Examination of Witnesses (Questions 20-39)
SIR MICHAEL
JAY KCMG, MR
RICHARD STAGG
CMG, MR RIC
TODD AND
MR DAVID
WARREN
28 JUNE 2006
Q20 Andrew Mackinlay: You do not
know what it is about? I am quoting from the Executive Summary2
produced by the board of which you are a member. It was a straight
quote, it was not me summarising. It says "Board leadership
is undermined by perceived weaknesses in managing the organisation
and delivering strategic priorities as well as a lack of clarity
about the relationships with ministers", I did not put that,
you put it.
Sir Michael Jay: I did not myself
put that, I did not tick that box when I filled in the form, which
will not altogether surprise you, I suspect. That is referring
clearly to a sense that there is a perception there which is,
as that says, causing us some difficulties. That is clearly something
which we need to address.
Q21 Andrew Mackinlay: Can I come
to Prism which is the technology relating to management information
and accounts. I recently asked a parliamentary question, and I
was told they were not able to answer it because it would cost
too much and I think it related to businesses and small contractors
not being paid by our missions because they could not pay them
because Prism was not up and running which, as an aside I say,
is rather disquieting because that information should be available
and it is a very important issue to our missions who are embarrassed
and contractors who are not being paid. I will return to that
on another occasion. Can you give us a position statement this
afternoon? Where is Prism not working? To what extent is it not
working in geographical areas and in terms of what critical information
is not available, such as I have cited?
Sir Michael Jay: In a moment I
will ask Mr Stagg who has been taking a very close interest in
Prism to answer some of the detailed questions. Let me say that,
as you know from the report which you have commented on from Norman
Ling, first of all, Prism is extremely important, it is absolutely
business critical that we have a proper management information
system. It has been more complex than we thought it would be to
roll out and we made some mistakes to start with and that was
what Norman Ling's report showed and I think we have recovered
from that. We now have Prism rolled out across the whole network
so it is operating everywhere except in one or two posts where
it is not feasible, and we are beginning to get the benefits from
that. It is also operating in the United Kingdom and we are getting
benefits from that. We are getting benefits in terms of greater
efficiency in our operation and better management information.
Where we still have problems, and I am conscious of this because
they are raised with me each time I go abroad, is in the performance
of Prism in a number of posts: it is too slow, it is too complicated
and that we are working to address in order to speed it up because
that is causing some difficulty for us. Overall, I think Prism
started business critical, started badly, is going much better,
is over budget but not by a huge amount, is delayed but not by
a huge amount and is beginning to bring us real benefits. Perhaps
I could ask Mr Stagg to answer some particular questions.
Mr Stagg: Mr Mackinlay, on the
question of the slow payment of bills, that is entirely right,
during the process of moving from one system to the new system,
there were glitches and posts did have difficulties. I think it
is fairly typical of these transitions that these things happen,
we should apologise for them, but it is not unusual. As far as
I am aware these things are working perfectly satisfactorily at
posts. On the question of areas where it is not working, geographically
it now is everywhere we want it to be because in some very small
posts it does not make sense to provide such a complex system.
In terms of the areas of the business, I think the only significant
area where it is not working as it should as yet is in procurement
where, I do not want to get too technical, we have not yet instituted
a three-way match system in the UK to ensure that those ordering
goods, authorising them and then receipting them are all properly
sequenced. That has happened everywhere overseas already and we
are going to introduce that in the UK from 1 October. That is
an area which is not yet perfect but the present system is a lot
better than it was before Prism came along when we had a very
simple paper-based system.
Q22 Andrew Mackinlay: On page 106
of the report there are five consultants, and perhaps you want
to give us a note on this, but I notice Morson Human Resources
has received £2.1 million. Do you know what Morson do for
us for £2.1 million?
Mr Stagg: I think I know but I
would rather write to you. [3]
Q23 Andrew Mackinlay: That is fine. Finally,
I notice on the minutes of the board there is talk about compulsory
early retirements for staff and I always bristle at this, because
of my background as a trade union official, and also the abuse
in the public sector of retirements, right across the public sector.
I notice that it says here, "The board discussed applications
for compulsory early retirements". That seems to me a contradiction
in terms. You do not apply for having it, do you, it is something
which is forced upon you. It suggests to me that there is a very
attractive package for some of your staff who can get away, start
a new career, start a second life. Whereas, in fact, in the interests
of the public sector as a whole in terms of maintaining expensive
qualified experienced staff, bearing in mind that your retirement
age now rises to 65, which I think is right in every respect,
why are we advertising saying, "Here, who wants to be compulsorily
retired?" It does seem to me a nonsense.
Sir Michael Jay: Because we have
too many people, more people than we can afford to pay given our
settlement, and we have a requirement under SR 2004 to reduce
our staff by some 300 or so.
Q24 Andrew Mackinlay: Turn the tap
off.
Sir Michael Jay: You can stop
recruiting, in which case you very soon have an unbalanced structure.
Q25 Andrew Mackinlay: As you would
say.
Sir Michael Jay: Or you can look
at where the imbalances are in your existing structures and try
to address that. What we concluded was that we had too many people
at senior levels and the right thing to do was to offer people
terms, which are the Cabinet Office terms, to take early retirement
in order to reduce people from the top and also enable the extraordinary
talent which there is in the organisation to move up through it.
That was the rationale for the compulsory early retirement scheme.
Q26 Andrew Mackinlay: Does it not
occur to you that the public purse paying for these generous retirements
is badly served in many cases? Of course, I was being slightly
flip because I do understand we have got to have talent coming
in, we want that for the next 20 or 30 years, but there is an
abuse throughout the public sector, and I suggest it to you, of
people being able to go too easily, suiting their purpose, often
at senior level so it is often not extended to other people, and
it should be reviewed. There should be a tighter grip and that
people will have to stay longer and expect to serve to 65, and
you adjust accordingly down the pyramid.
Sir Michael Jay: You have a difficult
choice to make and, as so often with these things, management
is a question of difficult choices. Equally, you could argue,
and I think I would argue, that it would be a waste of public
money if you train up very able people, you equip them with expensive
language skills, you send them to Beijing or Tokyo and then they
look in their mid-30s and see that there is above them a kind
of carapace through which they are not going to break because
there are senior people who are going to stay there, and they
leave. That also is a waste of public funds, so what one is trying
to do is to get the balance right here and to have the right mix
of skills, age and experience throughout the Office.
Q27 Mr Purchase: It is a short question,
but right at the beginning of this set of questions you said,
if I recall it correctly now, that one of the important factors
in the improvement of management had been a clearer sense of purpose
in the Department. How can I understand that in recent terms or
historical terms? What do you mean by that?
Sir Michael Jay: What I mean is
that the articulation of the strategic priorities as part of our
strategy, which was launched in 2003 and then revised this year,
has given the staff of the Foreign Office at home and abroad a
clearer sense of what the purpose of the Foreign Office is. There
are seven, eight or nine strategic priorities and people know
they are working for that. When I was in Delhi recently, for example,
and asked a member of our local staff, "What do you do?"
she did not say, "I am an LE 1 in the commercial section"
or whatever it was. She said, "I am working to deliver the
strategic priority on . . ." whatever it was. That is one
of the reasons why I think there was a very strong answer to the
question in the questionnaire, that a very high proportion of
people feel they are contributing to the objectives of the organisation,
and I do not think we have had that before.
Q28 Mr Purchase: I am dismayed. I
am literally dismayed that we have had a Foreign Office operating
for a couple of centuries that has not been clear what its purpose
is. You may dress it up in terms of modern management speak of
strategic objectives, it means nothing to me. What does mean something
to me is that people working on behalf of the British Government
and the British people almost directly, and particularly overseas,
did not have a clear sense of what the Foreign Office was for.
I am absolutely dismayed.
Sir Michael Jay: I think it is
more complicated than that. I think there was a time probably
20 or 25 years ago when the role of the Foreign Office was much
clearer than it had become, say, five or 10 years ago when the
nature of foreign policy was much clearer and when what foreign
policy was was much clearer. Now it is less clear because we are
living in an age of globalisation when Britain's external policy
is as much about climate change, environment and economy as it
is about the traditional security issues with which the Foreign
Office has been concerned. We are also living in an age in which
the services we deliver to our people, the consular services and
visa services, are high up on our agenda. What we have needed
to do is to respond through the strategic priorities with a set
of focused priorities which our staff know in this rather complicated,
confusing and difficult world are the ones which today's Foreign
Office is focusing on. That is what we have given to them and
that is what they appreciate. That shows and comes up in the survey.
That is what I am saying, Mr Purchase, not that we have had 200
years without knowing what we were doing, but as the world has
changed, so we have to change, and as we have to change, we have
to give people a clearer sense of how they fit into this rather
complex world.
Q29 Ms Stuart: Can I follow up on
this and try the same question but with a slightly different phrase.
The world is changing, I accept that. Foreign policy is changing,
I accept that, but we still require a definition of what our national
interests are.
Sir Michael Jay: Yes.
Q30 Ms Stuart: If I were to go through
this report, and say to you, "Could you please define for
me what Britain's national interest in the European Union is?"
could you give me an answer?
Sir Michael Jay: What I would
do would be to look at the strategic priorities. The report, which
was launched at the end of 2003 and then revised in March, has
a very clear section on the main objectives in the European Union
along—
Q31 Ms Stuart: No, not the main objectives,
a definition of what Britain regards to be its national interest.
I looked for that; I cannot find it anywhere.
Sir Michael Jay: I would regard
its national interest as being—I am afraid I have not got
the strategy document in front of me—an effective, secure
and prosperous Europe. I would need to check what the exact phrase
is, but that is our national interest. The Foreign Office's role,
through its embassies, its network overseas and through people
here working with others, is to deliver that.
Q32 Ms Stuart: But that is not a
definition of the national interest. To have Europe prosperous
is fine, that gives me the interest of the collective, but what
is Britain's national interest? My contention is if I were to
say to your French opposite number, "What are the French
national interests within the European Union?" he could come
up with a pretty sharp definition.
Sir Michael Jay: Let me say two
things to that, Ms Stuart. I think that building an effective
and globally competitive European Union in a secure neighbourhood
is a statement of Britain's national interest. I very carefully
said the Foreign Office role is to deliver that along with others,
but these strategic priorities were the result of a consultation
with all other government departments, they were agreed in Cabinet,
and they are, therefore, they are a statement of Britain's external
foreign policy, but that is the policy which is our job to deliver.
Q33 Mr Maples: Since this subject
has been raised, I wonder if I could ask you a couple of questions
about it. Your Annual Report has on the cover of it "The
purpose of the FCO is to work in the UK interest for a safe, just
and prosperous world". I think the first part of that sentence
is a proper statement of the Foreign Office's purpose, that a
safe, just and prosperous world is a hope and that is about it.
I think that the strategic priorities you have set in the document
published in March seem to me perfectly sensible. The foreword
by the Foreign Secretary is all about values, whereas I think
most of us would think the Foreign Office's job is mostly about
interests. I realise that, of course, these things overlap and
having the right values in place in some places serves our interest,
but I do not think it always necessarily serves our interest to
promote democracy, for instance, abroad, and we certainly decided
it is not really a huge interest in Saudi Arabia to promote democracy.
We have very close relations with a country which has got one
of the worst human rights records in the world and we seem reasonably
content with that because our interests are better served by having
a good relationship with them than by worsening that relationship
to promote our values. The Foreign Secretary's foreword in this
document, in which you set out the nine strategic priorities—none
of which I would disagree with at all, they all seem to be perfectly
sensible subsets of what is the UK national interest—does
go on an awful lot about democracy and see the world in which
freedom and justice and opportunity thrive and all of that, and
we then go on to get some rather more pragmatic objectives here.
I wonder where is this balance between interests and values? It
seems that the two most recent leaders of the Foreign Office bang
on an awful lot about values and I hope the Foreign Office is
getting on with our interests, but do you see a move in one direction
or another here? Do you see any conflict between what you say
on the front of your Annual Report and what the Foreign Secretary
says in his introduction to the strategic priorities?
Sir Michael Jay: I think the answer
to that question is clearly no. Let me take the question of Saudi
Arabia, which I think is a very interesting example. We do need
to find the right balance between values and interests. Clearly,
we have very considerable interests in Saudi Arabia and we have
an excellent ambassador who is doing an extraordinarily good job
in promoting them. I think it is also in our interests that there
should be—and we have worked with the Saudi authorities
on this and are doing so—a programme of reform in Saudi
Arabia which moves in the direction of the values which are discussed
in the document as well, so the difference between the interests
and the values I think will vary from place to place and you clearly
have to try and weigh those up. I do not think you would ever
find the Foreign Office now saying that the interests are so important
we will cast the values aside. What we were trying to do was to
find the balance between them and that is not always easy.
Q34 Mr Maples: When this Government
came into office there was a lot of stuff about ethical foreign
policy as though in some way values had never been part of the
equation and they did seem to get most of the attention for a
while. I wonder whether in the strategic priorities, the bit that
was not written by the Foreign Secretary, we are not coming back
to looking after our interests more pragmatically and certainly
in some of those cases they involve promoting our values. This
Committee took an interest in several British subjects who were
tortured, or alleged they were tortured, and you know all about
this because you paid for counsel to go to the court and help
the Saudi Arabian Government with its case.
Sir Michael Jay: Let us be very
clear about that. That case was on a very important principle
of law which was entirely independent of the allegation of torture
and I think it is a great pity the two did get confused.
Q35 Mr Maples: In that case at the
end of the day the Foreign Office did help to get those people
released. I do not know everything that went on behind the scenes,
but it was certainly extreme that the Foreign Office was far less
critical of the Saudi regime than we would have liked and I suspect
that it would have been had this been some no-account country
with no oil in north Africa, so are we seeing here an absolute
conflict of the values and interests question?
Sir Michael Jay: I think there
are conflicts and there are tensions. I was very much involved
in that particular case three years ago and there was a very single-minded
objective which was to get the British detainees released and
the judgment was how do you best achieve that? That sometimes
requires you not to say things that you were doing because if
you were to say things you were doing, that might set them back.
That is a good example of the difficult issues we do face almost
every day.
Q36 Mr Maples: I point out that I
detect a slight difference in tone between the Foreign Secretary's
introduction and the strategic priorities, but I hope the strategic
priorities are the things you are following. Could I switch to
a different subject for one question. Last year we took up with
you the difference between what other government departments did
in requiring professional qualifications or relevant career experience
in some of the corporate functions that you do. We identified
finance, human resources and estates management. I think the reason
we picked estates management was because the year before we had
some trouble over a couple of bad property deals the Foreign Office
had got itself into and the other area because we were surprised
to find that the director of finance the year before was between
diplomatic postings. We found almost every other government department
did require relevant experience or qualifications in these fields
and the Foreign Office did not seem to. We pointed that out in
our report and in your reply you said, "We are recruiting
a professionally qualified director of finance through open public
competition, and shall do so for our next chief information officer.
We will continue to do this with the directors of human resource
and estates management when their terms of office come to an end".
You then drew a trade-off, I think would be a fair way to say
it, between the qualifications and experience that are necessary
to do the job and the need to have people towards the top of the
Foreign Office who have experience of different areas of its activity.
It seems to me that the corporate world is moving away from that
generalist approach, particularly in those areas. Nobody would
suggest you took somebody from marketing and gave them a shot
as finance director for a while so their experience was broader.
I would suggest those are three areas, the ones we picked on,
where generalists cannot hack it and certainly at the higher levels
you really do need direct experience. I wonder if you can tell
us what has happened on the director of finance and chief information
officer and what you do expect to happen on the HR and estates
management? I do not know when their terms of office are coming
to an end.
Sir Michael Jay: Let me tell you
where we are on most of those. On the question of the finance
director, we did have an open competition earlier this year for
finance director and it did not result in somebody who I felt
I could really wholeheartedly recommend to my successor as the
right person to be the finance director, so we have relaunched
that competition. What I very much hope is we will have a professionally
qualified external finance director in place by the end of the
year, which is the Treasury's deadline for doing that.
Q37 Mr Maples: When they come from
elsewhere within the public sector, you say from outside, might
they come from some other government department?
Sir Michael Jay: This will be
an open competition, so I hope very much they will come from the
private sector and we get the benefit of private sector experience.
Q38 Mr Maples: Would it be open to
somebody with financial management experience in another government
department?
Sir Michael Jay: Yes, it will
be an open competition, which means that applications can come
from anywhere. Clearly I cannot commit my successor, but I would
expect the next estates manager also to be a professional with
professional experience recruited from outside. Since the last
time I appeared before this Committee, we have appointed a director
of FCO services which is a services arm in the process of an important
transformation towards agency status from the outside world, I
think from the commercial world. I would expect the next chief
information officer, the head of our IT operation, to be, again,
an expert professional recruited by open competition. I know this
is a slightly different area, but we had an open competition for
our legal adviser. We have an extremely experienced international
lawyer as our legal adviser making a big impact. As far as the
HR director is concerned, that is where I think we have to draw
the balance between HR experience which is very deep in the Office.
David Warren, our HR Director, is not himself an HR professional,
but nearly everybody else in the organisation is. I think we have
been very well served in a period of very difficult change in
the HR function by having an HR director who knows, and is seen
to know, the Office well.
Q39 Mr Maples: Does the public sector
as a whole not develop people in these specialisms? You talked
about recruiting them from outside, from the private sector; does
the public sector not recruit and train up financial managers
who can move around from one department to the other or HR professionals
who might be interested in the public bodies?
Sir Michael Jay: Yes, it does.
We do recruit people from other government departments. For a
finance director, for example, we would be looking for somebody
with the relevant kind of financial and accountancy experience
from outside the public sector. That might be somebody who is
now working in the public sector but will have had that outside
experience.
Chairman: We have a vote. Hopefully,
there will be only one and we will only be gone for 15 minutes.
The Committee suspended from 3.18 pm to 3.38 pm
for a division in the House Chairman:
Can I switch the focus, Sir Michael, to our representation in
other countries and bring in Fabian Hamilton to start.
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