Appendix 1: Government Response
Introduction
We are grateful to the Select Committee for its inquiry
into the Annual Report for 2004-05 and for producing its report.
We have considered the Committee's comments carefully.
Response to the Committee's conclusions and recommendations
Recommendation 1: We welcome the commitment to
Parliamentary scrutiny demonstrated by the Department's Ministers
and senior officials, but we regret Mr Prescott's absence from
our inquiry.
As the Committee's Report acknowledges, the Deputy
Prime Minister was required to take on additional responsibilities
in relation to the UK's Presidency of the EU. He met the committee
Chair, Dr Phyllis Starkey MP, on October 31 and apologised for
the fact that his Deputy Prime Ministerial duties prevented him
from giving evidence in the Annual Report inquiry.
The DPM also appeared before the Committee in February
to update them on the EU Ministerial Informal meeting held in
Bristol and on its outcome, the Bristol Accord. The DPM also discussed
with the Committee some of the other issues that were raised in
the Committee's report on ODPM Annual Report 2004/05.
Recommendation 2: We believe that the most senior
Minister in a Department should make himself available to a parliamentary
select committee when his presence is sought.
The DPM is committed to a constructive dialogue with
the ODPM Select Committee, and attended the Select Committee and
discussed a range of issues with it on 7 February in a session
lasting an hour.
Although the DPM could not attend on 25 October because
of other commitments, he ensured that David Miliband, Yvette Cooper,
Phil Woolas and Jim Fitzpatrick all appeared before the committee
for a full session. This was explained to the Chair of the Committee
in a personal interview with the DPM on the work of the department
and she accepted this and the DPM's commitment to appear
at a later meeting of the Committee. As the Committee is aware,
David Miliband is a Cabinet member and supports the DPM across
the full range of the ODPM's responsibilities.
The Department and the Committee
Recommendation 3: Mr Housden agreed that the
Department should respond to the Committee's requests for information
fully, swiftly, and in a form which meets the Committee's needs.
We welcome this assurance that in the future the Department will
engage positively with the process of scrutiny.
The Committee's position is noted.
Format of the Annual Report
Recommendation 4: We welcome the changes made
to the structure of this year's Report, which have made it more
accessible.
ODPM welcomes the Committee's remarks and will continue
to seek its suggestions for further improvements to the format
of the annual report.
Recommendation 5: It is essential that readers
of the Department's report should be able to determine whether
the Department's resource allocations properly support its objectives
and represent value for money. The current report does not allow
readers to do this. We urge the Department to look further at
ways in which it can clarify the links between its detailed spending
plans and its Public Service agreements in future annual reports.
ODPM will look at ways of presenting more clearly
the link between its spending and PSA target delivery and will
consider any specific suggestions from the Committee on this.
Recommendation 6: Double-counting is unacceptable
and the Department must ensure there is absolute clarity about
its resource management in future reports.
ODPM rejects any accusation of double-counting.
It was explained to the Committee, at the officials' oral evidence
session on 17 October, that ODPM has been set a number of targets.
It has one for efficiency gains in ODPM central programmes, and
one for gains delivered by local government. There is no overlap
between these. A third target, for social housing contributes
to both the central programme and the local government targets.
ODPM's evidence made clear that, of £835 million total efficiency
gains on social housing, £355 million, delivered by Registered
Social Landlords, counted towards the ODPM central target (£620
million); the balance contributed to the £6.45 billion local
government efficiency programme. ODPM undertook that next year's
annual report will make absolutely clear the relationship between
these targets.
Recommendation 7: We recommend that future reports
contain a short glossary of technical terms. The Department should
take particular care in proof-reading financial tables and charts.
ODPM accepts and is acting on the Committee's recommendations
on both points.
Recommendation 8: We are pleased that this year's
Annual Report sets out both successes and problems in programme
delivery so that they can be understood. We criticise the Department
for an unjustifiably favourable presentation of its achievements,
which is counter-productive.
ODPM drafts its annual reports in accordance with
HMT guidance and seeks to present a balanced picture. We are
happy to engage with the Committee on how effective we are in
reaching this balance.
Recommendation 9: We agree with Mr Housden that
the Department should ensure transparency and simplicity in its
communications, both internally and externally. We look forward
to a clear demonstration of the greater effectiveness of the Department's
communications in its next annual report.
ODPM recognises that both internal and external communications
are critical in delivering its objectives, and that the annual
report is an important tool in this regard.
Delivery
Recommendation 10: The £6.45 billion saving
required of local authorities is hugely significant to the Department
in reaching its efficiency targets - as well as being a major
challenge for local authorities themselves. We are not satisfied
with the audit process as it was finally set out for us. If the
scrutiny process and the support for local authorities are inadequate,
authorities under pressure may ultimately be tempted either to
reduce services rather than striving for ever greater improvements
in efficiency, or to label changes in internal priorities as efficiency
savings when they are nothing of the kind.
ODPM has made it very clear that simple reductions
in funding for services will not count as efficiency gains. Our
policy is to encourage and support local authorities to use the
resources available to them more effectively, not to cut their
budgets for frontline services or reduce their quality.
Annual efficiency statements are subject to considerable
assurance to achieve this aim. They are:
- Authorised by the Leader of the Council, Chief
Executive and Finance Directors of councils;
- Subject to an initial check by ODPM and other
relevant departments; and
- Returned as part of councils' Use of Resources
assessment (a key element of the CPA process) by auditors appointed
by the Audit Commission.
The second check allows ODPM and other departments
to query points made in statements. Councils are given the opportunity
either to review their statement and provide additional information
to give assurance or to recalculate their gains.
The third check provides for more assurance than
the Committee has given credit. While the auditors appointed by
the Audit Commission will not be auditing the efficiency statements,
they will be undertaking a formal review of them. This is in the
context of their audit of the procedures taken by local authorities
to achieve value for money. Councils will need to get this right
to avoid a negative impact on their CPA assessment.
The scrutiny process was drawn up in consultation
with local authorities, the Audit Commission, Chartered Institute
of Public Finance and Accountancy and the LGA. It recognises the
need to obtain robust figures from local authorities, while minimising
the burden on councils in terms of additional reporting and audit
fees.
This year, we will also be publishing revised guidance
to councils on how to measure and report efficiency gains, which
will clarify some of the more technical aspects of measurement.
Our main focus is on helping local authorities to identify the
opportunities for efficiency gains and obtain them. If councils
continue to engage with the work that is underway by ODPM, the
Regional Centres of Excellence and other change agents, then they
should continue to deliver the gains expected from them.
It should also be noted that the target for £6.45bn
efficiency gains by the end of 2007/08 applies to local government,
which includes gains obtained by councils, schools, the police
and fire authorities. Councils are expected to deliver £3.1bn
of the target, and expect to have achieved £1.9bn by the
end of this financial year, which would represent substantial
progress towards the full SR04 target.
Recommendation 11: The Department should investigate
the recent reports that thresholds to access adult social services
are being raised, and develop plans to work more closely with
local authorities and the Audit Commission to ensure that efficiency
savings are genuine and that the term "efficiency savings"
is not being used to camouflage service cuts.
We agree that service cuts are not branded as efficiency
gains and that people understand the very real difference between
'cuts' and 'efficiency'.
We have made it very clear, including through guidance,
conferences and workshops to both officers and members, that simple
reductions in funding for services will not count as efficiency
gains.
Revised guidance to councils will provide additional
clarity on what is an efficiency gain. The auditors who review
councils' efficiency statements will use the definition for efficiency
used by Sir Peter Gershon and will be checking that the processes
councils have in place respect this definition.
In terms of adult social services, the Department
of Health have worked closely with the Local Government Association,
the Commission for Social Care Inspection, the Association of
Directors of Social Services and ODPM to look at practical ways
of improving efficiency without detrimentally affecting the quality
of care. Some of this work is about the better use of new technology
and streamlining of processes.
In addition, it should be borne in mind that councils
retain the resources released from efficiency gains and can choose
how to reallocate them, whether to invest them in frontline services
or use them to hold down Council Tax. Thus, adult social
services could be a net beneficiary of efficiency gains delivered
in other parts of the council, though clearly this would be for
local determination.
Sustainable Communities
Recommendation 12: We recognise that the sustainable
communities agenda sets a significant challenge for the ODPM,
in achieving its objectives through the agency of other Departments.
Ministers, senior officials and other staff throughout the Department
are enthusiastic about this challenge. Nonetheless, like other
external stakeholders we remain to be convinced that the Department
will be able to ensure the co-ordinated Government action needed
to meet its goals.
Other Government departments are fully involved in
delivery of sustainable communities. The Comprehensive Spending
Review will include a cross-cutting review across Government of
infrastructure spending for sustainable communities. Departments
are already spending considerable sums on infrastructure - and
not just in the Thames Gateway.
The Department of Health, for example, have introduced
a Growth Area Adjustment to revenue for relevant Primary Care
Trusts. Amongst other factors, this led to the PCTs in the Growth
Areas receiving funding increases of £860m in 2006/07 and
£970m in 2007/08 (an increase over the two years of 20.8%
compared to a national average of 19.5%).
The Department for Education and Science is also
fully involved in delivering sustainable communities. It has
introduced a "safety valve" mechanism, whereby Local
Authorities, in exceptional circumstances (including rapid growth),
can apply for additional capital support to meet new school places
not otherwise covered by DfES "basic needs" or other
funding systems. Cambridgeshire and Milton Keynes have benefited
from £5.7m and £3.5m safety valve allocations for 2005/6.
The Department for Transport is investing heavily
in the Growth Areas. Latest estimates of recent and planned spending
on major LA, Government and Highways Agency schemes in our growth
areas total around £3.5 billion - consisting of around £1.3bn
for the Thames Gateway, £1.323bn for Milton Keynes South
Midlands, £811m for London-Stansted-Cambridge-Peterborough
and £50m for Ashford, Kent.
Staff management
Recommendation 13: We welcome ODPM's commitment
to consulting its personnel on their experience of work and we
congratulate it on its success in encouraging participation in
the 2005 staff survey.
Recommendation 14: It is essential that those
at the top of the organisation are visible and actively communicating
to staff the importance of delivering the Department's goals.
Recommendation 15: We note Mr Housden's efforts
to open up a dialogue with ODPM staff, but we believe it will
take time to see whether staff themselves perceive a wider, genuine
and lasting change in the Department's senior leadership.
Peter Housden and the ODPM Executive Board have put
in place a significant change programme, with a strong focus on
leadership, talent development for all staff and Board visibility.
ODPM will continue to track progress on these issues
through the Permanent Secretary's intranet forum and through staff
surveys.
Recommendation 16: The Department should take
steps immediately to reinforce the message that bullying and intimidation
is unacceptable. It should ensure that all staff are aware of
the procedures for reporting unfair treatment and that all staff
are confident such reports will be taken seriously.
ODPM does not tolerate bullying or discrimination,
and takes this issue very seriously. A programme of skills and
awareness training has already been put in place for all senior
and middle managers, to ensure that the organisation creates a
positive climate for all staff. This is in addition to ensuring
that the right procedures are in place to deal with cases where
staff feel they are not treated with dignity and respect.
Recommendation 17: Staff rationalisation should
be managed in a way that does not diminish Departmental effectiveness.
Service delivery is key to the success of the Office
and this needs to be maintained in handling staff reductions.
Our skills strategy, more flexible forms of organisation and tighter
programme accountability arrangements will enable ODPM to maintain
effectiveness as staff numbers fall. We have just completed
an early release scheme which will release just over 100 staff
primarily from areas identifying surplus staff. Any further reductions
in headcount will be handled sensitively and with full consultation
with the trade union side. We also aware of the need to follow
the Cabinet Office Protocols which set out the policy for all
government departments on the handling of surplus staff.
Recommendation 18: The Department has made a
start in listening to its staff and identifying their concerns.
The challenge facing Mr Housden and the Board is to find practical
ways of delivering internal change, in particular in the areas
of senior leadership, tackling unfair treatment, addressing poor
performance and maintaining morale. As Mr Housden noted, the
buck stops with him: we intend to return to these matters in
twelve months time to review progress.
Following discussion, led by the Board, with staff
across the Office on how we can improve leadership and our working
environment, at all levels of the organisation, a new package
of measures was announced by the Permanent Secretary 20 January:
- A new objective to be introduced from 2006-07
for all staff with line management responsibility which will hold
managers accountable for developing their staff and managing performance.
- Training on coaching and a self-awareness/360-degree
feedback tool for all senior and middle managers
- Workshops on treating staff with dignity and
respect for senior and middle managers to help them recognize
and deal with inappropriate behavior in the workplace.
- New measures to improve objective setting and
performance management this year and a new Task Force to review
the existing system and make recommendations for next year.
- A strong set of actions to mainstream equality
and diversity throughout management practice and culture.
- Implementing Professional Skills for Government
across ODPM to provide a clear framework for leadership, core
skills and professional development.
ODPM welcomes the opportunity to discuss with the
Committee the progress made in 12 months' time.
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