstances which involved the potential to give rise to conflicts on interest and which, may not have been in the best financial interests of the Met Office".[110] The MoD's written evidence states that those "decisions" relate to "the three stage investment of up to £500,000 in weatherXchange, a joint-venture company set up between the Met Office and other investors in 2001…".[111] The company was placed in administration with a loss to the public purse of about £4.5 million in total.[112]

59. We do not intend to go into the detail of the dispute between the Met Office, the MoD and others over the establishment and subsequent placing in administration of the weatherXchange joint venture. Nevertheless, we did probe during oral evidence some of the issues arising from the weatherXchange experience. Mr Ewins, Chief Executive of the Met Office when the joint venture was established, told us that a commercial proposition was put to the Met Office to establish a joint venture to provide brokerage, data and services to the global weather derivatives market.[113] The weather derivatives market was considered to be particularly attractive because of its success in the United States. Mr Ewins said that before committing to the arrangement a "proper investment appraisal" and a "proper business plan" were produced to ensure that the joint venture had a "reasonable chance of success".[114]

60. Mr Ewins did not believe that there was a conflict of interest for those Met Office officials who were nominated to the weatherXchange board, nor did he consider the governance arrangements when the joint venture was set up, to be unusual or a reason for the joint venture failing.[115] He told us that "Part of being a trading fund agency is the ability and the encouragement to go out and sell your wares more widely, to bring an income in…".[116] He added that "at the time joint ventures was something which the Government was pushing quite hard, so was the Treasury and so was the MoD".[117]

61. Mr Andrews told us that "fundamentally, the proposition to go into this area was a good business idea which had the potential to return a strong, financial value to the taxpayer", but he accepted that there had been failures of governance.[118] He told us that a post-investment review commissioned by the Met Office identified aspects of the internal control within the MoD and the Met Office that should have been stronger. He assured us that the improved controls had been examined by the National Audit Office and the MoD's external auditors, who were "satisfied that the appropriate lessons were identified and that the mechanisms that we have put in place with the systems and controls will prevent it happening again".[119]

62. We discussed with our witnesses whether the Met Office or the MoD had become unduly risk-averse as a result of the weatherXchange joint venture experience. Mr Hutchinson explained that:

    Our commercial strategy is to ensure that we have a growth plan so that we proactively select our partners if that is the way we want to go to market, rather than them selecting us. We cannot rule out opportunistic approaches from people but, where we get them, we will ensure they are properly scrutinised.[120]

63. Mr Hutchinson told us that the Met Office was looking to increase its commercial revenue by about a third over the next four years. He said "With that ambition comes an acceptance and indeed a willingness to consider risks. We are not risk averse in the sense of once bitten, twice shy, never go near a joint venture again".[121] Mr Ewins told us that the Met Office should not be discouraged from considering future joint ventures.[122] Mr Andrews described the MoD's approach as "risk awareness" rather than "risk averse".[123]

64. The weatherXchange experience has led to greater awareness of the pitfalls that can arise. Although the lack of success is a regret, the level of loss should be placed in context. More than £20 million was generated by commercial activity last year. The total cost to the tax payer of the weatherXchange joint venture was of the order of £4.5 million.

65. We would not wish to see the Met Office and the MoD overreact to the weatherXchange experience. We were reassured by the comments of the Minister and the Met Office's Chief Executive that commercial opportunities will be pursued.

66. The MoD and Met Office must ensure that future joint ventures are established with indisputably concrete governance arrangements and that no conflicts of interest are possible. Furthermore, the Met Office must do more to test the business case of commercial ventures, and seek to bring greater business acumen into the organisation.

Senior management

67. Peter Ewins left the Met Office in the Summer of 2004, after seven years as Chief Executive. His successor as Chief Executive, Dr Rogers, left after one year. The responsibility for appointing the new Chief Executive lies with the MoD. Following Dr Rogers' departure, the post of Chief Executive was advertised in September 2005. Interviews were held in January 2006 before a selection panel chaired by a Civil Service Commissioner. The MoD state that:

68. The MoD recognised the need for continued stability at the top of the Met Office and the Under Secretary of State for Defence announced on 27 January 2006 that Mark Hutchinson would take over as Chief Executive until Spring 2007 (Mr Hutchinson was not an applicant for the Chief Executive post). The MoD is to "reflect on how best to approach the recruitment market later this year to appoint a successor to Mr Hutchinson".[125]

69. We do not intend to go into the detail of why certain individuals left the organisation when they did, but without commenting on the specific circumstances, we suspect that instability in senior management has been detrimental to the smooth running of the organisation. For example, according to the Met Office's Employee Attitude Survey 2006, a quarter of the respondents called for "greater recognition of the detrimental effect on morale of the last 18 months", although that response does not necessarily refer to senior management issues.[126] The volatility among the Met Office's senior management is regrettable. The MoD and Met Office should work to ensure the organisation does not suffer as a result of that instability and that staff morale is supported.


70. In view of the acknowledged importance of the role, we were surprised to learn that the Chief Executive's post has been down-graded from a three-star post to a two-star post. Mr Andrews emphasised that the MoD did not believe the grade of the post was important, but rather the prestige of leading a world-class meteorological organisation would make the appointment attractive.[127] Mr Andrews conceded that, when the post of Chief Executive was initially advertised, the financial package was equivalent to a two-star post, but he argued that the grading was a technical matter that was only relevant if an internal Civil Service candidate had been successful.[128]

71. Mr Ewins told us that downgrading the post would inhibit the search for a new world class chief executive.[129] He explained that "The Chief Executive of the Met Office is normally appointed as the permanent representative to the World Met Organisation", and that:

    What gets you into the organisation is the quality of what you do. The level at which you hold the discussions is determined by the grade that you go in at. In order to have a proper relationship with the United States […] it is, in my view, a pity that we have lost the three-star interaction.[130]

He told us:

    I think certainly internationally and to some extent in dealing with the MoD, it is necessary for the Chief Executive not just to have the title but to be seen to have this wretched phrase "grade equivalence" with the people with whom he does business. If we want to be successful in our relationship, particularly with the United States, then it is not sensible to downgrade the post of Chief Executive to two star from three star. When I was Chief Executive my entrée into the States, what determined the level at which I interacted with the States was determined by my grade, not by who was running what. As a three-star officer I was able to negotiate, talk and discuss with the Head of [the National Oceanic & Atmospheric Administration]. You downgrade that and discussions will take place only with the Head of the National Weather Service, which will rule out things like climate change, et cetera, et cetera, so I think it is a bad move. Internally to MoD it is less important, but it does not take officers long before they start to realise you have been downgraded and they do treat one differently. The last point I would make is that in operating in the international arena, particularly in the World Met Organisation, whilst it is undoubtedly true that the principal reason the Met Office gets a good hearing is because of the quality of what it does, people are also conscious of the level at which the Chief Executive has been appointed. All those things add up and it saddens me that the post has been downgraded.[131]

72. Mr Andrews responded to those arguments that "the internal grade of the individual [does not have] any significance at all".[132] When we pressed Mr Andrews on the significance afforded to grades within the MoD he dismissed the suggestion, adding that he did not know what his military rank equivalence was. It is remarkable that as a very senior civil servant in the MoD Mr Andrews was unaware of his rank equivalent. We understand it to be four stars.

73. The new Chief Executive will have many challenges, including continuing to develop the opportunities for commercial enterprise. Mr Andrews said that in selecting the new chief executive commercial awareness "is very much at the forefront of our minds in terms of the skills and competences we need to bring in".[133] It seems absurd, given the calibre of the person the MoD is seeking, and has so far failed to find, that the MoD has reduced the grade of the post of Chief Executive of the Met Office. If the candidate is from outside the civil service, as seems probable given the importance of commercial experience, their grade will still be important in their relationship with the MoD and the international meteorological community.

74. We can find no justification for the proposed down-grading of the post of Chief Executive. Despite the MoD's protestations, it is inconceivable that a reduction in grade of the Chief Executive will have no effect on how that post or person is perceived within the MoD or international science and meteorological communities. Given the difficulties in identifying a suitable permanent replacement as Chief Executive down-grading cannot assist in finding someone with suitable experience and skills. We recommend that the MoD reverse its decision and retain the three-star grade for the Chief Executive.

75. The Met Office excels in its main task of providing accurate forecasts. Mr Ewins told us that "there are very few areas of scientific endeavour where the UK can claim to be the best in the world, but meteorology is one of them, and it is largely through the Met Office that that is achieved".[134] He praised the efforts of previous Directors General and Chief Executives, and the "hard graft of people who are utterly dedicated to the subject to want the best for the United Kingdom" that had led to the Met Office's well-deserved reputation.[135] From the evidence we have received it appears that the MoD has supported the Met Office and encouraged its scientific research, commercial activity and contribution to the Armed Forces.[136] We look to the Government, through the MoD, to maintain the support and investment that enables the Met Office to retain its world-leading position. That support must include doing everything to encourage the best possible candidates to apply for the post of Chief Executive.

63   Met Office Annual Report and Accounts 2004-05, p 38. The Key Performance Targets 2004-05 not met were: Direct services revenue growth; developing a new efficiency target; and forecast accuracy (increase in NWP Index). See alsoEv 47. Back

64   Q 11 Back

65   Q 14 Back

66   MoD Annual Report and Accounts 2004-05, p 210 Back

67   Defence Committee, Seventh Special Report of Seesion 2005-06, Ministry of Defence Annual Report and Accounts 2004-05: Government Response to the Committee's Sixth Report of Session 2005-06, HC 1293, p 9. Back

68   Ev 50-51 Back

69   Q 234 Back

70   HC Deb, 14 June 2006, col 61 WS. Back

71   Met Office Annual Report and Accounts 2004-05, pp 36-37; Ev 50-51 Back

72   Q 15 Back

73   Met Office Annual Report and Accounts 2004-05, pp 36-37 Back

74   Q 18 Back

75   Q 19 Back

76   Q 21 Back

77   Q 84 Back

78   Q 85 Back

79   Q 86 Back

80   Qq 87-91 Back

81   Q 86 Back

82   Q 91 Back

83   Qq 91, 90 Back

84   Q 20 Back

85   Ev 58-59. The "not achieved" target was to create a measure to assess research pull-through by end of 2005-06. Back

86   Q 235 Back

87   Q 105 Back

88   Q 82 Back

89   Q 105 Back

90   Ev 61-62 Back

91   Ev 61 Back

92   Met Office Annual Report and Accounts 2004-05, p 17, Ev 62 Back

93   Ev 62 Back

94   Ev 44 Back

95   Ev 44-45 Back

96   Q 286 Back

97   Ev 44-45 Back

98   Ev 61, 44 Back

99   Ev 60-61 Back

100   Ev 61 Back

101   Met Office Annual Report and Accounts 2004-05, pp 36, 38; See Q 238  Back

102   Met Office Annual Report and Accounts 2004-05, p 36 Back

103   Met Office Annual Report and Accounts 2004-05, p 38 Back

104   Q 229 Back

105   Ibid. Back

106   Q 239 [Mr Hutchinson] Back

107   Q 261 [Mr Hutchinson] Back

108   Q 262 [Mr Andrews] Back

109   Q261 [Mr Hutchinson] Back

110   Met Office Annual Report and Accounts 2004-05, p 43 Back

111   Ev 47 Back

112   Ev 49 Back

113   Qq 107-109, Ev 49 Back

114   Qq 109-111 Back

115   Qq 113-120 Back

116   Q 107 Back

117   Ibid. Back

118   Q 251 Back

119   Q 251 Back

120   Q 263 Back

121   Q 261 [Mr Hutchinson] Back

122   Q 179 Back

123   Q 262 [Mr Andrews] Back

124   Ev 43 Back

125   Ibid. Back

126   Ev 58 Back

127   Qq 266-284 Back

128   Ibid. Back

129   Qq 186-187 Back

130   Qq 78, 191 Back

131   Q 187. The National Oceanic & Atmospheric Administration (NOAA) is a federal agency of the US Department of Commerce. The United States' equivalent to the Met Office, the National Weather Service, is a branch of the NOAA. Back

132   Q 274 Back

133   Q 262 Back

134   Q 105 Back

135   Q 207 Back

136   Qq 207, 239 Back

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